Section 8 Company Compliances: Complete Guide for NGOs

A section 8 company is an NGO company which operates for charitable, educational or social objectives. Although the motive of such companies is social service, yet there are strict regulations in respect of compliance of section 8 company under Companies Act 2013. Knowing section 8 company compliance will help you to be legal and earn credibility from donors and other government authorities.

What is Section 8 Company Compliance?

Compliance of section 8 company means all the necessary filings which need to be done by non-profit companies after their registration as per law.
Even if the business activities are not undertaken, yet such filings become mandatory every year.

Section 8 Company Compliance Checklist

Check out a brief compliance checklist of a section 8 company as follows:-

1. Annual Filings under Companies Act 2013

• Filing AOC-4 form (annual financial statement)

• MGT-7 form (annual return filing)

• Both are basic requirements as per section 8 company annual filing

2. Holding of AGM

• Once in each financial year

• Financial accounts approved

3. Appointment of an Auditor

• Filing ADT-1 form after AGM

• Audit of financial statements

4. Maintenance of Register

• Members, directors, and financial statements must be maintained

5. Income Tax Return Filing

• It has to be done every year, irrespective of having income or not

6. Board Meetings

• Regular board meetings have to be carried out and recorded

Section 8 Annual Compliance of Company

Section 8 annual compliance of company focuses mainly on financial compliance.

Important Section 8 Annual Compliances Are:

• Financial statement preparation

• Audit report

• ROC filing (AOC-4 & MGT-7)

• Income tax return filing

• AGM

These section 8 annual compliances have to be done every year irrespective of any activity being carried out.

Section 8 Compliance (Other Than Annual Compliance)

Some important non-annual compliances include:

• Change in directorship

• Any alteration in MOA & AOA

• Appointing/Removing auditor

• Changes in share or membership

Why Section 8 Company Compliance Is Important?

1. Avoiding Fines

Non-compliance will attract heavy fines or license cancellation.

2. Credibility

Correct section 8 company annual compliance enhances credibility with donor bodies or CSR organizations and banks.

3. Easier Funding

Corporate/commercial funding depends upon compliance records.

4. Legal Protection

Correct filing protects directors from penalties.

Practical Case Study

Take the case of a small non-profit organization in the field of education. Despite having low-level funding:

• It needs to file annual returns.

• Keep books of account.

• Hold AGM.

Neglecting the above can result in penalties even if the organization performs real social activities.

Frequently Asked Questions Related to Compliance in Section 8 Companies

Is annual compliance necessary for section 8 companies?

Yes, the annual compliance for section 8 company is essential irrespective of business activities.

What are the major forms required for filing annual compliances?

The major forms are as follows:

• AOC-4 (Financial)

• MGT-7 (Annual return)

Is audit necessary in section 8 companies?

Yes, the audit is compulsory and requires the appointment of an auditor.

What are the consequences if compliances are not followed?

There will be penalties and fines, and the license of section 8 could get cancelled.

Is tax compliance necessary?

Yes, filing income tax return annually is a requirement.