In this article, we will discuss all the compliance requirements of a company formed under Section 8 of the Companies Act 2013
The Company under Section 8 of the Companies Act 2013
We often believe that the sole objective of a business is to earn profit. Section 8 of the Companies Act 2013 provides an exception to this perception. Section 8 provides provisions for entities with charitable and non-profit objectives. A company formed under Section 8 works to promote science, art, commerce, sports, charitable activities, etc. The profit reaped by the company is not distributed amongst the members rather it is re-invested in the company for meeting its objectives.
Annual Compliance under Section 8
The Companies Act 2013 mandates the company under Section 8 to carry out certain compliances. . A gist of these compliances is enlisted below:
- Appointment of auditor
As per Section 139 of the Companies Act, every company under Section 8 needs to appoint an auditor. The auditor is required by law to review the books of accounts of the company in order to determine the actual financial position of the company. In order to safeguard and maintain the firm in sound financial shape, the auditor provides his impartial assessment to the owners or shareholders of the company. Within 30 days of the date of establishment, the Section 8 company appoints its first auditor. The company appoints the auditor for a term of five years, and as part of that appointment, Form ADT-1 must be filed.
- Maintenance of statutory registers
The company is also required to maintain a statutory register that holds the records of members, the loan’s obtained, charges created, investments, and the directors of the company. The registers are required to be revised annually to check the status of the company.
- Income-tax return filing
It is required by the company to file ITR on or before 30th September for the respective financial year. The company under Section 8 enjoys qualifies for several benefits and a tax break under Section 80G of the Income Tax Act of 1961. To provide a thorough overview of the company’s income, income tax returns must be filed.
- Preparation of financial statements of the company
As required by the Companies Act of 2013, the company will annually prepare its financial accounts. The balance sheet, income statement, cash flow statement, and various annexures are all included in the financial statement which must be submitted to the ROC.
- Filing of Financial statements
A copy of the financial statements in the required format, i.e., the e-form AOC-4, must be filed by each Section 8 Company. Within thirty days after the date of the most recent annual general meeting, the financial statement must be filed.
- Filing of Annual returns
The annual return must be submitted in Form MGT-7. It must be filed within 60 days of the conclusion of the Annual general meeting of the company. Annual returns must also be filed within 60 days of the day the Annual General Meeting would have been held, or the date September 30th, in the event that the Annual General Meeting is not convened in any given year. There must be reasons attached to the statement mentioning not holding up the Annual General Meeting.
- Preparation of the Director’s report
The Director’s Report must be submitted in Form AOC-4 in accordance with Section 134 of the Companies Act, 2013. A director’s report is prepared to outline the precise situation of the company and its future business scope for the shareholders. The registered office is also where the signed.
There are certain event-based compliances that need to comply upon the occurrence of certain events such as the Appointment or resignation of Directors, Change in the Company’s name, Change of Registered Address, Any amendment in the Memorandum of Association
Appointment or resignation of Auditors, Transfer of Shares, Appointment of KMP (Key Managerial Personnel), etc.
Benefits of compliance for Section 8 companies.
It is necessary for the companies to adhere to the compliances as it helps the company to protect its trustworthiness and build credibility in the market. A company filing compliance and disclosing financial information on time ensures transparency of operations whereas non-adherence to the same might land the company in legal trouble and imposition of fines and penalties on the company by the government.
A company formed under Section 8 does enjoy certain exemptions because of its nature but it has to adhere to certain compliances mandatorily. If the necessary compliances are not met, severe penalties will be imposed. Additionally, the officer at the fault might face consequences such as imprisonment and a fine.