In this blog, we go over the necessary compliances for Section 8 companies for the benefit of interested readers.
Every Indian-incorporated corporation must submit an annual file. The Ministry of Corporate Affairs must receive the completed e-form filing and any necessary supporting documentation (MCA). Regardless of whether they are operating or not, all companies registered under the Companies Act, 2013 or earlier, such as private limited firms, one-person companies, limited companies, and Section 8 companies, are required to file MCA annual returns and income tax returns annually.
In order to remain in compliance, Section 8 corporations must hold an annual general meeting (AGM) at the conclusion of each fiscal year and submit their annual report and financial statements to the MCA. The annual compliance requirements outlined by the Companies Act of 2013 and the Income Tax Act of 1961 must be completed by every Section 8 company.
By doing this, the business maintains its reliability and credibility while avoiding sanctions for non-compliance. Throughout the year, compliance duties must be completed and may be onerous.
A Section 8 business seeks to advance education, the arts, business, sports, and other endeavours. These businesses are registered to support the advancement of India’s underrepresented communities and industries.
One of India’s most popular types of non-governmental organizations (NGOs) is a Section 8 business. It must adhere to the requirements set forth by the Companies Act of 2013, as it is registered under that law.
A Section 8 firm must adhere to the regulations set forth by the government. Companies that fail to maintain their Section 8 annual compliance must pay fines to the government.
All Section 8 companies in India are required by the Companies Act, 2013, to adhere fully to MCA regulations.
Advantages of Complying with Section 8 Annual Compliance
The advantages of adhering to the following Section 8 annual compliance requirements are listed below:
- Transparency in the company’s operations: The financial status of the company is clearly explained by compliances such as the creation and submission of financial returns and yearly returns, etc. As a result, submitting the company’s compliances creates transparency of the company’s operation or real state.
- Better credibility: Companies with timely compliance filings are seen as more reliable than those without. Therefore, it is easy for such businesses to obtain financial assistance and market credit from the relevant authority.
- Avoid legal complications: If you don’t abide by the company’s compliance policies, you could end up in legal difficulties later on after receiving letters from the MCA, for example. Therefore, it’s always essential to comply with the requirements on time to avoid any legal issues down the road.
- Build trust: Whether it’s a consumer, a vendor, a supplier, or a regulatory body, everyone has faith in businesses that submit compliances on time and are completely transparent with their financial information. Because they have greater credibility, these businesses find it easier to win over everyone’s trust.
- Avoid penalties: Of course, the primary justification for submitting compliances on time is to avoid penalties. Failure to comply could have a number of negative effects, including business closure, license confiscation, or hefty fines.
Section 8 Annual Compliance Checklist
Form ADT-1, Appointment of Auditor, must be submitted
The eighth section company is required by law to appoint an auditor to handle the company’s annual financial filings. In accordance with Section 139 of the Companies Act of 2013, each business is required to submit Form ADT-1 to the MCA announcing the appointment of the auditor. The statutory auditor, who will be appointed for a term of 5 years, shall audit the company’s books of accounts and annual reports.
Maintaining the accounts books
Every Section 8 firm is required to keep up with its financial records. Records of the submission of annual returns and other documents are kept in the books of accounts.
Retaining Statutory Registers
Every Section 8 company is required to keep the statutory registers updated. The register includes information about members, loans, investments, fees, etc. Additionally, it gives a general perspective on how actively the business operates each year.
Calling for Meetings
AGMs must be held once a year, within six months of the conclusion of the fiscal year, and additional board meetings must be held.
Report from the Director
The director’s report is a document that includes details on the business, its compliance, and a list of financial, accounting, and corporate social obligations. The Board of Directors is in charge of this report. Producing a director’s report is a requirement for every Section 8 company in India under the terms of the 2013 Companies Act.
Financial Statement Preparation
The balance sheet, cash flow statement, profit and loss statement, and other items make up the company’s financial statement. As a result, it is mandatory for every company to prepare its financial statements for the previous fiscal year.
Filing Income Tax Returns
Before or by September 30th of the next fiscal year, Section 8 companies must file their income tax reports. Income tax returns must be filed since they provide a summary of the company’s overall revenue.
Financial Statements Must Be Filed (AOC-4)
Each Section 8 company is obliged to submit a copy of the financial statements in the proper format, which is the e-form AOC-4. The financial statement needs to be submitted no later than 30 days after the most recent AGM was held.
MGT-7, Annual Returns to be Filed with the Registrar of Companies
Section 8 Companies must additionally submit Form MGT-7 to the Registrar of Companies (ROC) for filing the company’s annual returns because they are registered as limited companies. MGT-7 must be submitted no later than 60 days following the most recent AGM.
Annual Section 8 Compliance Based on Events
As the name implies, event-based compliances are those that must be reported when particular events take place. These are non-periodic compliances, as opposed to annual compliances. The following is the Section 8 company’s event-based compliance checklist:
- Directors’ appointment or resignation;
- The selection or removal of auditors;
- Shares transferred;
- Key managerial personnel (KPMs) are appointed;
- Receiving payment for a share application;
- Name change for the company;
- Modifications to the company’s Memorandum of Association (MOA);
- A change to the business’s registered address;
- More structural changes to the business, etc.
Penalties for Failure to Comply
In the event that any procedure is not followed, the MCA has the authority to impose specific penalties. The potential sanctions are as follows:
- On the rare occasion that it discovers that the organization is operating improperly or in a way that violates the organization’s purpose, the Central Government may revoke the authorization granted to the organization;
- The organization’s leaders and every official in default shall be subject to a term of imprisonment, a fine that may be increased to Rs. 25 lakhs, or both; and
- Every official in default will be subject to Area 447 activity if it is shown that the organization’s problems were unjustly directed.
If found guilty, the company will pay a fine that must be at least Rs. 10 lakhs and may perhaps reach Rs. 1 crore.
The timeframe for a few of the compliances
A Section 8 company must adhere to the annual compliances during the period of time below:
| Form Nos. | Compliances | Due Dates | Last Date |
| AOC-4 | Director’s report | 30 days following the AGM | 29 October |
| MGT-7 | Annual returns | 60 days following the AGM | 28 November |
| Form ITR-6 | Income tax returns | 30 September | 30 September |
What are the advantages of adhering to Section 8 of the company’s annual compliance?
Avoiding penalties is the main justification for Section 8 company compliance. Additionally, it guarantees the company’s efficient operation. Here are a few advantages:
- Greater trustworthiness of the businesses
- Avoid any potential legal problems
- To increase client confidence
- To avoid conflict
Conclusion
According to everything we’ve discussed so far, a Section 8 company must comply with the following requirements:
- Selection of an auditor
- Keeping Registers
- Retaining Financial Statements
- Making the Director’s Report
- Filing Income Tax Returns
- Hold a board meeting
- Hold an AGM
- Financial Return Filing with the ROC
A Section 8 corporation must also follow the compliance requirements imposed by the ROC and income tax authorities. Heavy fines are incurred when compliance criteria are not met, and it’s possible that such firms and their directors could be temporarily disqualified.
In view of the aforementioned, we hope that this blog will be useful to all readers who are curious about Section 8 company compliance requirements.
