Section 8 Company under the Companies Act, 2013 is a non-profit organization established to promote charitable, social, educational, and not-for-profit objectives organizations. The Section 8 Company includes the name “Foundation”, “Association”, “Society”, “council”, “Charity” and other terms as per guidelines. Such organizations must be registered with the Registrar of Companies (RoC) under the provision of the Companies Act, 2013. These are eligible for tax exemptions, and other benefits under 12A and 80G of the Income Tax Act.
Mandatory Section 8 Company Compliances:
- Appointment of Auditor- Organize a shareholder Annual General Meeting within a predetermined time frame following the end of the fiscal year (often within six months). Organize a shareholder Annual General Meeting within a predetermined time frame following the end of the fiscal year (often within six months).
- Maintaining registers- To take care of the financial filings and financial recordings on an annual basis, Section 8 needs to appoint an auditor.
- Maintenance of books of accounts- Section 8 companies need to maintain statutory reports in registers, which are maintained yearly. These are primarily maintained to check the company’s annual performance. Moreover, it also contains other details of members, loans, and investments.
- Preparing the Director’s report- The purpose of preparing the Director’s report is to preview the financial position of the company to shareholders. It should be maintained and describe the “minutes of meetings” required to manage at the Registered office
- Income Tax return filing- To provide a holistic overview of the company’s income, it is crucial to file an Income Tax return. If your organization is registered under the 12A and 80G registers, you can avail of various tax exemptions.
- Conduct Annual General Meeting- section 8 Company should have held an Annual General Meeting yearly or before 30th September. All the directors, members, and auditors should attend the AGM. They must have been notified not less than 21 days before the meetings. The reports must be submitted within 30 days of the Annual General Meeting.
- Filing of Financial Return and Annual Return with RoC- The financial statements must be filed through E-form AOC-4, within 30 days from the annual general meeting.
Event-based compliance for Section 8 company:
- Transfer of shares
- Allotments of shares
- Modification in company’s name
- Registration of auditors
- Changes in the company’s MOA
- Share application money
- Alteration in the company’s structure
The following advantages of Section 8 Annual Compliance:
- Legal recognition: Timely compliance of Section 8 companies ensures that the organization has legal entity status. These are recognized and regulated under the Companies Act, 2013.
- Tax exemptions: Regular compliance makes the company eligible for various tax benefits such as exemption from income tax under sections 12A and 80G. This results in captivating more donors.
- Separate legal identity: Section 8 Companies have separate legal entities from their members, which enhance their credibility, and ability to contract, own property, or be sued in its name.
- Funding opportunities: Compliance with the Company Act brings exciting offers including subsidies, govt. grants, and more funding opportunities.
Necessary documents required:
- DSC of the owner
- Article of association (AoA)
- Memorandum of Association (MoA)
Penalties for Non-Compliance
In case of non-compliance, the Ministry of Corporate Affairs (MCA) has the authority to apply certain fines. The following are the potential penalties:
- In the unlikely event that it discovers that the Organization is operating improperly or in a way that violates the Organization's goal, the Central Government may revoke the permit granted to the Organization.
- The chiefs and every official who is in default shall be subject to imprisonment and a fine of Rs. 25 lakhs.
- Every official in default will be subject to activity under area 447 if it is found that the Organization's problems were improperly directed.
- The charitable or the organization will be found guilty with a fine of Rs. 10 lakh to Rs. 1 crore.
What are the due dates for filing Compliance?
You need to know before begin everything.
Inability to document return illegal offense with a fine of Rs. 50,000 to Rs. 5 lakhs. So, file an annual compliance today with the help of our legal professionals and Chartered Accountants. Contact Darshan Corporate Pvt Ltd now, our experts will manage your compliance tasks and get them done with a stress-free process.