Section 8 Company Compliance
The objective of establishing a Section 8 Company is to foster, support, and cultivate endeavors associated with art, science, sports, commerce, charitable initiatives, and similar fields. A Section 8 Company can be classified in various ways.
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Overview of Section 8 Company Compliance
The Companies Act of 2013 mandates that all Section 8 Companies comply with the regulations set forth by the Ministry of Corporate Affairs (MCA).
The primary objective of establishing a Section 8 Company is to foster, support, and develop initiatives related to art, science, sports, commerce, and charitable endeavors, among others. Such companies are classified as Non-Governmental Organizations (NGOs). They are permitted to operate under the designation of “Limited Company,” although the term “Limited” is not appended to their names. In summary, Section 8 Companies are dedicated to advancing the welfare of underprivileged communities and sectors within India. Furthermore, these companies are not obligated to distribute income or dividends to their members.
Benefits of Section 8 Company Compliance
- Gives company a better credibility
- Protects the company from any legal trouble
- Help the company in circumventing penalties
- Work in the direction of forming trust amongst the customers
Penalties to be charged in case of Non-Compliance
- The Central Government reserves the right to revoke the permit granted to the organization if it determines that the organization is operating fraudulently or in a manner that contravenes its stated objectives.
- Organizations found in violation will incur a penalty, with fines starting at ten lakh rupees and potentially reaching up to one crore rupees.
- Directors and any officials of the organization deemed to be in default may face imprisonment for a term that could extend to twenty-five lakh rupees, or may be subjected to both finesand imprisonment.
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Should it be established that the organization’s affairs were conducted dishonestly, all officials in default will be liable for action under Section 447.
Deadlines for Submitting Section 8 Company Compliance Documents.
Failure to comply may result in penalties; however, for a Section 8 Company, the most effective method to avoid such penalties is relatively straightforward. The company simply needs to adhere to the compliance requirements within the designated timeframe.
Event-based Annual Compliances of Section 8 Company
Event-based compliances, as the term suggests, refer to the requirements that must be documented in response to specific occurrences. Unlike annual compliances, these are not periodic and occur as needed.
A comprehensive checklist for compliance requirements related to events for Section 8 Companies:
- Transfer of shares
- Allotment of shares
- Appointment/Resignation of Directors
- Appointment/Resignation of Auditors
- Modification in company’s name
- Modification in company’s MOA
- Appointment of Key Managerial Personnel
- Receipt of share application money
- Any alteration in the company’s structure
Tax Compliance for Section 8 Companies
The Company is obligated to pay corporate tax as stipulated in the Income Tax Act. However, by implementing specific strategies, the Company may qualify for exemptions on certain income from this tax. To be eligible for these exemptions, a Section 8 Company must adhere to the following compliance requirements:
- Section 8 companies must be registered under Section 12A of the Income Tax Act, with the Principal Commissioner using form 10A.
- It must adhere to the conditions mentioned in the Section 11 if the company wants to fall under the criteria of eligibility for the exemption.
- Section 80G must approve the company through Form 10B.
Documents Required for Annual Compliances of Section 8 Company
- Designation of Auditor –
-
It is compulsory for a Section 8 company to appoint an auditor to take care of their financial recordings every year
- Keeping Records
-
Maintaining statutory records in registers is expected from Section 8 companies. These registers are maintained on a year basis and the purpose of these registers is to check how the company has performed annually. Information related to members, loans, charges and investment is provided in the register.
- Management of Financial Statements
-
Financial records of a Section 8 Company are maintained on an annual basis. Once the financial records are prepared they are presented in the front of the registrar. Financial records consist of the following information:
- Trading Account
- Profit and Loss Account
- Balancesheet
- Income Tax Return Filing
-
Preparing Director’s Report
-
Conduct Board Meeting
-
Conduct Annual General Meeting
-
Filing of Financial Return with RoC
-
Filing of Annual Return with RoC
Legalixo Support in transitioning a Section 8 Company Compliance
- Purchase a Plan for Expert Assistance
- Add Queries Regarding the conversion
- Provide Documents to Legalixo Expert
- Complete all other required Actions
- Get your work done!
Penalties to be charged in case of Non-Compliance
- The Central Government reserves the right to revoke the permit granted to the organization if it determines that the organization is operating fraudulently or in a manner that contravenes its stated objectives.
- Organizations found in violation will incur a penalty, with fines starting at ten lakh rupees and potentially reaching up to one crore rupees.
- Directors and any officials of the organization deemed to be in default may face imprisonment for a term that could extend to twenty-five lakh rupees, or may be subjected to both finesand imprisonment.
-
Should it be established that the organization’s affairs were conducted dishonestly, all officials in default will be liable for action under Section 447.
Deadlines for Submitting Section 8 Company Compliance Documents.
Failure to comply may result in penalties; however, for a Section 8 Company, the most effective method to avoid such penalties is relatively straightforward. The company simply needs to adhere to the compliance requirements within the designated timeframe.
Event-based Annual Compliances of Section 8 Company
Event-based compliances, as the term suggests, refer to the requirements that must be documented in response to specific occurrences. Unlike annual compliances, these are not periodic and occur as needed.
A comprehensive checklist for compliance requirements related to events for Section 8 Companies:
- Transfer of shares
- Allotment of shares
- Appointment/Resignation of Directors
- Appointment/Resignation of Auditors
- Modification in company’s name
- Modification in company’s MOA
- Appointment of Key Managerial Personnel
- Receipt of share application money
- Any alteration in the company’s structure
Tax Compliance for Section 8 Companies
The Company is obligated to pay corporate tax as stipulated in the Income Tax Act. However, by implementing specific strategies, the Company may qualify for exemptions on certain income from this tax. To be eligible for these exemptions, a Section 8 Company must adhere to the following compliance requirements:
- Section 8 companies must be registered under Section 12A of the Income Tax Act, with the Principal Commissioner using form 10A.
- It must adhere to the conditions mentioned in the Section 11 if the company wants to fall under the criteria of eligibility for the exemption.
- Section 80G must approve the company through Form 10B.
Documents Required for Annual Compliances of Section 8 Company
- Designation of Auditor –
-
It is compulsory for a Section 8 company to appoint an auditor to take care of their financial recordings every year
- Keeping Records
-
Maintaining statutory records in registers is expected from Section 8 companies. These registers are maintained on a year basis and the purpose of these registers is to check how the company has performed annually. Information related to members, loans, charges and investment is provided in the register.
- Management of Financial Statements
-
Financial records of a Section 8 Company are maintained on an annual basis. Once the financial records are prepared they are presented in the front of the registrar. Financial records consist of the following information:
- Trading Account
- Profit and Loss Account
- Balancesheet
- Income Tax Return Filing
-
Preparing Director’s Report
-
Conduct Board Meeting
-
Conduct Annual General Meeting
-
Filing of Financial Return with RoC
-
Filing of Annual Return with RoC
Legalixo Support in transitioning a Section 8 Company Compliance
- Purchase a Plan for Expert Assistance
- Add Queries Regarding the conversion
- Provide Documents to Legalixo Expert
- Complete all other required Actions
- Get your work done!
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