All the benefits of a Section 8 company, such as the ability to raise funds in the form of donations and contributions achieved through disciplined compliance.
A Section 8 company is a form of NGO registered under the Companies Act, 2013. According to which all Section 8 companies must adhere to the compliance levied by Registrar of Companies (RoC) and Income tax authorities. Failure to fulfill their compliance requirements results in paying heavy penalties (up to Rs. 1 lakh a year), and chances are such organizations and their directors’ may even get blacklisted for a period of time.
Income of sec 8 company is treated in the same manner as treatment of income of a society or a public charitable trust. Such Companies also can get itself registered under section 80G of the Income Tax Act, 1956 and the donor making the donation to such company will get a deduction of 50% of the sum donated from its income. The Company has to apply in Form10G to the Commissioner of Income Tax for such Registration. Section 12(A) of the Income Tax Act 1956 provides for mandatory audit of such companies provided the total income exceeds the maximum amount which is not chargeable to Income Tax (without giving effects to the provisions of Sec11). The audit report is to be submitted in Form. 10B and must be duly signed by the Chartered Accountant holding certificate of practice.
FCRA Registration is compulsory for receiving the foreign funds.
Labour and other relevant laws are applicable as per the applicability of the same.
Filing of returns.
Maintenance of separate bank account exclusively for foreign contributions.
Not to mix foreign contributions and local contributions.
Copy of the Annual Return to be filed with Registrar: Every company shall file with the registrar a copy of the annual return Within sixty days from the date on which the annual general meeting is held Where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held (i.e.30th September) together with the statement specifying the reasons for not holding the annual general meeting.
Copy of the financial statement to be filed with Registrar: All Section 8 limited companies shall file a copy of the financial statements in E-form AOC-4 within 30 days from the date on which the annual general meeting is held.
Preparation of Board's Report: A report by Board of Directors prepared required to be laid before members in Annual General Meeting. The meetings need to be logged and the signed minutes need to be maintained at the Registered Office.
Appointment of Auditor: A section 8 company would need to appoint an individual auditor or a firm to take care of all the financial filings annually, who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.
Registers to be maintained: All the companies belonging to the Section 8 category are expected to have statutory records maintained update for the following members, charges, loans and investments. The above would give an overview of how active the company has been on yearly basis.
Every Section 8 company has to prepare its records on annual financial records, once the financial records and statements they must be produced to the registrar and is done to stay legal.
Section 8 companies can wind-up or dissolve themselves either voluntarily or under orders given by the Central Government. If any assets remain after satisfaction of debts and liabilities upon such winding-up, the National Company Law Tribunal can order the transfer of these assets to a similar company. It can also order that they must be sold and the proceeds of this sale should be credited to the Insolvency and Bankruptcy Fund.
Any company that contravenes provisions of Section 8 is punishable with a fine ranging from Rs. 10 lakhs to Rs. 1 crore. Further, directors and officers of the company are liable to punishment with imprisonment up to 3 years and a fine between Rs. 25,000 to Rs. 25 lakhs. Such officers can also face prosecution under stringent provisions of Section 447 (dealing with fraud) if they conduct any affairs with fraudulent motives.