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Section 8 Compliance

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Introduction

In this arena, where on daily basis there are 100s of companies which are getting register to make profit out of them, there are also some companies which do not have any motive to earn profit but to work for the social causes. These are known to be as Non-Profit organisation.

For registering any such Non-Profit Organisation, Section 8 Companies are best to go with. These are registered under Companies Act 2013 with a sole objective of social welfare only without taking any profit out of them.

A Section 8 Company has the main objective of promotion of science, art, commerce, sports, charitable activities, etc.

Like any other type of business entity, Section 8 companies are also required to maintain and file compliance. As per guidelines, these companies are not allowed to forget to comply with the compliance. Any failure or delay in this will lead to heavy penalties. Due to non-filing of the compliances MCA has already issued notice to almost 2 lakh companies that got stuck-off and almost 3 lakh directors got disqualified - according per one of the MCA’s report.

IMPOTANCE OF THE ANNUAL COMPLIANCE-

As per Section 609 of Companies Act, Registrar of Companies (RoC) is an authority under MCA that particularly involves into the administration of the Companies Act, 2013. The role of these ROCs is to ensure every company registered under Companies Act are registered as per the details mentioned in the act and are complying with the statutory requirements.

The requirements mentioned in the Companies Act, 2013 which every company registered under Companies Act, 2013 have to fulfil annually are termed as ROC compliances. These compliances includes their annual details like the financial statements or loan details, shareholder and director details, etc. These compliance many sometimes seems a tedious task to follow, however can result into –

  • The smooth operation of the company
  • Transparency in the company’s operations
  • Better Credibility rate
  • Attracts more donations
  • Avoid legal trouble
  • Build trust among donors
  • Avoid penalties of non-filing

List of the compliances to be followed by section 8 –

MANDATORY COMPLIANCE

These are to be filled annually without any fail. These include -

S. No.

Compliance to be done

Form Name

Details

Due dates

1.

Appointment of Auditor

ADT 1

The sole objective of auditor is to check and verify all the financial filings of the company.

 

Within 30 days from the date of incorporation/ first Annual General Meeting

2.

Maintenance of Financial Statements

 

Financial records (including Trading Account, Profit and Loss Account and Balance sheet) has to be maintained on an annual basis and must be submitted to the registrar.

 

 

3.

Registers are to be maintained

 

The Register must include the details of members, charges, loans and investments.

 

 

4.

Director’s Report

 

AOC 4

Directors Report is to be prepared to explain the shareholders the exact financial position of the company and the scope of its business.

 

30th October

5.

Income Tax Return Filing

 

 

Income Tax Returns must be filed on or before 30th September of the next financial year.

 

30th September  

6.

Hold Board Meeting

 

 

Held twice a year and the gap between the two meetings should not be more than 90 days.

 

 

7.

Hold Annual General Meeting

 

MGT 15

All the Directors, members, and auditors must be notified about the meeting and the notice should be sent minimum 21 days in advance.

 

30th September  

8.

Filing of Financial Statements

 

AOC 4

It should be filed within thirty days from AGM

 

Within 30 days of the Annual General Meeting

9.

Filing of Annual return

 

MGT 7

The annual return is to be filed in Form MGT-7 within 60 days from the conclusion of the Annual General Meeting.

If Annual General Meeting is not held, the annual return along with the reasons of not commencing AGM, must be filed within sixty days from the days on which the AGM should have been held that is 30 September.

Within 60 days of the Annual General Meeting  

 

EVENT BASED COMPLIANCE -

If in between the financial year a Section 8 company plans to do any changes in the management part e.g. change in registered office, change in director, adding any shareholder etc. are considered as event based requirement. These changes are required to be updated to RoC as soon as they are done, this update is termed as Event Based Compliance. These are also mandatory to file. These can be-

S. No.  

Compliance Detail

1.

Appointment, re-appointment of Director

2.

Removal of Directors  

3.

Appointment, re-appointment of Auditor

4.

Removal of Auditor

5.

Change in the  Company’s name  

6.

Change of Registered Address

7.

Amendment in the Memorandum of Association  

8.

Share Transfer

PENALTIES OF NON-COMPLIANCE -

  • Fine of up to ten lakh rupees and can be extended to one crore rupees.
  • The directors can punished with a fine of up- to INR 25 lakh rupees.
  • Director can be dis-qualified
  • MCA may revoke the license granted to the Section 8 Company in case if it finds that there is any activity running which was not amended in the MOA.
  • If any fraudulent activity is found to be conducted, then all the members and auditor in default will be liable for action under section 447.

EXPERT’s CALL

Registering a non-profit organisation under Section I may sound easy but from the above discussion it’s very clear that even an NGO has to maintain and fulfil the requirements as by MCA under Companies Act 2013 just like any other company. The on time filing of these compliance gives an advantage to the Section 8 NGO of not standing in pool of penalties also results in easy sail while running it.

The compliances are required to be followed on annual basis. It’s not only about the filling but it also about the correct filing of the form within due date.

Corpseed advice you that it’s better to avoid the last minute filing of the forms, as many times MCA portal also not works due to heavy traffic. Our experts will help you in the filing of all the forms days in advance.

BOOK A FREE CONSULTATION

Get help from an experienced legal adviser. Schedule your consultation at a time that works for you and it's absolutely FREE.

Author
Shamshad Alam
Experienced Digital Marketer with a demonstrated history of working in the internet industry. He likes to write about the latest technology trends, Skilled in Digital Marketing likes. Search Engine Optimization, SMO, SEM, PPC, Content Writing, and, Designing, etc.