Annual Compliance for Section 8 Company in Rajasthan: A Complete Checklist

Imagine a checklist that helps Section 8 Companies sail smoothly through the sea of regulations. From organizing important meetings to submitting essential documents, we’ve got you covered. We make compliance easy and stress-free so that these organizations can focus their energy on transforming lives and creating a better society.
In the realm of non-profit organizations, Section 8 Companies stand out as beacons of hope, dedicated to making a positive difference in society. These companies, also known as non-governmental organizations (NGOs) or non-profit organizations (NPOs), are driven by a mission to promote education, charity, social welfare, and various other noble causes. However, to ensure their effectiveness and credibility, Section 8 Companies must adhere to a set of compliance requirements. In this article, we will discuss a comprehensive checklist of the annual compliance for Section 8 Company in Rajasthan.

Overview of Section 8 Company Annual Compliance

Section 8 companies, also known as non-profit organizations or non-governmental organizations (NGOs), are registered under Section 8 of the Companies Act, 2013. These companies are formed to promote art, science, commerce, education, charity, social welfare, or any other useful purpose, provided the profits, if any, are utilized for the promotion of these objectives and not distributed among the members.

In Rajasthan, like in any other state in India, Section 8 companies are required to comply with various legal and regulatory requirements on an annual basis. Adhering to these compliance obligations ensures the smooth functioning and legality of the company’s operations.

Benefits of filing Annual Compliance for Section 8 Company in Rajasthan

Some benefits of filing annual compliance for Section 8 Company in Rajasthan are-

• Avoid Penalties – Failure to comply can result in penalties and fines for the company.
• Building Trust – A company that submits compliance statements and discloses financial information promptly is seen as trustworthy in the eyes of suppliers, vendors, and customers.
• Transparency of Operations – Compliance records reveal the current state of a company’s operations.
• Avoid any legal problems – Failure to comply can result in legal consequences such as a notice from the Ministry of Corporate Affairs.
• Credibility – It is easier for a company to obtain financial assistance and market credit in case of timely performance than for a company whose performance is not appropriate.

What are the Requisite Documents for Section 8 Annual Compliance Registration?

The below-mentioned documents are mandatory to complete registration of Section 8 Annual Regulations in India-

• Memorandum of Association and Articles of Association i.e. MoA and AoA
• Digital Signature Certificate (DSC) for online signing.
• Certificate of Incorporation of the Company

Mandatory Compliances for Companies under Section 8

The obligations for Section 8 Companies are as follows:

• Appointment of auditor: Every year, according to Section 8, the company is obliged to employ an auditor who will supervise its financial records.
• Keeping registers: Companies under Section 8 are required to keep legal records in registers. These registers are kept every year and their function is to check how the company has performed each year. In addition, the register contains information on members, loans, contributions, and investments.
• Management of financial statements: Section 8 Company requires to maintain their financial records annually. When the financial records are completed, they are forwarded to the registrar. Financial records contain the following information:
  • Account for trading
  • Profit and Loss
  • Balance sheet
• Creating a director’s report: Under Section 134 of the Companies Act, 2013, Form AOC-4 is required to file a director’s report. The aim of compiling the director’s report is to provide shareholders with an overview of the company’s financial situation and business activities. Signed meeting minutes must be kept at the company’s headquarters.
• Filing an income tax return: Section 8 Companies must file an income tax return no later than September 30 of the following fiscal year. IT returns must be filed to provide a thorough picture of the company’s earnings. However, if the company is registered under Sections 12A and 80G, it may be eligible for tax exemption.
• Hold a board meeting: For small businesses, board meetings should be held twice a year. The time between these two meetings should not exceed 90 days.
• Hold an annual general meeting: The Annual General Meeting (AGM) of the company according to Section 8 should be held every year no later than September 30. All directors, members, and auditors must attend the meeting. They should be given at least 21 days’ notice of the appointment. Form MGT-15 is used to submit the annual report of the general meeting. The report must be submitted within 30 days of the conclusion of the meeting.
• Filing of financial statement with RoC: Use E-form AOC-4 to submit a copy of the financial statements. It must be filed within one month of the date of the annual general meeting.
• Filing of annual return with RoC: Form MGT-7 is used to file a company’s annual return. The annual return is due 60 days after the end of the annual general meeting. If no annual general meeting is held during the year, the annual return must be filed within sixty days of the date on which the annual general meeting was to be held, which is 30 September.

Other compliances

In addition to the annual compliance list above, a Section 8 Compliant Company may perform other compliance-related tasks depending on the situation. Although our package does not include such tasks, you can do it on request for an additional fee. Examples of such tasks are:

• Director’s consent form (DIR 2 form) to occupy the office within 30 days of appointment as director
• Return form (MR-1 form) within 60 days of the appointment of CEO, manager, or other key management contribution.

In case your company receives donations or funds from donors, then this income is eligible for tax exemption. To avail of this exemption, the company has to fulfill the conditions mentioned in section 11 and register under section 80G and section 12A. Again, this is not covered by the annual compliance package but is available as a separate service.

Event-Based Compliance under Section 8 Company

As the name suggests, these are fulfillments that should be reported on certain occasions. These are non-periodic, unlike annual payments.

• Checklist for compliance with Section 8 company action requirements:
• Stock transfer
• Sharing distribution
• Appointment of Director/Resignation
• Appointment/resignation of auditors
• Company name changes
• Changes to the company’s MOU
• Appointment of key management personnel
• Acceptance of an application for an equity fund
• Any changes in the company structure.

Penalties for non-compliance

The Ministry of Corporate Affairs imposes certain sanctions if it witnesses any non-compliance with the procedures. The penalties that will be imposed are as follows:

• The Central Government can disassociate itself from the permission granted to an organization if it happens to find that the organization is working improperly or in a way that violates the objective of the organization;
• The head and every officer of the organization in default shall be liable to imprisonment for a term and to a fine which may extend to Rs. 25 lakhs or both;
• If the affairs of these companies are found misdirected, any officer in default will be subject to action in Area 447;
• The organization shall be liable to a fine not less than Rs. 10 lakhs and may be extended to Rs. 1 crore.

Final words

Complying with the annual compliance requirements is crucial for Section 8 companies in Rajasthan to ensure their legal and smooth functioning. By following the checklist provided in this article, Section 8 companies can ensure that they meet their obligations under the Companies Act and other relevant laws. It is important to maintain proper records, conduct regular meetings, and file necessary returns and statements within the prescribed timelines. Non-compliance can result in penalties, loss of privileges, or even the potential dissolution of the company. Therefore, Section 8 companies should engage professional help, such as chartered accountants or company secretaries, to ensure accurate compliance with all legal and regulatory requirements.

In case of any query regarding the annual compliance for Section 8 Company in Rajasthan, a team of expert advisors from Legal Window is here to assist you at every step. Feel free to reach us at admin@legalwindow.in.