Understanding Section 8 Companies: Annual Compliances and Benefits

Understanding Section 8 Companies: Annual Compliances and Benefits

Category : Section 8 Company

Section 8 companies in India are non-governmental organizations (NGOs) established to support and promote a wide range of activities. These companies are registered to assist underprivileged populations and industries. In this article, we will delve into the Section 8 Company Annual Compliance companies need to fulfil.


Benefits of Section 8 Companies:

Section 8 Companies offer several advantages to those interested in establishing non-profit organizations. These benefits include:


Flexibility: Section 8 Companies provide greater flexibility and a structured approach to executing non-profit objectives.


No Capital Limitations: Section 8 Companies do not have any minimum or maximum limits on paid-up capital.


Tax Benefits: Section 8 Companies are eligible for tax benefits under Section 12AA and 80G of the Income Tax Act.


Directorship Access: Members or partners of any company or firm can access directorship positions in Section 8 Company Annual Compliance.


Annual Compliances for Section 8 Companies:

Section 8 companies must fulfil various legal obligations and file annual compliances. Let's discuss the different types of annual compliances required for Section 8 companies:


Appointment of Auditor: As per Section 139 of the Companies Act, 2013, every Section 8 company must appoint an auditor. The company needs to submit Form ADT-1 to the Ministry of Corporate Affairs (MCA) to notify them about the details.


Maintenance of Statutory Register: Section 8 companies are required to maintain a register containing details of loans taken by the company. This obligation is outlined in Section 8 of the Companies Act, 2013.


Conducting Meetings: Section 8 companies need to conduct an Annual General Meeting (AGM) twice a year, along with other statutory meetings.


Report by Board of Directors: The directors of a Section 8 company must prepare a report, known as the Director's Report. It includes information about the company's compliance, corporate social responsibilities, accounting, and other annexures. This report needs to be filed with the AOC-4 Form.


Preparation of Financial Statements: Section 8 companies must prepare financial statements, including a balance sheet, profit and loss statement. These statements must be filed with the Registrar of Companies (ROC) and audited by the appointed auditor.


Penalties for Non-Compliance:

Section 8 companies, like all registered companies, must comply with specific rules and regulations. Failure to comply can lead to penalties. Here are the penalties that Section 8 companies may face for non-compliance:


1. License Termination: If the Central Government determines that a company is operating dishonestly, it may terminate the company's license.


2. Monetary Fines: Fines imposed on non-compliant companies must be not less than Rs. 10 lakh to Rs. 1 crore.


3. Director and Officer Liability: Directors of non-compliant Section 8 companies can face both imprisonment and monetary fines of up to Rs. 25 lakhs.


4. Fraudulent Operation Liability: If a Section 8 company's operations are discovered to be fraudulent, the officers in default will be held liable. This is under section 447 of the Companies Act, 2013.


Section 8 companies are non-profit or non-governmental organizations that utilize their profits to promote various social causes. By adhering to their annual compliance requirements, these companies can enjoy numerous benefits.


Company Bio: PKP is a leading Chartered Accountancy Firm that provides a comprehensive range of services related to Section 8 Company Annual Compliance. We are dedicated to offering our clients outstanding service and cutting-edge solutions based on our years of expertise.

14 Jun, 2023


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