Section 8 Company compliances as per Companies Act 2013
Section 8 Company Under the Companies Act 2013
 |
| Non-Profit-Organisation |
Introduction
A Section 8 Company is a type of non-profit organization registered under the Companies Act, 2013, primarily for promoting charitable, social, or other not-for-profit objectives such as arts, commerce, education, research, sports, environment protection, and social welfare.
Unlike other companies that operate for profit, a Section 8 Company reinvests its earnings into achieving its objectives and cannot distribute dividends to its members.
The Ministry of Corporate Affairs (MCA) grants such companies a license under Section 8 of the Companies Act, 2013, subject to compliance with specific regulations.
Is a Cash Flow Statement Mandatory for a Section 8 Company?
✅ Yes, a Section 8 company is required to prepare a Cash Flow Statement.
Legal Justification:
- Definition of Financial Statements (Section 2(40) of the Companies Act, 2013)
- As per Section 2(40), a financial statement includes:
- Balance Sheet
- Profit & Loss Account (or Income & Expenditure Account for Section 8 companies)
- Cash Flow Statement
- Statement of Changes in Equity (if applicable)
- Explanatory Notes
Exception:
- Only the following are exempt from preparing a cash flow statement:
- One Person Companies (OPCs)
- Small Companies
- Dormant Companies
o 📌 Important: The law does not exempt Section 8 companies from preparing a cash flow statement.
“One Person Company” means a company which has only one person as a member;
“Small Company” means a company, other than a public company, —
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; or and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
Dormant Company
As per sec 455 of the Companies Act, 2013 “Dormant Company” means a company
Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.
Explanation. —For the purposes of this section, —
(i) “Inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
(ii) “significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any other law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records
Conclusion
Therefore it can be concluded
- that the financial statements of Small Companies, Dormant Companies and OPCs need not include a cash flow statement.
- However, Section 8 companies are not included in this exemption, because it is neither an OPC nor it is a Small Company.
- It can only be exempted if it applies for Dormant Company.
FAQs on Section 8 Company Under the Companies Act, 2013
1. What is a Section 8 Company?
A Section 8 Company is a non-profit organization registered under the Companies Act, 2013, to promote charitable or social causes like education, arts, sports, and welfare.
2. Can a Section 8 Company earn profits?
Yes, it can earn profits, but the profits must be reinvested in furthering its objectives and cannot be distributed as dividends to members.
3. Who grants approval for a Section 8 Company?
The Registrar of Companies (ROC) grants approval, and a license is issued by the Ministry of Corporate Affairs (MCA) under Section 8 of the Companies Act, 2013.
4. What are the key benefits of a Section 8 Company?
- No minimum capital requirement
- Tax exemptions under the Income Tax Act
- Exemption from using “Limited” or “Private Limited” in the name
- Higher credibility compared to trusts and societies
5. Can a Section 8 Company be converted into a private or public company?
Yes, with approval from the Central Government and compliance with the prescribed rules under the Companies Act, 2013.
6. How is a Section 8 Company different from a Trust or Society?
A Section 8 Company is registered under the Companies Act and enjoys better governance, transparency, and credibility, whereas trusts and societies are regulated by state laws.
7. Is a Section 8 Company required to prepare a Cash Flow Statement?
✅ Yes, it is mandatory to prepare a Cash Flow Statement as part of its financial statements, unlike OPCs and small companies, which are exempt.
8. What is the tax exemption benefit for a Section 8 Company?
A Section 8 Company can apply for 80G and 12A registration under the Income Tax Act to allow donors to claim tax exemptions.
9. What is the minimum number of directors required?
- Private Section 8 Company: Minimum 2 directors
- Public Section 8 Company: Minimum 3 directors
10. Can foreign funding be received by a Section 8 Company?
Yes, but it must comply with Foreign Contribution (Regulation) Act (FCRA), 2010 to receive foreign donations or grants.
11. What are the Compliance
Requirements for a Section 8 Company Under the Companies Act, 2013
|
Compliance |
Due Date |
Remarks |
|
First Board Meeting |
Within 30 days from the date of
Incorporation |
Notice must be given at least 7
days before the meeting. Shorter notice is allowed for urgent matters. |
|
Issuance of Share
Certificate |
Within 2 months from the date
of Incorporation |
Subscription amount (paid-up
capital) must be deposited. |
|
Form INC-20A (Declaration
for Commencement of Business) |
Within 180 days from the date
of Incorporation |
Filed after the subscription
amount (paid-up capital) is deposited. |
|
Form ADT-1 (Appointment of
Statutory Auditors) |
Within 15 days of AGM |
Statutory Auditors are
appointed for 5 years, except the first auditor, who is appointed up to the
first AGM. |
|
Form MBP-1 (Disclosure of
Interest by Directors) |
1st April every year |
Every Director must submit it
in the first Board Meeting of the financial year. |
|
Form DIR-8 (Notice of
Non-disqualification of Directors) |
31st March every year |
Required, if applicable. |
|
Board Meeting |
At least 1 meeting within every
6 calendar months |
– |
|
Minutes of Board Meeting |
Within 30 days of the Board
Meeting |
Minutes must be circulated
within 15 days. Directors must provide comments within 7 days, after which it
is deemed approved. |
|
Form DIR-3 KYC (KYC of
Directors) |
On or before 30th September of
every financial year |
To be filed by every director
with the ROC. |
|
Form DPT-3 (Return of
Deposits or Non-deposit Transactions) |
On or before 30th June of every
financial year |
Filing is required, even if
there is nil amount. |
|
MSME Form-1 (Delay in MSME
Vendor Payments) |
April-September: 31st October
October-March: 30th April |
Applicable if payments to Micro
and Small Enterprises are delayed beyond 45 days. |
|
Annual General Meeting (AGM) |
Within 6 months from the end of
each financial year, with a maximum gap of 15 months between two AGMs. |
The first AGM can be held
within 9 months of the closure of the first financial year. |
|
Form AOC-4 (Audited
Financials and Board Report) |
Within 30 days of AGM |
The first financial year of the
company can be of 15 months. |
|
Form MGT-7 (Annual Return) |
Within 60 days of AGM |
The list of shareholders must
be attached with Form MGT-7. |
12. Mandatory Registers to be
Maintained by a Section 8 Company
1. Mandatory Registers
Applicable to All Section 8 Companies:
- Register of Members
- Register of Directors & Key Managerial
Personnel (KMP) and Their Shareholding
- Attendance Register of Directors and Members
2. Other Registers (Applicable
on a Case-to-Case Basis):
- Register of Debenture Holders
- Register of Renewed & Duplicate Share
Certificates
- Register of Loan & Guarantee
- Register of Sweat Equity Shares
- Register of Employee Stock Options (ESOP)
- Register of Securities Bought Back
- Register of Deposits
- Register of Charges
- Register of Contracts & Arrangements in Which
Directors Are Interested
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CS Yogesh Hegde
I am a Company Secretary by profession, I have knowledge in corporate compliance, legal advisory, and ROC filings, helping businesses stay legally sound. Having knowledge in company law and regulatory filings, I ensure smooth documentation, board resolutions, annual returns, and corporate legal compliance. My role involves ensuring that organizations meet corporate governance standards, avoid legal risks, and maintain proper records. Whether it's ROC filing, regulatory documentation, or legal compliance, I strive to provide accurate and efficient solutions to support business growth. Regards, CS Yogesh Hegde - Kalyan | Mumbai
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The main purpose of a section 8 company is to promote commerce, art, science, religion, or charity. Thank you for the valuable blog. It is very helpful. To know more visit: section 8 company incorporation procedure
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