Section 8 Company Registration
Ideal business structure for NGO’s and Non Profit Organizations
Starting At Rs. 12,999
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Section 8 Company Registration
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Section 8 Company
A Section 8 Company is a specific form of Company which:
- Is incorporated for the promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of environment or any such other object.
- It intends to apply all it’s profits, income, or other earnings, in promoting these objects.
- Pays no dividend or income to its members.
These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name. They may have been registered either as “private limited or public limited companies”.
Section 25 Company (under Companies Act, 1956) is a prior version. Section 8 Companies are a legal form of “Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs)”. A Section 8 Company has the authority to work anywhere in the country.
Section 8 Company Registration
The process and requirements of a Section 8 Company are exactly the same as laid down for a limited company, including all the rights and obligations that come with such a limited company. The only aspect where they differ is that a Section 8 Company cannot use the words “Section 8” or “Limited” in it’s name.
- The process of registering a Section 8 Company is the same as of incorporating an NGO, Trust or Co-operative Society under the Companies Act 2013.
- An additional requirement is there of seeking a license from the central government under Section 8 of the Companies Act, 2013.
- The license, essentially, permits them to delete Private/Public Limited from their name. With this license, the company becomes eligible for certain exemptions from the provisions of law and avail the benefit of concessions in the fee.
- If the proposed Section 8 Company has been registered as a private limited then a minimum of 2 directors are required. But if it is a “public limited Section 8 Company” then a minimum of 3 directors must be there.
Benefits of Section 8 Company Registration
Being an NPO or a Non-profit Organization does not mean that the company cannot make a profit or income. It only signifies that the company can earn income but the promoters are not to benefit from those profits. The profits cannot be distributed among the promoters. All incomes must be applied to promoting the object.
Still, certain exemptions and benefits have been provided for both “NGO and NPO” u/s 8 of the Companies Act 2013. Numerous Tax exemptions are also there for such companies. Even the donors contributing towards Section 8 Company are eligible to claim the Tax Exemption against these donations.
Some of the advantages are:
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Distinct Legal Identity: Section 8 Company is a separate legal entity and is different from it’s members. The Company has perpetual existence. Along with having organized operations and greater flexibility.
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Zero Stamp Duty: A Section 8 Company is exempt from the requirement of paying stamp duty on the MoA and AoA of the private or public limited company, which is applicable for registration of other kinds of company structures.
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No Minimum Capital Requirement: o minimum capital limit has been mentioned for a Section 8 Company in India. And the capital structure can be altered at any stage as per the growth requirements of the company. This implies that it can be formed without any share capital. The funds necessary for carrying the business operations can be brought, later, in the form of donations and/or subscriptions from members and the general public.
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Name: Section 8 Company is not required to suffix “Public Limited or Private Limited”, next to it’s legal name. It can be registered with names such as “Association, Society, Council, Club, Charities, Foundation, Academy, Institute, Organisation, and Federation”.
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CARO: Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
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Tax Benefits: For Section 8 Companies in India, many tax benefits are granted.
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Credibility: Section 8 Companies are more reliable than all other forms of charitable organizations. They are governed by the Companies Act and are regulated strictly. Such as the requirement of a mandatory annual audit, and both the “MOA and AOA” cannot be altered at any stage or situation. The rules on managing the profits and losses of the company make these companies trustworthy.
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Exemption to the donors: Those donating to a Section 8 Company are eligible for tax exemptions u/s 12A and 80G of the Income Tax Act.
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Membership: A registered partnership firm can become a member in it’s individual capacity and obtain Directorship.
Eligibility
- Objects of Section 8 Company must be the promotion of Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of Environment or any such other object.
- The Company must intend to apply it’s profits (if any) or other income in promoting these objects.
- It must intend to prohibit the payment of any dividend to it’s members.
Section 8 Company is created by those who do not wish to earn profit from this venture. Rather they want to dedicate themselves to improving a segment of the social structure.
Other than the conditions laid down in it’s definition above, the following criteria must be fulfilled as well for registering a Section 8 Company:
- Registration Under: Companies Act, 2013.
- License: License to be applied to MCA.
- Directors: A Minimum of “2 Directors for a Private Limited Company and 3 Directors for a Public Limited Company” must be there.
- Indian Resident: At least 1 director must be a resident of India, i.e., have stayed in India for a total period of not less than 182 days in the previous calendar year [(Section 149(3)].
- Subscribers to MoA: If the Company is proposed to be incorporated as a private company or a public company respectively, it’s MoA must have at least 2 or 3 subscribers.
- MoA & AoA: Decide about the name to be applied for, objects to be carried by the Company, planned registered office address, number of Directors and promoters, authorized capital, and number of shares to be subscribed by each promoter. They must mention the plan laid-out to meet your social objectives. The ROC (Registrar Of Company) is entitled to ask about it.
- Initial Capital: Whatever amount of initial capital has been proposed for the Company, it must get invested in the Company within 2 months.
- Property Management: The ownership of the property lies in the name of the Company and it can only be sold as per the rules mentioned under the Companies Act. (Ex: With the consent of the Board of Directors in the form of a resolution).
- Dissolution: The Section 8 Company may be wind-up only by following the bye-laws of the society. Upon dissolution and after settling all debts and liabilities, the funds and property of the society are not to be distributed among the members of the company. Instead, the remaining funds and property would be given or transferred to some other Section 8 Company, someone that has a similar object.
- Annual Compliance: There must be Annual filing of accounts, statements and returns of the company with the ROC, in order to adhere to the set compliances.
- Documents: All the Directors must have their valid DIN (Director’s Identification Number) & DSC (Digital Signature Certificate).
KBTM Consultants Offers
KBTM Consultants offers to assist you in all matters of company registration. Let our expert team handle the complex procedure of completing papers, selecting and searching availability of the name, logo or trademark designing, trademark registration, etc. While you can concentrate on matters of business operations which require your attention. We will stand by with you through each and every stage of the incorporation procedure. For any queries on related topics, you can consult with the CA/CS here.
Our package includes:
DIN for 2 Partners
Digital Signature For 2 Directors
Name search & approval
MOA/AOA
Registration Fees
Company Pan Card
Process of Section 8 Company Registration
Documents Required
| For Directors/Shareholders | For Registered Office |
|---|---|
| Copy of PAN Card | Ownership Proof (House Tax etc.) |
| Aadhaar Card | |
| Address Proof (Bank Statement, Electricity Bill, Telephone Bill) | Utility Bill (Electricity Bill, Gas Bill) |
| 2 Passport Sized Photographs | NOC(from the owners – if the premises is rented) |
Important Points
The mandatory requirements to start section 8 company are as follows:
Minimum Requirement
- A Section 8 Company gets incorporated by the MCA.
- All requirements of the Companies Act 2013, such as the minimum number of Directors and Shareholders, etc. must be met with.
Charitable Object
- Section 8 Companies can be established for non-profit objectives only. Any profit earned or income received by this Company is not to be distributed among it’s members.
- This implies that the income will either be reinvested in the business or utilized for the progress of it’s main objects, i.e. charitable purpose.
Management Team
- Unlike other Trusts which are governed by the Trustees as per a Trust Deed, the operations of Section 8 Companies are managed by the Board of the Directors as per their MoA and AoA.
Companies Act, 2013
- A Section 8 Company must follow the provisions which have been prescribed under the Companies Act, 2013. It must perform all the tasks such as “Maintaining the Book of Accounts, Audits, Return Filing, Board Meetings, etc”.
MoA & AoA
- A Section 8 Company shall not make any changes to the provisions of it’s MoA & AoA without seeking approval from the Central Government first.
Voting Rights
- The voting rights of the shareholders of a Section 8 Company are based on the number of shares held by them. Similar to that of any other company.
Income tax
- The Company has to follow the provisions of the Income Tax Act.
GST Registration
- If Section 8 Company comes under the purview of the GST Act, it must get registered with GST.
Conversion
- It may not convert itself to any other kind of company structure without complying with conditions, as applicable.
Donations/Funding of Section 8 Company
Section 8 Company is not allowed to raise capitals by way of deposits but they can accept donations from the general public. Below are some of the ways by which it can raise funding:
- Foreign Donations: Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been done. FCRA license can only be applied after 3-years from the date of registration. However, if some really urgent foreign donations are necessary, then you may apply for a prior permission from the commissioner.
- Equity Funding: Section 8 Company can also raise funds by issuing new equity shares at a higher value.
Domestic donations: There is no limitation to the domestic donations. But to avoid money laundering cases, a proper system must be laid down to keep them in check.
Name Approval
The name of your Section 8 Company will act as it’s first impression to the world. It’s selection, therefore, is very important. It should stand out, yet be easy to remember, attractive, relevant, and indicative. Here are some points you can keep in mind about choosing a name for your company.
Forms Required
| Number | Purpose |
|---|---|
| INC-1 | To apply with the ROC for Name Approval. |
| INC-7 | Application for Incorporating the Company |
| INC-8 | Declaration to Apply for PAN & TAN |
| INC-9 | Affidavit from each Director and subscriber of the MoA |
| INC-12 | This is to apply for the issuance of License to operate as a Section 8 Company. |
| INC-13 | Memorandum of Association (MoA) |
| INC-14 | Declaration from a practicing Chartered Accountant or Company Secretary |
| INC-15 | Declaration by each Subscriber of MOA (On duly notarized Non- judicial stamp paper of Rs. 100/-) |
| INC-16 | License to operate as Company under Section 8 of the Companies Act, 2013 |
| INC-22 | Notice of Location of the registered office |
| DIR-2 | Consent of Directors to act on behalf of the Company |
| DIR-3 | Application to ROC to get DIN |
| DIR-12 | Appointment of Directors of the Company |
Compliances
If a Section 8 Company fails to comply with the legal provisions, then the central government may revoke the license issued under this act.
In case of revocation, the company may get wound up. Or it may be simply asked to change it’s name by adding either “Private or Public Limited” in the end of it’s name. And the assets remaining after clearing debts and liabilities of such a Company shall be transferred to some other Section 8 Company having similar objects.
If the operations of the Company are found to be conducted fraudulently or in violation with the objects of the Company or are unfavorable to public interest. then also, the license can be revoked.
If a company defaults in complying with the provisions of the Act, it shall, without prejudice to any other action under the provisions of this section, be punishable with a fine which shall not be less than Rs.10 lakh and may extend to Rs.1 crore. The Directors and all other officers of the company, found in default, shall be punishable with imprisonment for a term which may extend to 3-years, or with fine not be less than Rs.25, 000 which may extend to Rs.25 lakh, or both. Provided that it is proved that the operations were conducted fraudulently. Then every officer in default shall be liable for action.
Any such order shall not be passed unless the company has been given a reasonable opportunity of being heard.
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