Annual Compliance of Section 8 Company

About Annual Compliance of Section 8 Company

A Section 8 Company is formed with the objective of promoting commerce, arts, science, sports, education, research, protection of environment etc. for the benefit of the society and country as a whole. Though section 8 companies are authorized to run a business of profit, but the profit can only be utilized for the social objectives for which it was formed. A section 8 Company is also required to adhere to the compliance set by the Registrar of Companies and Income Tax Authorities, failure of which attracts heavy penalties and even results in director’s disqualification in long run.

Company Compliance with TRUSTLINK

Section 8 Company compliances are time bound. Each and every compliance has a definite deadline, beyond which a company may attract penalties that to be bore by the promoters. So, it becomes necessary to keep a regular check on the deadlines. We, in TRUSTLINK keep our clients updated with each upcoming compliance with early reminders that makes it easy for promoters to go with their preparations for every compliance without having a last time embarrassment.

Compliances for newly incorporated Section 8 Company

A newly incorporated section 8 company has some onetime compulsory filings to start its business journey as a Company:

  • Appointment of First Auditor (ADT-1): A newly incorporated section 8 companies must appoint its first Auditor within the 30 days of its incorporation for conducting statutory audit of books of accounts of the company for the financial year. The appointment of Auditor should be intimated to the ROC through ADT-1 form with necessary documents. The first Auditor shall hold the office till the conclusion of the first Annual General Meeting.
  • Commencement of Business (INC20A): Any section 8 company that incorporated after 2nd November 2018 and having a share capital shall not commence any business activity without this one time filing. As per Company Law, a declaration to be filed by the directors within 180 days from the date of incorporation in INC20A Form with the ROC that every subscriber to the MOA has paid the agreed upon shares to be taken by him on the date of making such declaration.

Annual Compliance for a Section 8 Company

Following compliances and filing are mandatory for each fiscal year for a section 8 company:

  • First Board Meeting: First board meeting of the company along with the Directors within 30 days of incorporation of the section 8 company. Minutes of meeting should be prepared and declaration of board meeting must be sent to each director at least 7 days before the meeting.
  • Subsequent Board Meetings: Minimum of 4 board meetings to be held each year with a gap of not more than 120 days between two meetings.
  • Acknowledgement of Interest by Directors: A Director of a Section 8 Company is required to compulsorily disclose his concern or interest including shareholding interest in any other organisations by giving a notice in Form MBP-1
  • Subsequent Auditor: The Board of Directors shall delegate the Auditor in first AGM of the company who shall hold the position till the conclusion of 6th AGM and shall notify the same to ROC by filing ADT-1.
  • Annual General Meeting (AGM): Every section 8 company required to have a Annual General Meeting on or before 30th September on a working day at the registered office of the company. A notice is required to be given in advance regarding the same.
  • Filing of Annual Return (MGT-7): Annual return for the period 1st April to 31st March to be furnished by every Private Limited Company every year within 60 days of operating of Annual General Meeting. It is a mandatory compliance for all registered section 8 companies to file this annual return in form MGT-7. The last date for filing MGT-7 is generally 29th November every year.
  • Filing of Financial Statements (AOC-4): Every section 8 company is expected to file its balance sheet, along with the statement of Profit & Loss account and Director Report in Form AOC-4 within 30days of Annual General Meeting.
  • Statutory Audit of Accounts: Every section 8 company should prepare its accounts and get it audited by professional/Chartered Accountant at the end of the financial year. The Audited financial statements along with Audit Report should be filed with the Registrar.
  • Income Tax Return: A section 8 company can avail the benefit of tax exemption if it is registered under section 12A and 80G. In other cases, a section 8 company has to give income tax to government as a normal company on profit.

Benefits of Annual Compliance

  • Regularity in the compliance is a increases the business credibility of a section 8 company. Moreover the compliance status of a section 8 company is shown on the MCA portal. Proper compliance records attract more grants and donations and help the section 8 company to meet its social objectives.
  • Every donors or corporates give importance to financial records and compliance status of a section 8 company before donating or approving CSR funds. So, to attract more revenue, it’s important to file annual returns regularly.
  • Non-adherence to regular compliance attracts huge penalties that may disrupt the company profitability. Failure to file the annual compliance can also reduce the status of the section 8 company’s social performance.

Documents Required for Annual Compliance

To prepare the total annual compliance of a section 8 company, the following documents generally serves the purpose; other than any special case.

  • PAN Card of the Company
  • Certificate of Incorporation
  • MOA and AOA of the Company
  • Audited financial statements
  • Audit Report and Board Report
  • DSC of Directors.

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