Section 8 Company

Is Audit Compulsory for Section 8 Company?

An audit and appointment of an auditor are required because the auditor will review the company's financial records and yearly reports and provide his unbiased opinion.

According to the Companies Act of 2013, all Section 8 Companies must report Section 8 Compliance to the Ministry of Corporate Affairs. Supporting, advancing, and encouraging activities in the domains of science, art, sports, charity, business, and other areas is one of the main reasons that Section 8 Company was founded. Section 8 Companies are included in the non-governmental organisations’ category. 

These activities will be handled professionally for you as part of Vakilsearch’s annual compliance package for Section 8 Companies while you concentrate on the company’s core operations. Experts at Vakilsearch will make your company compliant for Section 8 Companies in a much-simplified process.

Section 8 Company Compliance 

  • Audit: A section 8 company must audit its financial records annually. A Section 8 company is required to appoint an auditor to annually review and maintain its financial records and statements
  • Conducting Board Meetings: A company’s board of directors should conduct board meetings twice a year, with a maximum of three months or ninety days between sessions
  • Income Tax Return filing (ITR): IT returns filing for Section 8 companies must be submitted no later than September 30 of the preceding fiscal year. In order to offer thorough information about its earnings, the corporation must file an income tax return. If the company is registered under Sections 12A and 80G, it may be eligible for tax exemption
  • Filing Financial Return with ROC: To send copies of financial reports and statements, utilise the E-form AOC-4. Within a month or 30 days after the date the annual general meeting is held, it must be filed
  • Annual General Meeting (AGM) – This company’s annual general meeting must occur by September 30th or earlier each year. All directors, shareholders, members, and auditors must be present at the meeting. Within 21 days of the meeting, a formal notification must be provided to all parties involved. The report of the Annual General Meeting must be filed using Form MGT-15 within a month or 30 days of the meeting’s conclusion
  • Annual Return Filing with ROC – The yearly return of a section 8 company must be filed on Form MGT-7. After the annual general meeting is held, the annual return must be filed within 60 days. If there isn’t an annual general meeting held during the year, the yearly return must be filed within sixty days after the day or days on which the annual general meeting should have occurred, which is September 30. Annual filing is mandatory for all companies in India and Vakilsearch is your go-to source for all such needs to avoid any legal complications and penalties.

Section 8 Company Income Tax Compliance

According to the Income Tax Act, Section 8 Companies are required to pay corporate tax. However, the Section 8 Company can continue to enjoy the income tax exemption by including a few measures.

The following compliances must be met by Section 8 Company in order to benefit from such exemptions:

  • According to Section 12A of the Income Tax Act, Section 8 companies are required to register with the Principal Commissioner using form 10A
  • If the business wants to meet the requirements for exemption eligibility, it must follow the rules outlined in Section 11
  • The nominees must receive Form 10B approval from Section 80G.

Documentation Needed for Section 8 Companies to Comply Annually

There is a list of the necessary paperwork that audit for section 8 company must submit annually;

  • Memorandum of Association (MOA)
  • Article of Association (AOA)
  • Certificate of Incorporation
  • Digital Signature Certificate (DSC)

The Benefits of Section 8 Compliance for Companies

  • Eliminate Penalties: If compliances are not filed, the company risks fines and penalties
  • Creating Trust: From the viewpoint of suppliers, vendors, and customers, a business is deemed trustworthy if it timely files compliance reports and discloses financial data
  • Operations Transparency: Submission of compliances reveals the current state of affairs in business operations. Compliance documents, including financial returns, can provide information about the company’s financial situation
  • Avoid any Legal Trouble: The Ministry of Corporate Affairs may issue a notice if compliances are not filed, among other legal repercussions. To avoid any legal issues, one should file compliance on time
  • Credibility: If the compliances are timely filed, a company will have an easier time obtaining financial assistance and market credit than one whose compliances are inappropriate.

Penalties that will be Assessed in the Event of Non-Compliance

In the event that any compliance is not followed, the Ministry of Corporate Affairs has the power to apply certain fines. The following penalties are to be imposed:

  • The Central Government may terminate the company’s authorisation in the unlikely event that it learns the organisation is acting dishonestly or against its stated objectives
  • The companies will be subject to a fine that cannot be less than ₹10 lakhs and may not exceed ₹ 1 crore
  • The company’s chiefs and every official who is in default will be held accountable and may face both imprisonment and a fine of up to ₹ 25 lakhs

Characteristics of section 8 companies

  • Charitable Objective: Companies with Section 8 status are those whose primary goal is not to make a profit. Their goals are solely charitable
  • No Minimum Share Capital: There is a requirement for a minimum paid-up share capital for Section 8 companies under the Companies Act
  • Government Authorisation: These businesses can only be established with authorisation from the Central Government. Such a license may be revoked at any time as needed by the Central Government
  • Members of Section 8 companies are only liable for a fixed amount of money, hence there is no such thing as an unlimited liability.

Conclusion 

The compliances that must be reported on a recurring basis are known as annual compliances. These are recurring in nature and represent a liability for the company to disclose. Every Section 8 company is required to engage an auditor to manage the company’s books of accounts. All Section 8 companies must appoint an auditor. – A section 8 company is required to annually audit its financial records.

In order to ensure that any data given to department and ministry websites is acceptable, Vakilsearch has experience aiding Section 8 companies with appropriately filling forms and annual returns. So what are you waiting for? Get all your annual compliance done by the professionals of Vakilsearch.

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