A Section 8 Company comprises a Non-Governmental Organization (NGO) and this is one of the most favored forms of NGO in India. Section 8 companies are registered under the Companies Act, 2013; and hence, they are required to follow the compliances as stated under Companies Act, 2013.
A Section 8 Company's main purpose is to promote science, art, commerce, sports, charitable activities, and such other objectives and make use of its profit for the promotion of its purposes and they do not pay any dividends towards its members in the corporation. Basically, it is a Corporation that has no intent to make a profit. Any person or association of the persons can form a Section 8 Company. A minimum of 2 individuals are compulsory in order to set up a Section 8 company.
The Companies Act, 2013 commands the provision for all the Section 8 Companies in India to adhere to the compliances with the MCA (Ministry of Corporate Affairs) strictly.
Annual Compliance of Section 8 Company
The annual compliances of a Section 8 Company are as follows:
Filing ADT-1, that is Appointment of Auditor
In order to take care of the company’s monetary fillings on an annual basis, Section 8 Company is required to appoint an auditor mandatorily. As per section 139 of the Companies Act, 2013, every corporation is required to inform the MCA relating to the auditor’s appointment in the form ADT-1.
Maintenance of Books of Accounts
Every Section 8 Company is obliged towards maintaining the books of accounts of the corporation. The book of accounts maintains the records of the filing of the annual return, etc.
Maintenance of Statutory Registers
Section 8 Companies are required towards maintaining the statutory records in the statutory registers. The register comprises the particulars of members, loans as well as investments, and charges. Furthermore, it furnishes an overview of how actively the corporation is working on a yearly basis.
Conducting Statutory Meetings
The corporations registered under the Companies Act, 2013 are required to convene statutory meetings each year at certain intervals. Statutory meetings contain meetings of Shareholders, Board of Director’s meeting, etc.
Director’s report
Director’s report is the document that contains the information relating to the corporation and its compliance along with a set of fiscal, accounting, as well as corporate social responsibility. The Board of Directors is liable for producing this report.
According to the provisions of the Companies Act, 2013, producing director’s report is obligatory compliance for every Section 8 Company in India.
Preparation of Financial Statements
The financial statement of the corporation contains the balance sheet, cash flow statement, profit, and loss of the business and more. Therefore, every corporation is required to prepare the financial statements of the preceding fiscal year compulsorily.
Income Tax Returns Filing
It is vital for every Section 8 Company towards filing income tax returns before or by 30th September of the next economic year. It is compulsory to file income tax returns as it gives an outline of the total earnings of the corporation.
Filing of Financial Statements (AOC-4)
Every Section 8 Company is required to file a copy of the financial statements in the set format that is in the e-form AOC-4. The financial statement should be filed within 30 days from the date of the last annual general meeting held.
MGT-7, Filing of Annual Returns with ROC
As Section 8 Companies are registered as limited companies, thus, they are required to file –form MGT-7 with the ROC for filing annual returns of the corporation. MGT-7 should be filed within 60 days from the date of the last annual general meeting was held.
Exemptions for Section 8 companies are:
• Section 8 companies have no obligation of minimum paid-up share capital as well as the appointment of Company Secretary
• Such companies have a non-applicability of the maximum number of Directors
• Section 8 companies have no requirement of Independent Director
• Directorship in Section 8 Company doesn’t count for the maximum number of Directorship of a Director.
• Section 8 companies have no obligation for the constitution of nomination and Remuneration Committee and Stakeholder Relationship Committee
Penalties for Non-compliance
The non-compliance might lead towards a penalty punishable with a minimum fine of Rs.25, 000, up to Rs.5, 00,000 or both with fine and imprisonment.
Tax compliances
A Section 8 company is legally responsible for paying corporate tax as set by the Income Tax Act. However, it could claim some income to be excluded in computing the total earnings which are chargeable to income tax. The compliances that are required to be fulfilled to claim such an exemption are:
• The Section 8 company must be registered under Section 12A of Income Tax Act with the Principal Commissioner using form 10A
• It should adhere to the conditions as stated under Section 11 so as to be qualified for the exemption
• The corporation has to be approved under Section 80G through Form 10B.
Event-based Annual Compliances of Section 8 Company
The event-based, as the name proposes, are the compliances that must be filed on the occurrence of certain definite events. Unlike annual compliances, these are non-periodical in nature.
The event-based compliances for Section 8 Company are:
• Appointment or resignation of Directors;
• Appointment or resignation of Auditors;
• Transfer of Shares;
• Appointment of Key Managerial Personnel;
• Receipt of share application money;
• Change of Corporation’s name;
• Amendment in the corporation’s Memorandum of Association;
• Change in corporation’s registered address;
• Any other changes in the corporation’s structure, etc.
Due dates for filing Section 8 Company Compliances
The due dates for Section 8 Company compliances are
• AGM (Annual General Meeting) – 30th September
• AOC-4 - Within 30 days of AGM
• MGT-7 - Within 60 days of AGM
• Income Tax Return - 30th September
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