Annual compliances for Section 8 Company
Section 8 companies are crucial for advancing social causes in India, supporting underprivileged communities and industries. In this blog, we’ll delve into the annual compliance needs for such organizations.
StartUpPortal Business Services streamlines the setup and management of Section 8 companies, providing customized business solutions that guarantee adherence to regulatory requirements throughout the process. From securing essential certifications to managing periodic compliance reports, our comprehensive assist enables social entrepreneurs to concentrate on their mission of effecting positive change, while we handle the executive complications, empowering them to produce a significant social impact.
What is a Section 8 Company?
Section 8 company is a non- profit organization established to promote charitable conditioning such as education, social welfare, or environmental security. It operates under Section 8 of the Companies Act, 2013, and must utilize any earnings or profit generated for its objectives, without distributing dividends to its members.
Process of Section 8 Company Registration:
- DSC and DIN: Obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for proffered administrators.
- Name Approval: Choose a special name and get it approved by the Ministry of Corporate Affairs (MCA).
- Registration: Prepare and submit documents, carrying Memorandum and Articles of Association, to the Registrar of Companies (ROC) for registration.
- License and Commencement: Obtain a Section 8 license, then commence operations after approval.
Section 8 Company Benefits:
Section 8 Companies provide several advantages to those aiming to establish a non-profit organization:
- Enhanced Flexibility: Section 8 Companies offer a structured framework for efficiently pursuing non-profit objectives, allowing for systematic execution of charitable activities.
- Simplified Registration: Being registered under the Companies Act streamlines the registration process, eliminating the necessity for physical presence of partners or members, thus making it more convenient to establish the organization.
- Capital Flexibility: There are no minimum or maximum limitations charged on the paid- up capital of Section 8 Companies, supplying flexibility in financial structuring.
- Tax Advantages: Section 8 Companies are eligible for tax advantages under Sections 12AA and 80G of the Income Tax Act. This can mainly reduce the tax burden, allowing additional resources to be directed towards the organization’s charitable trials.
- Accessible Directorship: Members or partners of any company or firm can serve as directors of a Section 8 Company. This accessibility facilitates individuals seeking to contribute to social welfare through their involvement in the organization’s governance.
Annual Compliances for Section 8 Company:
- Appointing an Auditor: Every year, a Section 8 company needs to appoint an auditor to take care of its fiscal reports. This appointment needs to be communicated to the Ministry of Corporate Affairs (MCA) utilizing Form ADT- 1. He generally serves for a max of five years and checks the company’s fiscal health each year. It’s pivotal to appoint the auditor within 15 days of the Annual General Meeting (AGM), or the company could face penalties.
- Keeping Records: Section 8 companies must preserve a register with details like loans taken, manager info, any changes in administrators, charges created, and leaguers made. This helps keep track of everything that is going on within the company.
- Holding Meetings: Section 8 companies need to hold an annual general gathering once a year along with at least four board meetings. These meetings are essential for making opinions and keeping everyone informed.
- Director’s Report: The directors have to put together a report covering various aspects like compliance, corporate social responsibilities, and financial details. This report needs to be submitted using a specific form.
- Financial Statements: Section 8 companies have to prepare financial statements, carrying balance sheets, earnings and loss statements, and cash income statements. These documents need to be checked by the named auditor and then filed with the Registrar of Companies.
- Filing Financial Statements: There’s a shape called AOC- 4 that needs to be submitted within 30 days after the annual general meeting. Missing this deadline can direct to penalties, so it’s important to stay on track.
- Filing Annual Returns: Another form MGT- 7, needs to be filed within 60 days after the annual general meeting. This is important for keeping the government streamlined on the company’s activities.
- Income Tax Return: Precisely like individuals, Section 8 companies need to file their income tax return by September 30th each year. This summarizes the company’s complete income for the year.
Non-Compliance Penalties for Section 8 Companies:
- Section 8 Companies, like all registered realities, must cleave to regulations. Failure to misbehave can affect in penalties
- License Termination If supposed dishonest or deviating from its stated aims by the Central Government, a Section 8 Company may face license termination.
- Fines Range from Rs. 10 lakhs to Rs. 1 crore for non-compliance.
- Directors and officers in default can face imprisonment and fines up to Rs. 25 lakhs.
- Fraudulent Operation Any fraudulent operation implicates officers under Section 447 of the Companies Act, 2013.
- Non-compliance risks the company’s legit status and its capability to fulfill its objectives. Adherence to regulations is crucial for uninterrupted operations and credibility.
Conclusion:
In conclusion, Section 8 companies are vital in promoting social causes by utilizing their profits for the greater good. Adhering to annual compliance requirements is essential to reap benefits and avoid penalties. Therefore, opting for a Section 8 company over a trust or society is recommended for those committed to serving noble purposes while maintaining legal status and credibility.