A Section 8 company is a company formed for charitable or not-for-profit objects. It is the preferred vehicle for non-profit organisations, but it is subject to a distinct compliance regime that differs from both a for-profit company and a trust or society.
The Registration
The company must be formed with the object of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other similar object. The company must apply to the Central Government for a licence, and the licence is granted on the satisfaction of the conditions. The memorandum and articles must prohibit the payment of any dividend to the members and the application of the profits to any purpose other than the promotion of the objects.
The Governance
The Section 8 company must have a board of directors, and it must comply with the provisions relating to the board meetings, the general meetings, the statutory registers, and the filings. The company cannot alter its memorandum or articles in a manner that conflicts with its objects without the prior approval of the Central Government.
The Compliance
The company must file the annual return in Form MGT-7, the financial statements in Form AOC-4, and the other statutory returns. The accounts must be audited by a chartered accountant, and the audit report must be filed with the ROC. The company must also comply with the CSR requirements where Section 135 applies.
The Common Pitfalls
The common pitfalls are the application of the income to a purpose that is not authorised by the objects, the payment of unreasonable remuneration to the directors, the failure to obtain the Central Government's approval for an alteration of the memorandum, and the failure to file the annual returns. The Central Government can revoke the licence where the company contravenes the conditions or where its affairs are conducted in a manner that is not in accordance with its objects.
Call to Action
Anuj Desai & Associates advises Section 8 companies on the registration and compliance—from the licence application and the objects to the annual filings and the governance. If your Section 8 company needs assistance with its compliance, we can help.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 209