An audit and appointment of an auditor are required because the auditor will review the company’s financial records and yearly reports and provide his opinion.
Is an audit required for a Section 8 company?
An audit and the hiring of an auditor are essential because the auditor will analyse and offer his opinion on the company’s financial records and yearly reports.
All Section 8 Companies are required under the Companies Act of 2013 to submit Section 8 Compliance to the Ministry of Corporate Affairs. One of the primary reasons Section 8 Company was created was to support, advance, and encourage activities in the fields of science, art, sports, charity, business, and other sectors. Section 8 companies are classified as non-governmental entities.
Section 8 requires the following documents:
- A passport-sized photograph
- Identification of all firm members
- Directors and promoters list
- Address verification for all directors and promoters
- Lease Agreement (If rented premises)
- Landlord’s no objection certificate (NOC)
- Utility bill or water bill together with property paperwork (if self-owned property)
Section 8 Company Characteristics
A Section 8 corporation has the following distinguishing characteristics that most other types of businesses do not:
- Charitable goals: Section 8 enterprises do not seek profits. Their goals are entirely altruistic in nature. They attempt to further causes such as science, culture, research, sports, religion, and so on.
- No minimum share capital: Unlike all other businesses, Section 8 firms do not require a minimum paid-up share capital.
- Limited liability: These firms’ members can only have limited responsibility. In any case, their liabilities cannot be endless.
- Government licence: These businesses can only operate if they get a licence from the Central Government. This licence can also be revoked by the government.
- Privileges: Because these organisations have benevolent goals, the Companies Act provides them with a number of perks and exemptions.
- Firms as members: Apart from individuals and associations of persons, Section 8 also allows firms to be members of these companies.
Formation of Section 8 Company
Section 8 of the Companies Act allows a person or a group of people to apply to the Registrar of Companies with the necessary paperwork to incorporate a company with philanthropic intentions. If satisfied, the Central Government may approve such an application subject to any restrictions and limitations imposed by the licence given by it. After the applicants have paid the required fees, the Registrar of Companies will register the firm.
It is vital to emphasise that such businesses can only be limited. In this circumstance, all limited company advantages and liabilities apply. Furthermore, unlike all other corporations, firms do not have to contain the terms “Limited” or “Private Limited” in their titles.
Because the existence of such firms is founded on the licence granted to them, they cannot even change their memorandum or articles of organisation without the authorization of the Central Government. They are also not permitted to do anything that is prohibited by the licence.
The Central Government must provide a licence to Section 8 enterprises. All such licences are also revocable on the following grounds: * the corporation breaches Section 8 requirements; licence conditions are breached; and * when its activity is dishonest or contradicts its own purposes and public policy.
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