{"id":31088,"date":"2020-04-21T10:46:23","date_gmt":"2020-04-21T05:16:23","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=31088"},"modified":"2022-09-13T16:40:23","modified_gmt":"2022-09-13T11:10:23","slug":"the-relevance-of-annual-compliance-for-section-8-company","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/the-relevance-of-annual-compliance-for-section-8-company\/","title":{"rendered":"The relevance of Annual Compliance for Section 8 Company"},"content":{"rendered":"<p class=\"has-drop-cap\">Section 8 Company has the objective of the encouragement in the field of arts, sports, science, research, religion, education, social welfare, and protection of the environment and other objectives. Section 8 Company is to be registered as Non- Governmental Organization under the <strong>Companies Act, 2013<\/strong>. The promoters of section 8 Company do not make and share profits which are made for charitable activities. The profit generated is likely to be invested in the company, which also helps in the promotion of the non-profitable activities of the company. <strong><a href=\"https:\/\/enterslice.com\/section-8-company-registration\">Section 8 Company<\/a><\/strong> must mandatorily follow the Compliances prescribed under the Companies Act, 2013. It is necessary for Section 8 Company to follow compliances as mentioned by the Government. In case if a company does not comply with the compliances, then they might be liable for the penalties and can end up paying the penalties to the Government.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is Section 8 company?<\/h2>\n\n\n\n<p>A Section 8 Company is that Company which is incorporated\nwith the good intention and helps to promote charity, social welfare,\nprotection of environment or any such other related activities. Section 8\nCompany, in its legal form, is a Non- Governmental Organization. These are the\ncompanies which are treated as Limited Companies, but it does not use the\nphrase limited in it. Section 8 Company also does not provide income or\ndividend to its members.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What are the required Compliances for section 8 Company?<\/h2>\n\n\n\n<p><em>The required Compliances which are necessary for section 8 Companies are listed below:<\/em><\/p>\n\n\n\n<p><strong><em>Appointment of Auditor<\/em><\/strong>: As provided under <strong>section 139<\/strong> of the Companies Act 2013, after <strong>filing form ADT-1<\/strong>, it is must for the companies to appoint an auditor. The company shall be maintained the book of accounts and annual returns.<\/p>\n\n\n\n<p><strong><em>Maintenance of Financial Records:<\/em><\/strong> The Company requires to file\nthe balance sheet, cash flow statement, profit and loss A\/C, and other\nfinancial statements for the previous financial year.<\/p>\n\n\n\n<p><strong><em>Registers are to be maintained:<\/em><\/strong> The Company also requires\nmaintaining a statutory register which consists of details like loans obtained,\ncharges created, who its members, etc. are as enumerated under section 8 of the\nCompanies Act 2013.<\/p>\n\n\n\n<p><strong><em>Preparation of the Director&rsquo;s Report:<\/em><\/strong> The Directors of a\ncompany has to file their annual report in an appropriate manner, which must\nconsist of fiscal data and corporate social responsibility. The board directors\nare responsible for presenting this report.<\/p>\n\n\n\n<p><strong><em>Income Tax Return Filing:<\/em><\/strong> Before every 30th September tax\nreturns needs to be filed, which is at the end of every assessment year.<\/p>\n\n\n\n<p><strong><em>Financial Statements to be filed with Registrar:<\/em><\/strong> The financial\nstatement must be filed within 30 days from the last general body meeting in\nthe appropriate form (E-FORM AOC-4).<\/p>\n\n\n\n<p><strong><em>Annual Return to filed with the Registrar:<\/em><\/strong> The Limited\ncompanies need to file annual returns within 60 days of the annual general\nmeeting in the Form MGT-7 with Registrar of Companies. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Appointment of Auditor by filing Form ADT-1<\/h2>\n\n\n\n<ul><li>The Auditor is appointed as per the provisions\nof Section 139 of the Companies Act, 2013.<\/li><li>The first auditor for section 8 Company is to be\nappointed within 30 days from the date of its incorporation.<\/li><li>The auditor can be either an individual or can\nbe a firm.<\/li><li>The auditor requires maintaining records for all\nthe financial filings of a company.<\/li><li>The Auditor appointment has to be in the first\nAnnual General Meeting. <\/li><li>The Auditor must hold office from the conclusion\nof the First AGM, i.e. Annual General Meeting to the conclusion of the sixth\nAGM, i.e. Annual General Meeting, which is for five years.<\/li><li>A notice regarding appointment of the Auditor\nmust be filed with the Registrar within 15 days of the Auditor&rsquo;s appointment.<\/li><li>All the criteria prescribed under Section 141[1]\nfor eligibility of the auditor has to be fulfilled.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Maintenance of Financial Statements<\/h2>\n\n\n\n<ul><li>Section 8 Company needs to prepare the financial\nrecords on an annual <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Basis&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In finance, the &amp;quot;basis&amp;quot; is a term with several applications, including representing the difference between the spot price and the future contract price of an asset, which is vital in investment(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/basis\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>basis<\/a>.<\/li><li>Once the financial records and statements get\nprepared, it must be produced to the registrar of the company.<\/li><li>The financial records must contain the financial\nstatements like the details of Trading Account, Balance sheet, Profit and Loss\nAccount.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Registers have to be maintained. <\/h3>\n\n\n\n<ul><li>All Section 8 Companies must mandatorily have statutory records in the registers.<\/li><li>Registers required to be maintained on a yearly basis to monitor how active the company has been annual.<\/li><li>The Register must have the details such as of its members, loans, charges and investments.<\/li><\/ul>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/rules-under-section-8-company-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">Rules and Regulations Under Section 8 Company Registration<\/a><\/mark>.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Preparation of the Director&rsquo;s Report<\/h2>\n\n\n\n<ul><li>According to Section 134 of the Companies Act,\n2013, the Director&rsquo;s Report is to be filed in Form AOC-4 <\/li><li>A Directors Report is prepared in order to\nexplain the exact position of the company to the shareholders and the future\nscope of its business.<\/li><li>The signed &lsquo;minutes of meetings&rsquo; is also to be\nmaintained at the Registered Office.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Income Tax Return Filing<\/h2>\n\n\n\n<ul><li>A Section 8 Company on or before 30th September of the next financial year has to file Income Tax Returns.<\/li><li>It is mandatory to file <a href=\"https:\/\/enterslice.com\/income-tax-return-filing\"><strong>Income Tax returns online<\/strong><\/a> in order to provide a complete overview of the income of the company.<\/li><li>However, there are certain incomes which are to be excluded from the income tax.<\/li><li>If the company is registered under Section 12A and 80G, then it can also claim for tax exemption.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Hold Board Meeting<\/h2>\n\n\n\n<ul><li>In the case of small companies, the Board\nmeeting of every company should be held twice a year <\/li><li>The gap between these two meetings must not be\nmore than 90 days.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Hold Annual General Meeting<\/h3>\n\n\n\n<ul><li>Every year the Annual General Meeting is to be\nheld on or before 30th September.<\/li><li>All the Directors, auditors and its members\nshould be notified about the meeting.<\/li><li>The notice has to be sent to the directors,\nauditors and members by a given period of not less than 21 days notice.<\/li><li>The notice regarding the Annual General Meeting\nis also needs to be published on the Company&rsquo;s Official website.<\/li><li>A report made of the Annual General Meeting must\nbe submitted in Form MGT- 15 within 30 days of the meeting.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Filing of Financial Statements with ROC<\/h2>\n\n\n\n<ul><li>The copy of financial statements must be filed\nin E-form AOC-4.<\/li><li>It must be filed within 30 days from the date on\nwhich the annual general meeting is held.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Filing of Annual return with ROC<\/h2>\n\n\n\n<ul><li>The <strong>annual return<\/strong> is required to be filed in Form MGT-7.<\/li><li>It must be filed within 60 days from the conclusion of the AGM, i.e. Annual General Meeting.<\/li><li>In the case, in any year if Annual General Meeting is not held, then also the annual returns must be filed within 60 days from the date on which the Annual General Meeting would have been held or from the date 30<sup>th<\/sup> September.<\/li><li>There must be reasons attached to the statement mentioning for not holding up the Annual General Meeting.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Importance of Compliances for a Section 8 Company<\/h2>\n\n\n\n<p>Section 8 Company is a form of NGO which is registered under the Companies Act, 2013. According to the Act, all Section 8 companies must adhere to the <strong>compliance<\/strong>, which is levied by Registrar of Companies and Income tax authorities. If there is a failure in fulfilling the required compliances, then the heavy penalties are to be paid, which may extend up to Rs. 1 lakh a year. Also, there might be possible chances that directors of such companies may even get blacklisted for a period of time. All the benefits given to Section 8 Company are for the ability to raise funds in the form of contributions and donations achieved through disciplined compliance. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Other Compliances for Section 8 Companies<\/h3>\n\n\n\n<ul><li>Notice as to the appointment of Auditor in Form ADT-1\nwithin 15 days of the appointment.<\/li><li>Director&rsquo;s consent in Form DIR 2 to occupy the\noffice within 30 days from the director&rsquo;s appointment.<\/li><li>Returns form in Form MR-1 within 60 days from\nthe appointment of Managing Director, key managerial person or managers<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Event-Based Annual Compliances of Section 8 Company<\/h3>\n\n\n\n<p>The <strong><a href=\"https:\/\/enterslice.com\/section-8-annual-compliance\">annual compliances of section 8 company<\/a><\/strong> requires to be filed on the occurrence of certain events. Below is the checklist of event-based compliances:<\/p>\n\n\n\n<ol><li>Appointment, re-appointment or Removal of\nDirectors&nbsp; <\/li><li>Appointment of the Key Managerial person&nbsp; <\/li><li>Appointment, re-appointment or Removal of\nAuditors&nbsp; <\/li><li>Transfer of shares&nbsp; <\/li><li>Change in the Company&rsquo;s name<\/li><li>Change of Registered Address&nbsp; <\/li><li>Any <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amendment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An &amp;quot;amendment&amp;quot; refers to the formal change or correction of a legal document, often involving additions, variations, or deletions to address irregularities or clarify points in an agreement.(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amendment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>amendment<\/a> in the Memorandum of\nAssociation&nbsp; <\/li><li>Any other changes in the company&rsquo;s policy<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">Due dates for the filing Section 8 Company Compliances<\/h2>\n\n\n\n<p><em>Section 8 Company must follow compliances within the duration mentioned below:<\/em><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  Form No\n  <\/td><td>\n  Compliance\n  <\/td><td>\n  Due Date\n  &nbsp;\n  <\/td><\/tr><tr><td>\n  MGT-15\n  <\/td><td>\n  Annual General Meeting\n  &nbsp;\n  <\/td><td>\n  30th September&nbsp;\n  \n  <\/td><\/tr><tr><td>\n  MGT-7&nbsp; \n  <\/td><td>\n  Annual Returns\n  <\/td><td>\n  Within the 60 days of Annual General Meeting\n  &nbsp;\n  <\/td><\/tr><tr><td>\n  AOC-4&nbsp;&nbsp; \n  <\/td><td>\n  Directors Report\n  <\/td><td>\n  Within the 30 days of Annual General Meeting\n  &nbsp;\n  <\/td><\/tr><tr><td>\n  &nbsp;ITR -6\n  <\/td><td>\n  Income Tax Returns\n  &nbsp;\n  <\/td><td>\n  30th September&nbsp;\n  \n  &nbsp;\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Immediate Compliance after Incorporation<\/h2>\n\n\n\n<p><strong><em>Appoint Auditor within 30 Days:<\/em><\/strong> The Section 8 Company\nnecessarily required appointing the Auditor within 30 days from the date of its\nincorporation for all the annual financial filings of a company. <\/p>\n\n\n\n<p><strong><em>Conduct Meeting for Board of Directors within 30 Days:<\/em><\/strong> The\nfirst time meeting of the Board of Directors has to be conducted within 30 days\nfrom the date of incorporation. Thereafter, the Board of Directors must hold at\nleast one meeting on every six calendar months.<\/p>\n\n\n\n<p><strong><em>Annual General Meeting:<\/em><\/strong> A Section 8 company shall hold its\nfirst Annual General Meeting (AGM) within 9 months from the closure of the\nfirst financial year of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Penalties for Non-Compliance<\/h2>\n\n\n\n<p>The Ministry of Corporate Affairs, i.e. MCA has prescribed\npenalties for section 8 Company if one does not comply with the procedures:<\/p>\n\n\n\n<ul><li>The Central Government can revoke the license\ngranted to the company if it has been found out that the company is working in\na fraudulent manner or violates any of the objects of the company.<\/li><li>The companies shall be liable to pay the fine,\nwhich shall not be less than 10 lakh rupees and further can be extended to 1\ncrore rupees.<\/li><li>The Directors and the officer of the company who\nis in default must be punished with imprisonment for a term or fine which\nextend to 25 lakh rupees or with both.<\/li><li>Every officer in default must be liable for his\naction under section 447 if it is discovered that the affairs of the company\nwere conducted by fraud.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What are the benefits of following annual compliance of Section 8 Company?<\/h2>\n\n\n\n<p>The main benefit of meeting the compliance of Section 8\nCompany is to avoid the penalties. And also, it ensures the smooth functioning\nof the company. Below are some of the listed points:<\/p>\n\n\n\n<ul><li>Better Credibility of the Companies<\/li><li>Avoid getting into any legal trouble<\/li><li>To build trust amongst the customers<\/li><li>To avoid penalties<\/li><li>There is no requirement of the minimum paid-up\nshare capital or appointment of any Company Secretary.<\/li><li>Non-applicability of the maximum number of the\nDirectors.<\/li><li>Non-requirement of the Independent Directors.<\/li><li>No requirement for the constitution of\nnomination, Stakeholder Relationship Committee and Remuneration Committee<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What is the Tax Compliances for the Section 8 Company? <\/h2>\n\n\n\n<p>A Section 8 company has a liability to pay corporate tax, as\nmentioned by the Income Tax Act. Also, it can claim for certain incomes which are\nto be excluded in calculating the total income when income tax is paid. The\ncompliances need to be fulfilled to claim such exemptions are:<\/p>\n\n\n\n<ul><li>The Section 8 Company must be registered under\nSection 12A of the Income Tax Act, and with the Principal Commissioner using\nthe Form 10A. <\/li><li>It must also comply with the conditions provided\nunder Section 11, so for the eligibility for the exemption.<\/li><li>The company requires to be approved under\nSection 80G, through Form 10B.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Conclusion<\/h3>\n\n\n\n<p>Section 8 Company enjoys the various exemptions and benefits like other kinds of NGOs. It is far better to incorporate a non-profit organization in the form of a Company rather than trust or society. The company needs to follow all the mandatory compliances and event-based compliances for avoiding facing the penalties imposed by the Government. The Ministry of Corporate Affairs, i.e. <strong>MCA<\/strong><sup><a href=\"http:\/\/www.mca.gov.in\/\"><strong>[1]<\/strong><\/a><\/sup>, has provided very strong punishments on the non-compliance. Section 8 Company also enjoys an extra benefit of the Tax exemption if it gets registered under Section 12A and 80G of the Companies Act, 2013.<\/p>\n\n\n\n<div class=\"read\"><p><b>See Our Recommendation:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/checklist-incorporation-section-8-company\/\" target=\"_blank\" rel=\"noopener noreferrer\">Checklist for Incorporation of Section 8 Company<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Section 8 Company has the objective of the encouragement in the field of arts, sports, science, research, religion, education, social welfare, and protection of the environment and other objectives. Section 8 Company is to be registered as Non- Governmental Organization under the Companies Act, 2013. The promoters of section 8 Company do not make and [&hellip;]<\/p>\n","protected":false},"author":34,"featured_media":31092,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1405],"tags":[2927],"acf":{"service_id":"11"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Relevance of Annual Compliance for Section 8 Company-Enterslice<\/title>\n<meta name=\"description\" content=\"A Section 8 company shall hold its first Annual General Meeting (AGM) within 9 months from the closure of the first financial year of the company.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/the-relevance-of-annual-compliance-for-section-8-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Relevance of Annual Compliance for Section 8 Company-Enterslice\" \/>\n<meta property=\"og:description\" content=\"A Section 8 company shall hold its first Annual General Meeting (AGM) within 9 months from the closure of the first financial year of the company.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/the-relevance-of-annual-compliance-for-section-8-company\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2020-04-21T05:16:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-09-13T11:10:23+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/04\/Relevance-of-Annual-compliance-Section-8-Company.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Soumya Bajpai","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/02\/Soumya-Bajpai.jpg","authorDescription":"Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.","postViews":471,"readingTime":7,"nextPost":{"id":31099,"slug":"msme-samadhaan-to-recover-pending-dues-from-customers-by-msmes"},"prevPost":{"id":31082,"slug":"provisions-for-valuation-by-registered-valuer-under-companies-act-sebi-and-ibc"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/04\/Relevance-of-Annual-compliance-Section-8-Company.jpg","postTerms":"Section 8 Company","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/31088"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=31088"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/31088\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/31092"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=31088"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=31088"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=31088"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}