Quick Review of Section 8 Company Annual Compliance

Every Section 8 company is required to carry out annual compliance tasks under the Companies Act, 2013 and the Income Tax Act, 1961. This ensures that the company is trustworthy and reliable while avoiding penalties for non-compliance. Compliance tasks need to be done throughout the year and can be tedious. Without further ado, let us have look at Section 8 Company Annual Compliance.

Overview of Section 8 Companies Act, 2013

Section 8 society aims to promote science, art, commerce, sports, charitable activities, etc. These societies are registered to work for the promotion of less discussed communities and sectors in India. A Section 8 Company is a Non-Governmental Organization (NGO) and one of the most preferred forms of NGO in India. It is registered under the Companies Act 2013 and therefore has to follow the compliances prescribed by the Companies Act 2013. A Section 8 company needs to follow the compliances prescribed by the government. If the company does not remain in compliance with Section 8 Annual Compliance, it will eventually pay fines to the government. The Companies Act 2013 mandates all Section 8 companies in India to strictly comply with the MCA (Ministry of Corporate Affairs).

Benefits of compliance filing

• Avoid penalties- Failure to meet the requirements may result in sanctions and fines for the company.
• Building trust- A company that timely submits compliance statements and discloses financial information is seen as trustworthy in the eyes of suppliers, vendors, and customers.
• Transparency of operations- Compliance records reveal the current situation in the company’s operations. Compliance filings such as financial statements can reveal a company’s financial health.
• Avoid any legal problems- Failure to comply may result in legal consequences such as notice from the Ministry of Corporate Affairs. Therefore, you should file your compliances on time to avoid legal problems.
• Credibility- It is easier for a company to obtain financial assistance and market credit in the case of timely compliance than for a company whose compliances are not suitable.

Checklist for Section 8 Companies Act- Annual Compliance in India

• Filing of ADT-1 i.e. Appointment of Auditor: According to section 8, the company must appoint an auditor to ensure the Company’s annual financial statements. As per Section 139 of the Companies Act, 2013, every company has to inform the MCA of the appointment of an auditor in Form ADT-1. The accounting book and annual returns of the Company will be verified by a statutory auditor who will be appointed for 5 years.

• Accounting books: According to section 8, every company is obliged to keep its Company accounting books. In the accounting books, records are kept of the submission of annual statements, etc.

• Management of statutory registers: According to section 8, all companies must keep the legally prescribed records in the registers. The register contains details of members, loans and investments, fees, etc. It also provides an overview of how actively society operates each year.

• Convening meetings: The Annual General Meeting will be held once a year within six months of the end of the financial year and the next board meeting must be held.

• Director’s Report: The Director’s Report is a document that contains information relating to the Company and its compliance along with a set of financial, accounting, and social responsibilities of the Company. The Board of Directors is responsible for the preparation of this report. As per the provisions of the Companies Act, 2013, submission of direct reports is a mandatory requirement for every section 8 company in India.

• Preparation of financial statements: The Company’s financial statements consist of the balance sheet, cash flow statement, profit and loss statement of the Company, and others. Therefore, it is assumed that every company compulsorily prepares financial statements for the previous accounting period.

• Filing an income tax return: Every company under section 8 must file an income tax return on or before 30 September of the next financial year. A tax return must be filed because it provides an overview of the company’s total income.

• Submission of Financial Statements (AOC-4): According to Section 8, every company must submit a copy of the financial statements in the prescribed format, i.e. in electronic form AOC-4. The financial statements must be submitted within thirty days of the date of the last annual general meeting.

• MGT-7, Filing of Annual Returns with ROC: Since Section 8 companies are registered as limited liability companies, they also have to file Form MGT-7 with the ROC for filing the company’s annual returns. The MGT-7 must be filed within sixty days of the date of the last annual general meeting.

Deadlines for Section 8 Company Compliance

A Section 8 company should avoid penalties and fines by filing timely compliance. Below are the deadlines for filing compliance for the company according to Section 8.

Penalties for non-compliance

The Ministry of Corporate Affairs has the power to impose certain sanctions if it encounters non-compliance with the procedures. The fines that will be charged are as follows:

• The Central Government can disassociate itself from the permission granted to an organization if it happens to find that the organization is working improperly or in a way that violates the objective of the organization;
• The head and every officer of the organization in default shall be liable to imprisonment for a term and to a fine which may extend to Rs. 25 lakhs or with both;
• If the affairs of the Organization are found to have been misdirected, any officer in default will be subject to action in Area 447;
• The organization shall be liable to a fine not less than Rs. 10 million and may be extended to Rs. 1 crore.

Final words

In a nutshell, Section 8 Companies are registered as NGOs under the Companies Act, 2013 after the due company registration process. The promoters of the Section 8 Corporation cannot share in the profits made as a result of charitable activities. The profit achieved must be invested in the company to support the non-profit activities of the company. A Section 8 Company must comply with the Compliance as defined in the Companies Act 2013. It shall follow the compliance prescribed by the Government. If the company does not stay informed about the company’s Section 8 compliance, it may end up paying a fine to the government.

Legal Window is a team of expert professionals which helps you with the annual compliance of Section 8 Companies Act, 2013 hassle-free. It provides an end-to-end support system to our valued customers through the below steps-

• Assign professional resources for consulting and assisting regarding annual compliance.
• Maintain and prepare accounts and financial reports.
• Filing all compliances
• File Section 8 Company with ROC
• Assistance in audit
• Meeting minutes, notices, and statutory register

Contact us and get rid of your concerns regarding compliance.