Section 8 Companies under Company L...
This article talks about, relaxing provisions provided to Section 8 companies under the Compani...
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As per Section 8 companies, an NGO can be registered with no profit motive and in Companies Act, 2013 the Compliance of Section 8 Companies have been simplified and compliance for such Companies are 100% online process. In this article, we will discuss the applicable compliances for Section 8 Companies.
Section 8 Companies under the Companies Act 2013 are companies, which have as their objective the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, and/or protection of the environment.
These companies apply their profits or income in the promotion of their objectives and prohibit payment of dividends to their members. It is a company which has obtained license and is formed under Section 8 of Companies Act.
Section 8 Companies need not have a minimum paid up capital of Rs. 1 lakh or Rs. 5 Lakh as may be applicable, resulting in the reduction of cost of registration of such companies.
The time, date, and place of the Annual General Meeting, as per section 96(2) state that every company other than an OPC is required to call its AGM during business hours (between 9 am to 6 pm) on any day except on a national holiday. Such a meeting shall take place at the registered office of the company or within the city, town, or village in which the registered office is situated.
Section 101(1) requires that a minimum of fourteen days’ notice be given before a general meeting of a company may be called.
An extension of seven days has been granted to section 8 companies for sending copies of their financial statements, auditor’s report, etc. to their member’s debenture trustees, etc. Section 118 requires a company to prepare and sign the minutes of the proceedings for every general meeting of shareholders or creditors within 30 days from the conclusion of such a meeting. It requires the minutes from AGM’s be consecutively numbered. It further details what should and should not be included in the minutes, in addition to the punishment for tampering with minutes to their member’s debenture trustees, etc.
A relaxation from section 118 has been provided to section 8 companies, except where the AOA of such a company contains a provision for confirmation of minutes by circulation. Hence no provision of section 118 relating to minutes of proceedings from general board meetings etc. shall apply to Section 8 Companies, except where its AOA contains a provision that minutes have to be confirmed by circulation.
Section 8 Company can now appoint any number of directors. There is no minimum requirement nor a restriction of a maximum number of directors that can be appointed by such companies. Also, a special resolution is not needed for appointing more than 15 directors.
As per the notification subsections (4) to (11), 12 (i) and (13) of section 149, section 150 and proviso to section 152(5), this section has been amended to change the quorum requirement for Section 8 companies to either 8 directors or 25% of the total strength, whichever is lower.
The powers of the board under clauses (d), (e) and (f) of section 179(3) may be exercised by the board of Section 8 companies by circulation instead of a meeting. Hence, the directors may exercise these powers by passing resolutions through circulation instead of a meeting. These powers include borrowing money, investing the funds from the company, granting loans, or giving a guarantee and providing security in respect to loans.
The audit committee of a section 8 company need not have independent directors forming a majority.
Section 178 shall not apply to Section 8 company. Thus section 8 companies are not required to form any of the above-mentioned committees.
This section shall apply to section 8 company only with reference to transactions under section 188 exceeding Rs. 1 lakh. Hence every director of a Section 8 Company shall disclose the nature of his concern or interest at a board meeting if the related party transaction exceeds Rs. 1 lakh, and he shall not participate in such a meeting.
The following annual compliances are to be followed:
It is mandatory for companies to appoint an auditor. A statutory auditor shall be appointed for 5 years and will audit the books of account and company’ annual return.
The company should also maintain a statutory register as enumerated in Section 8 of the Companies Act, 2013.
The board report should be filed in Form AOC-4. The Board of Directors shall file their boards report in appropriate manner.
The annual return having information such as management details shall be filed in Form MGT-7 with Registrar of Companies. It has to be filed in 60 days of the Annual General Meeting.
A Section 8 Company has different forms of compliances to follow but it also enjoys various benefits as well. There should be no non-compliance on occurrence of which penalty may be applied. Seek the assistance of an expert to sail through the compliances part.
Read our article: Section 8 Company Registration: A Step by Step Guide