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Section 8 Company
A Section 8 Company is a Company which:
- Is incorporated for the promotion of commerce, art, science, sports, social welfare, religion, charity, education, research, protection of environment or any such other object.
- It Intends to apply all it’s income, profits, or otherwise, in promoting these objects.
- It Pays no dividend to it’s members.
Earlier known as a “Section 25 Company (under Companies Act, 1956)”, it is a legal form for Non-Profit Organizations (NPO) or Non-Governmental organizations (NGOs). Section 8 Company is a licensed company that is authorized to work anywhere in the country.
These are limited companies and will be treated as limited companies without adding “limited” to its name. They may be privately limited or public limited companies.
Section 8 Company Registration
The process and requirements of a Section 8 Company are exactly like for a limited company. Including all the rights and obligations that come with such a company. The only aspect of difference is that it cannot use the words “Section 8” or “Limited” in it’s name.
- Registration of a Section 8 Company involves the same process as incorporating an NGO, Trust, or Co-operative Society under the Companies Act 2013. Because it is registered for not-for-profit purposes.
- One additional requirement is that it has to seek a prior license from the central government u/s 8 of the Companies Act, 2013.
- The license is essentially permission to delete Private/Public Limited from the proposed name. It also entitles the Company to be eligible for certain exemptions from provisions of law and a concessional rate of fees.
- If the proposed Section 8 Company is a private limited then a minimum of 2 promoters are required. But if it is a public limited one then a minimum of 7 persons must be the promoters of the Company.
Benefits of a “Section 8 Company” Registration
The phrase Non-Profit in NPO does not mean that the Company cannot generate profit or income. It just implies that the Company can earn income but the promoters cannot be benefitted out of those profits. , All incomes and profits need to be applied for promoting the object. The income cannot be distributed among the promoters.
Still, certain advantages have been provided for an NGO/NPO u/s 8 of Companies Act 2013. Numerous Tax exemptions have also been provided. Even the donors donating to a Section 8 Company are eligible to claim the Tax Exemption against these donations.
Some advantages are:
Separate Legal Identity: Section 8 Company is a distinct legal entity and is separate from it’s members. It has it’s own legal standing apart from its members. And has perpetual existence. As well as organized operations and greater flexibility.
No Minimum Capital Requirement: There is no requirement of having a minimum capital to be registered as a Section 8 Company in India. And the capital structure may be changed at any stage as per the growth requirements of the Company. It can be formed without share capital also. Later, the necessary funds for carrying the business can be brought in the form of donations and/or subscriptions from members and the general public.
No Stamp Duty: Section 8 Company is exempt from the payment of stamp duty on the MoA and AoA as is in the case of either a private or a public limited company. Hence, no stamp duty is imposed on the incorporation of Section 8 Company, which is applicable for registration of other forms of company structures.
CARO: Provisions under Companies Auditor’s Report Order or CARO do not apply to this type of Company.
Tax Benefits: There are numerous tax benefits for Section 8 Companies in India.
Name: Section 8 Company is not required to suffix “Limited or Private Limited “, next to it’s legal name. It can be registered with names that have words like Association, Society, Council, Institute, Academy, Foundation, Club, Charities, Organisation, and Federation.
Trustworthy: Section 8 Company has more credibility than all other forms of a charitable organization. Because it comes under the stringent regulations of the Companies Act and requires a mandatory audit annually. Government rules on managing the profits and losses of the company make the company trustworthy. Such as the MOA and AOA cannot be altered at any stage or situation.
Exemption to the donors: The donors to the Section 8 Company get tax exemptions u/s 12A and 80G of the Income Tax Act.
Eligibility Conditions
- 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 intends to apply its profits, if any, or other income in promoting these objects.
- It intends to prohibit the payment of any dividend to its members.
Section 8 Company is formed by those who do not have any motive to earn a profit. Rather they want to dedicate themselves towards social upliftment.
Other than the above-stated conditions, 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 Central Government.
- Directors: Minimum of 2 Directors for a private limited company and 3 Directors for a public limited company. The maximum limit is 15 Directors. More than 15 directors can be appointed after passing a special Resolution in a general Meeting. And they must have a valid DIN.
- Indian Resident: At least one Director must have stayed in India for a total period of not less than 182 days in the previous calendar year.
- MoA Subscribers: There must be at least 2 or 3 subscribers to the MoA in case the Company is proposed to be incorporated as a private company or public company respectively.
- MoA & AoA: Decide regarding the proposed name to be applied, objects to be carried by the Company, planned registered office address, number of promoters, number of Directors, authorized capital, and number of shares to be subscribed by each promoter. They must mention the plan for your social objectives. The ROC (Registrar Of Company) is authorized to ask about it.
- Initial Capital: Whatever amount of initial capital has been mentioned for the Company, it must get invested in the Company within 2 months.
- Property management: The property of the Company vests in the name of the Company and the same can 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).
- Winding up or closure: Dissolution as per the bye-laws of the society, upon dissolution and after the settlement of all debts and liabilities, the funds and property of the society may not be distributed among the members of the Company, rather, the remaining funds and property must be given or transferred to some other Section 8 Company, preferably one with similar objects.
- Annual compliance: There is a requirement of annual compliance by the filing of annual accounts and the returns of the Company with the ROC.
What We Offer
Let ”CompanyRegistrationOnline” register your Section 8 Company. Get registered to let us assist you in all matters of company registration. Our team of experts will help you out on every stage of its incorporation. Right from completing papers, selecting and searching availability of name, logo or trademark designing, trademark registration, etc. While you can concentrate on more pressing matters of business. For any queries, you can get in touch with the professional and consult on related topics.
Our package includes:
DIN for 2 Partners
Digital Signature For 2 Directors
Name search & approval
MOA/AOA
Registration Fees
Company Pan Card
Procedure For Section 8 Company Registration
Step 1
Get Registered with Us: You are required to fill in your details in our simple questionnaire given above. It contains Name, Complete Address, Proposed Names for the Company, Number of Directors and their details, Authorized Capital and Capital Contribution Ratio, etc.
Step 2
Get DIN & DSC: Signed applications are to be filed with the ROC to obtain DIN and DSC. First, apply for DSC of the proposed Directors of the Section 8 Company. Once it is received, Form DIR-3 is to be filed with the ROC for obtaining a DIN. A photograph, attested ID Proof and Address proof of the Director are to be attached to these applications.
Step 3
Name Approval: We search, select and apply for a unique name for the company. Name availability has to be checked in the “Reserve Unique Name” or RUN facility. The name of Section 8 Company shall include Foundation, Forum, Chambers, Confederation, Council, Electoral Trust, etc.
A maximum of 2 names can be proposed at a time, in Form INC-1. If rejected 1 resubmission is allowed. Both times in separate Formats.
Step 4
Apply for License & COI: We will apply for the Section 8 License with the Central Govt, in Form INC-12. It is to be attached with MoA in Form INC-13. AoA, Declaration of CA/CS/CWA in Form INC-14, Declaration by Directors or Applicant in Form INC-15, Name Approval Letter, and an estimate of future income & expenses for up to 3 years. And apply for the Certificate of Incorporation. COI is proof that the company has been created. It also contains the unique CIN (Company Identification number).
Step 5
Your Section 8 Company is now operative: Once all the processes have been completed and your Section 8 Company has been registered, we’ll apply for your TAN and PAN. It is done through Form INC-7, 8, 10, 9, 22, DIR-12, 2 with the ROC, along with the required documents. We’ll get them ready, and will be sent to you immediately.
Documents For Section 8 Company Registration
| For Directors/Shareholders | For Registered Office |
|---|---|
| Copy of PAN Card | Ownership Proof (House Tax etc.) or Rent Agreement |
| Aadhaar Card | Utility Bill (Gas Bill, Electricity Bill) |
| Address Proof (Bank Statement, Mobile Bill, Telephone Bill) | NOC(from owners – if the premises is rented) |
| 2 Passport Size Photographs |
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 minimum number of Directors and Shareholders, as laid down under the Companies Act 2013, must be met with.
Charitable object
- Section 8 Companies must be established for non-profit objectives. Any profit earned or income received by a Section 8 Company is not to be distributed among it’s members.
- Thus the income will either be reinvested in the business or utilized for the furtherance of it’s main objects, i.e. charitable purpose.
Management Team
- Unlike other Trusts which are managed by the Trustees as per a Trust Deed, Section 8 Companies are governed by the Board of the Directors as per their MoA and AoA.
Companies Act, 2013
- Section 8 Company must follow the rules and regulations as prescribed under the Companies Act, 2013. Maintaining Book of Accounts, Audits, Board Meetings, Return Filing, etc.
MoA & AoA
- A Section 8 Company shall not alter the provisions of it’s “MoA & AoA” without seeking prior approval from the Central Government.
Income tax
- The Company has to follow the provisions of the Income Tax Act.
GST Registration
- In case the operations of the Section 8 Company come under the purview of the GST Act, it’ll require GST Registration.
Compliances
If a Section 8 Company fails to comply with the requirements under Section 8, then the central government may revoke the license issued under this act. If the affairs of the Company are found to be conducted fraudulently or they are in violation of the objects of the Company or prejudicial to public interest then, also, the license can be revoked.
In case of revocation, the Company may get wound up.
For the assets remaining after clearing debts and liabilities of the Company in question, they shall be transferred to another Section 8 Company having similar objects.
If a Company defaults in complying with any of the requirements laid down, 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 crores. The Directors and every officer of the Company who is in default shall be punishable with imprisonment for a term which may extend to 3-years or with a fine not less than Rs.25,000 and may extend to Rs. 25 lakhs or both. Provided that when it is proved that the operations were conducted fraudulently, 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.