Having a basic understanding of section 8 companies is essential before we can proceed to Annual Compliance. According to the Companies Act 2013, non-profits and charitable organizations can now register as Section 8 companies in India. Besides promoting commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, a Section 8 Company can be incorporated as a private limited or public limited company.
KEY FEATURES OF SECTION 8 COMPANY:
- Private companies must have at least two directors and public companies must have at least three directors.
- Be subject to all the rights and responsibilities of a limited company.
- Section 8 companies can be members of firms.
- Objects can only be promoted with profits/income.
- Dividends cannot be paid to its members.
- Only the Central Government can alter its memorandum.
- There is no requirement to add the words “limited” or “private” to its name.
- AUDITOR APPOINTMENT- As per section 139 of The Companies Act 2013, a company must appoint an auditor whether it is a public, private, or section 8 company, As part of the Companies Act 2013, the Registrar of the Companies must appoint an auditor within 30 days of its incorporation and submit the form ADT-1 (Information for Appointment of Auditor) within 15 days of the appointment of the auditor along with the applicable fees.
- KEEP STATUTORY RECORDS – State law mandates that all companies keep statutory records. Companies Act, 2013 specifies that section 8 companies must maintain their proper records in separate registers such as the register of the company, the register of members, the register of loans, and the register of charges. As a result of maintaining separate registers, compliance is easier for all and helps companies avoid heavy penalties that could result if proper compliance is not achieved.
- DIRECTORS AND SHAREHOLDERS MEETINGS – Directors should meet to discuss the performance of the company, review the business, decide future strategy, etc. To establish healthy communication with shareholders about the company, directors should also meet them. According to section 173 of the Companies Act, 2013 section 8, a company shall hold at least one board meeting every six calendar months. A gap of 90 days between two board meetings is required. Additionally, its members must hold an Annual General Meeting within six months of the end of its fiscal year.
- A DIRECTOR’S REPORT refers to a document in which the director of the company discloses both the financial and non-financial position of the company to its shareholders. In accordance with section 134 of The Companies Act 2013, every company, including section 8 companies, is required to prepare a Board Report.
- FILLING OUT INCOME TAX RETURNS – An income tax return is a form submitted to the income tax department of India with information about a person’s or entity’s income and taxes due on it. Every year, Section 8 companies are required to file their income tax returns in form ITR-7 by September 30.
- STATUTORY BOOKS OF ACCOUNTS – As required by section 128 of The Companies Act 2013, every company is required to keep a proper book of accounts at its registered office or such other place as prescribed, which should give a true and fair view, prepared on an accrual basis and using double entry methods. Profit and loss sheets,cash flow statements, and so on, make up books of accounts.
- Section 8 – FILLING OF FINANCIAL STATEMENTS AND ANNUAL RETURNS – AOC-4 (Form for filing financial statement and other documents with the Registrar) and MGT-7 (Form for filing an annual return by a company) must be filed with the Registrar of Companies within 30 days and 60 days of the company’s annual general meeting, respectively.