Section 8 Company is incorporated with an object to promote commerce, art, science, sports, research, education, religion, protection of environment, charity or any other object, who intends to apply their income and profits in promoting their objects and prohibits the payment of dividend to its members. Section-8 Company can be incorporated as a Private or Public Company.
There are three types of charges that are levied by the Micro Finance Company (MFI) while giving loans.
The rates of interest charged by Micro Finance Companies must be less of the following:
The average base rate is 8.67% to be charged from the borrowers from 1st April, 2020.
Section 8 Company or a Non-Profit organization (NPO) is a Company established for promoting commerce, art, science, religion, sports, education, research activities, charity, or any other useful social object. The profits and donations are applied for promoting only the objects of the company and no dividend can be paid to its members or owners.
The term No Profit does not mean that the Company cannot generate profit or income, but what it means is that the Section 8 Company has to apply the income for promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot benefit from those profits.
| Basis For Difference | Non-Government Organisation | Section 8 Company |
|---|---|---|
| Definition | A Non-Government Organisation, or NGO, is a non-profit organisation that provides social services without financial assistance from the government. | A Section 8 company is a for-profit organisation that provides low-income people housing and receives government funding. |
| Types | NGOs are categorised as either public benefit organisations or private foundations. | There are different types of Section 8 companies, such as landlords with HUD contracts, congregate housing projects, and transitional housing agencies. |
| Other Organisations Similar to Non-Government Organisations and Section 8 Companies | Some organisations similar to Non-Government organisations are credit unions, food banks and religious organisations. | Some other organisations similar to a Section 8 company are shelter providers and domestic violence shelters. |
| Differences in Funding | Non-government organisations usually rely on donations. | Section 8 companies can receive money from various sources, including state and local governments. |
| Governance | Non-governmental organisations typically have volunteers on their boards of directors. | Section 8 companies may have a combination of paid staff and volunteers. |
| Timing of Service | Non-governmental organisations usually provide their services to reach long-term goals. | Section 8 companies provide short-term benefits. |
To take care of the Company's financial filings on an annual basis, the Section 8 Company needs to appoint an auditor mandatorily. According to section 139 of the Companies Act, 2013, every Company must inform the MCA about the auditor's appointment in the form ADT-1. The book of accounts & annual returns of the Company shall be audited by the statutory auditor who will be appointed for a period of 5 years.
Every Section 8 Company is obligated to maintain the books of accounts of the Company. The books of accounts keep the records of the filing of the annual returns, etc
All the Section 8 Companies must maintain the statutory records in the registers. The register contains the details of members, loans and investments, and charges, etc. Further, it provides an overview of how actively the Company works every year.
Annual general body meeting is to be conducted once a year within six months of the end of Financial Year & other board meetings have to be conducted.
Director's report is the document that consists of the info regarding the Company and its compliance along with a set of financial, accounting, and corporate social responsibilities. The Board of Directors is responsible for producing this report. As per the provisions of the Companies Act, 2013, producing a director's report is compulsory compliance for every Section 8 Company in India.
The Company's financial statement consists of the balance sheet, cash flow statement, profit & loss of the Company and more. Hence, every Company is supposed to prepare the financial statements of the preceding financial year mandatorily.
Every Section 8 Company must file income tax returns before or by 30th September of the next financial year. It is necessary to file income tax returns because it gives an overview of the Company's total income.
Every Section 8 Company needs to file a copy of the financial statements in the prescribed format, i.e. in the e-form AOC-4. The financial statement must be filed within thirty days from the date of the last annual general meeting held.
Since Section 8 Companies are registered as limited companies, they also need to file Form MGT-7 with the ROC for filing the Company's annual returns. MGT-7 must be filed within sixty days from the date of the last annual general meeting.
The Ministry of Corporate Affairs has the power to impose certain penalties in case it encounters any non-compliance with the procedures. Penalties to be charged are as follows: