Annual Compliance of Section 8 Company
The Companies Act of 2013 outlines Section 8 companies that serve to promote areas such as commerce, education, and social welfare, prioritizing the public interest over profit generation. These companies in India must fulfill annual compliances to ensure honesty, responsibility, and lawful adherence. This guide elaborates on the specific annual compliances that Section 8 companies in India must complete and following them is essential for maintaining legal status, obtaining exemptions, and fulfilling the organization’s social goals.
1. Incorporation and Registration
To ensure compliance on an annual basis, a Section 8 company should commence by achieving full incorporation and registration. This process comprises several crucial stages, including:
The Section 8 company’s directors and authorized representatives need to acquire digital signature certificates (DSCs) to sign electronic documents needed for registration.
The Registrar of Companies (RoC) needs to give the green light on the chosen name of the Section 8 company to make sure it meets the requirements for naming.
The RoC requires the preparation and submission of both the Memorandum of Association and the Articles of Association, which detail the goals, governance policies, and operational guidelines of the company.
To become a Section 8 company, the organization is required to submit the essential paperwork and declarations to the Registrar of Companies (RoC) and pay the applicable fees.
Once the RoC approves the registration, a Certificate of Incorporation will be provided to signify that the Section 8 company has been formally registered.
2. Annual General Meeting (AGM)
For Section 8 companies, it is mandatory to conduct an Annual General Meeting (AGM) within six months after the end of the financial year. This meeting provides an opportunity for stakeholders to deliberate and sanction significant issues. Adhering to AGM norms involves several important factors.
The members must approve the financial statements, which include the balance sheet, profit and loss account, cash flow statement, and auditor’s report.
The selection or renewal of auditors responsible for reviewing the company’s financial statements for the upcoming year must be authorized by the members.
2.3. Dividend Declaration: In case a Section 8 company has made profits, its members have the option to announce dividends at the Annual General Meeting (AGM).
In the English language, it is required that directors provide a report detailing the company’s activities, financial success, and future outlook.
The Annual General Meeting (AGM) is a suitable occasion to elect or designate directors to serve on the board of the Section 8 organization if it is required.
3. Financial Statements and Audit
Companies that fall under Section 8 are obliged to produce financial statements that accurately reflect their financial status and achievements. The core components of financial statements consist of the:
The balance sheet displays the assets, liabilities, and shareholder equity of the organization after the fiscal year.
The profit and loss statement gives a summary of the business’s earnings, expenditures, and overall profit or loss during the fiscal year.
The cash flow statement displays how much money and its equivalents have been coming in and going out during the fiscal year. This information is separated into three categories: operating, investing, and financing activities.
3.4. Accounts require additional details and clarifications, which can be provided through notes accompanying the financial statements. These notes help provide a better understanding of specific details mentioned in the statements.
The Section 8 company is required to choose a competent auditor to perform an examination of the financial records and issue an objective audit report.
Companies categorized as Section 8 are required to adhere to the relevant accounting standards to produce accurate and proper financial statements.
4. Annual Return Filing
Companies registered under Section 8 regulations must submit an annual report to RoC that details crucial details about the management and activities of the organization. The process of submitting the annual report includes making note of significant elements.
The annual return, which includes information about the registered office address, members, directors, key managerial personnel, and shareholding pattern, is submitted through Form MGT-7 within 60 days after the AGM.
Companies registered under Section 8 are required to submit Form AOC-4 as part of their annual reporting. This form contains financial statements, a report by the directors, and the auditor’s report.
The company’s yearly report should contain details about its operations and adherence to the regulations stated in Section 8 of the Companies Act.
5. Compliance with Other Laws
Apart from adhering to the Companies Act, Section 8 companies must abide by various other legal rules and regulations. Some vital areas of compliance include:
Section 8 companies are required to follow income tax regulations which involve submitting income tax returns, paying taxes, and acquiring any essential tax exemptions or authorizations.
If a Section 8 company is involved in providing goods or services and earns more than the set limit, it is required to register for Goods and Services Tax (GST), submit regular GST returns, and adhere to other GST responsibilities.
If a Section 8 organization receives donations from foreign sources for their social welfare projects, they must adhere to the Foreign Contribution Regulation Act (FCRA) regulations, including enrolling, submitting reports, and appropriately using the funds.
The Section 8 company may be required to follow particular laws and regulations related to various sectors such as education, healthcare, and the environment, depending on the type of activities it engages in.
In India, Section 8 companies must comply with annual regulations to maintain their legal status, fulfill their societal objectives, and ensure transparency and accountability. By following the annual compliance guidelines outlined in this article, Section 8 companies can exhibit good governance, meet legal requirements, and build trust with stakeholders. Section 8 companies must take proactive steps towards compliance such as holding AGMs, producing financial statements, conducting audits, submitting annual returns, and adhering to other applicable laws, for their long-term success and influence.