Checklist of Section 8 Annual Compliance Requirements in India

The main goal of Section 8 Company is to Promote science, the arts, business, sports, philanthropic endeavors, etc. Generally Section 8 Companies are registered to promote underrepresented populations and industries in India and one of India's most popular types of Non-Governmental Organization (NGO) is a Section 8 Company.

The Companies Act, 2013 requires all Section 8 companies operating in India to adhere to certain rules and regulations as outlined below.

Benefits of following Section 8 Annual Compliances

Following are the benefits of following Section 8 Annual Compliances:

1. Transparency in the Operations

The Company's financial status is explained in detail by compliances including the creation and submission of financial returns and annual returns. Therefore, by filing the Company's compliances, the Company's operation or actual situation become transparent.

2. Trust / Credibility

‍Companies with timely compliance filings are seen as more reliable than those without. Therefore, it is simple for such businesses to obtain financial assistance and market credit from the relevant authority.

3. Avoid Legal Complications

If you don't adhere to the Company's compliance policies, you could end up in legal difficulty later on after receiving letters from the MCA, for example. Therefore, it's always essential to comply with the requirements on time to avoid any legal is sues down the road.

4. Build Trust

Whether it's a consumer, a vendor, a supplier, or a regulatory body, everyone has faith in businesses that submit compliances on time and are completely transparent with their financial information. Because they have greater credibility, these businesses find it simple to win over everyone's trust.

5. Avoid Penalties

The primary justification for submitting compliances on time is, of course, to avoid penalties. Failure to comply could have a number of negative effects, including business closure, license confiscation, or hefty fines.

Checklist for Section 8 Annual Compliances in India

1. Filing ADT-1 .i.e. Appointment of Auditor

The Section 8 Company is required by law to appoint an auditor to handle the Company's yearly financial filings. Section 139 of the Companies Act of 2013 mandates that each Company submit Form ADT-1 to the MCA notifying it of the appointment of the auditor. The statutory auditor, who will be hired for a term of 5 years, will audit the company's books of accounts and annual reports.

2. Maintenance of Books of Accounts

The Company's books of accounts must be kept up to date by every Section 8 Company. Records of the submission of annual returns and other documents are kept in the books of accounts.

3. Maintenance of Statutory Registers

The statutory records must be kept in the registers by all Section 8 Companies. The register includes information about members, loans, investments, fees, etc. Additionally, it gives a general summary of how actively the Company operates each year.

4. Convening Board Meetings

Every year, within six months after the end of the fiscal year, there must be an annual general body meeting and additional board meetings.

5. Director’s Report

The Director's Report is a document that details the Company's compliance with a number of financial, accounting, and corporate social obligations. This report is the responsibility of the Board of Directors. Producing a director's report is a requirement for every Section 8company in India under the terms of the 2013 Companies Act.

6. Preparation of Financial Statements

The balance sheet, cash flow statement, profit & loss of the Company, and more are included in the financial statement of the Company. As a result, it is mandatory for every Company to compile the financial statements for the previous fiscal year.

7. Income Tax Returns Filing

Before or by September 30th of the next fiscal year, Section8 Companies must file their income tax reports. The purpose of filing income tax returns is to provide a summary of the Company's total income.

8. Filing of Financial Statements (AOC-4)

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.

9. MGT-7, Filing of Annual Returns with ROC

Section 8 Corporations must additionally submit Form MGT-7 to the ROC for filing the Company's annual returns because they are registered as limited companies. Within sixty days of the most recent annual general meeting, MGT-7 must be submitted.

Event-based Section 8 Annual Compliances

As the name implies, event-based compliances are those that must be reported when particular events take place. These are non-periodic compliances, as opposed to annual compliances. The following is the Section 8Company's event-based compliance check list:

1. Appointment or resignation of Directors;
2. Appointment or resignation of Auditors;
3. Transfer of Shares;
4. Appointment of KPM (Key Managerial Personnel);
5. Receipt of share application money;
6. Change of Company’s name;
7. Amendment in the Company's MOA (Memorandum of Association);
8. Change in Company's registered address;
9. Any other changes in the Company's structure, etc.

Due Dates for Filing Section 8 Company Compliances

Follow the compliances within the allotted period in order to avoid penalty and fee for non-compliance for Section 8 Company.

The deadlines for Section 8 Company compliance are listed below:

Penalties for Non-Compliance

In the event that any procedure is not followed, the Ministry of Corporate Affairs has the authority to apply certain fines. The following are the potential penalties:

• In the unlikely event that it discovers that the Section 8 Company is operating improperly or in a way that violates the Company goal, the Central Government may revoke the permit granted to the Company;
• The chiefs and every official of the organization in default shall be subject to a term of imprisonment, a fine that may be increased to Rs.25 lakhs, or both;
• If found guilty, the Organization will pay a fine that must be at least Rs.10 lakhs and may even reach Rs.1 crore.

FAQ on Section 8 Companies

Que: Who may submit an application to register a Section 8 company?
Ans - Any individual or group of individuals may submit an application for a section 8 company registration as long as they: The company's mission is to further the values of the arts, sciences, research, culture, education, and general social welfare. Following incorporation, the business invests its earnings in advancing its goals. The business does not provide shares or dividends to its shareholders.

Que: Who grants a Section 8 company's licence?
Ans - The licence for a Section 8 company may only be issued by the Registrars of Companies of the relevant jurisdictions with permission from the Central government.

Que: Can a One Person Company (OPC) be registered or transformed into a Section 8 Company?
Ans - No. OPC cannot be incorporated or changed into a Section 8 company under the Companies Incorporation (Rules), 2014 regulations.

About Jordensky

At Jordensky we want to ensure that small businesses continue to thrive while we provide them the best inputs using the latest technology and tools.

Jordensky helps you in accounting, taxes, MIS, and CFO services for Startups and growing business and are focused on delivering an experience of unparalleled quality.