The goal of the Section 8 Company is to promote the arts, science, sports, education, religion, social welfare, environmental protection, or any other goal.
Following the proper procedure for company registration, Section 8 companies are registered as non-governmental organizations under the Companies Act of 2013.Profits from charitable endeavors cannot be shared by the promoters of Section 8 Company. To promote the company’s non-profitable activities, the profit must be invested in the business. The Compliances outlined in the Companies Act of 2013 must be adhered to by Section 8 Company. Section 8 Company must adhere to government-imposed compliance requirements. A company could end up paying the penalty to the government if it does not keep up with Section 8 compliance requirements.
What is a Section 8 business?
A Section 8 company is one that is formed with the intention of supporting charitable causes, environmental protection, or other similar endeavors. A legal type of non-governmental organization is the Section 8 Company. These businesses are treated as limited liability companies without the word “limited.” The members of the Section 8 company do not receive any dividends or income.
For a section 8 company, what are the necessary compliances?
The following are the mandatory compliances for section 8 businesses:
The Auditor is appointed in accordance with Section 139 of the Companies Act by filing Form ADT-1.
Within thirty days of its incorporation, a section 8 company must appoint its first auditor.
An individual or a company can serve as the auditor.
The company’s financial records must be examined by the auditor.
The first Annual General Meeting will select the Auditor.
The Auditor’s term of office is five years, beginning with the First Annual General Meeting and ending with the Sixth Annual General Meeting.
Within fifteen days of the Auditor’s appointment, a notice of appointment must be filed with the Registrar.
For the auditor to be eligible, each and every one of the requirements outlined in Section 141 must be met.
Section 8 of the Financial Statements Maintenance Act requires the company to annually prepare its financial records.
The financial records and statements must be presented to the registrar following their preparation.
Financial statements like the Trading Account, Profit and Loss Account, and Balance Sheet are required to be included in the financial records.
Registers are to be kept up with
All Segment 8 Organizations are supposed to have legal records in registers.
Each year, registers need to be kept up to see how active the business has been.
The information about members, fees, loans, and investments will be in the Register.
Preparation of the Director’s Report In accordance with Section 134 of the Companies Act of 2013, the Directors Report must be submitted on Form AOC-4.
The purpose of a Directors Report is to provide shareholders with an explanation of the company’s precise financial situation and business operations.
The Registered Office must keep the signed “minutes of meetings.”
Income Tax Return Filing A Section 8 company is required to submit its income tax returns by September 30 of the following fiscal year.
It is necessary to file Income Tax returns online in order to provide a comprehensive overview of the company’s income.
However, it can assert that certain income is exempt from income tax.
The company is eligible for tax exemption if it is registered under Sections 12A and 80G.
Hold a Board Meeting Every business should hold a board meeting twice a year, especially small businesses.
There shouldn’t be more than 90 days between the two meetings.
Hold the Annual General Meeting Every year on or before September 30th, an Annual General Meeting must be held.
The meeting should be announced to all directors, members, and auditors.
By giving at least 21 days’ notice, the notice should be sent to the directors, members, and auditors.
The official website of the company ought to include a notice of the Annual General Meeting.
In Form MGT- 15, a report of the Annual General Meeting must be submitted within thirty days of the meeting.
E-form AOC-4 should be used to submit a copy of the financial statements to the RoC.
It must be submitted within thirty days of the annual general meeting’s date.
Form MGT-7 is required for the annual return to be submitted to the RoC.
It must be submitted within sixty days of the Annual General Meeting’s conclusion.
If there is no Annual General Meeting in any given year, the annual return must be submitted within sixty days of the 30 September date on which the Annual General Meeting should have been held.
It ought to be included in the statement that explains why the Annual General Meeting was not held.
Penalties for Non-Compliance The following penalties have been established by the Ministry of Corporate Affairs for section 8 companies that do not follow the procedures:
If the Central Government determines that the company is operating fraudulently or in a manner that is contrary to the company’s mission, it may revoke the license that was granted to it.
The businesses will be subject to a fine of up to one crore rupees, which cannot be less than ten lakh rupees.
The company’s directors and every officer who are in default will face either a sentence of imprisonment for up to 25 lakh rupees or both.
Every officer in default is subject to section 447 action if it is determined that the company’s affairs were conducted fraudulently.
Section 8 Companies receive a number of exemptions and advantages over other NGOs. Instead of incorporating trusts or societies, it is preferable to incorporate non-profit organizations as companies. To avoid government penalties, the business must adhere to all event-based and mandatory compliances. For noncompliance, the Ministry of Corporate Affairs has imposed severe penalties. If a Section 8 company is registered under Sections 12A and 80G of the Companies Act of 2013, it gets an additional tax break.