Section 8 Company Registration

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Section 8 Company Registration

 

Overview

A Section 8 company under the Companies Act, 2013 is an organization registered with an objective of promotion of arts, science, sports, education research, social welfare, religion, charity, protection of environment or any other such object. These are the limited companies established under the Companies Act. The Government grants these companies an exclusive license under Section 8 Companies Act.

Section 8 Company has more advantages in comparison to a trust and society. Its registration is governed by the Ministry of Corporate Affairs whereas the Trust & Society registration is governed by the registrar of state under the State Government.

For Section 8 Company, it is not required to use words ‘LTD’ or ‘PVT LTD’ in their name. With effect from June 5, 2015, under the act, there is no such requirement regarding the minimum capital.

Types of Non Profit Organizations India

In India, there are mainly the following types of non-profit organizations i.e. Section 8 Companies (earlier Section 25):

  • Societies registered under section 20 of the Societies Registration Act 1860.
  • Trusts formed under Indian Trusts Act 1882

Advantages

Some of the advantages of registering a Section 8 Company are:

  1. Tax Exemption:

Since, it is a non-profit organization; hence they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits.

They gain benefits under section 80G of the Income Tax Act, 1961. Also, they pay less stamp duty as compared to other organizations.

  1. No requirement of title:

It need not include the terms “private limited” or “limited” as a suffix in the name of the Company.

  1. Ease in Transferring Ownership:

Not like other businesses, where it is not possible to transfer ownership easily, for a Section 8 Company it is easier to leave the membership of Section 8 Company or to transfer its ownership.

  1. Capital Flexibility:

Apart from the share capital of the Company, the necessary funds are brought in the form of donations, subscriptions from members or the general public.

  1. Zero Stamp Duty

A Section 8 company do not have to pay stamp duty at the time of incorporation.

  1. Minimum Compliances

Section 8 Company is required to do lesser legal formalities as compared to any other company. It gets special exemptions and privileges under the Companies Act, 2013. Therefore, in Section 8 Company, less number of compliances are required.

Donations/Funding of Section 8 Company

Section 8 Company is not allowed to raise capitals by way of deposits. However, they can accept donations from the general public. Below are some of the ways by which it can raise funding:

  1. Foreign Donations: Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been taken. 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 prior permission from the commissioner.
  2. Equity Funding: Section 8 Company can also raise funds by issuing new equity shares at a higher value.
  3. 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.

Checklist

  • The company should be formed for the charitable or such other object only
  • Income and profits should be used towards the charitable purpose only
  • The company should not pay any dividend to its members.
  • Whatever amount of initial capital has been proposed for the Company, it must get invested in the Company within 2 months.
  • 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
  • All the Directors must have their valid DIN (Director’s Identification Number) & DSC (Digital Signature Certificate).

Documents Required

In India, Section 8 company registration is done with proper identity proof and address proof. Identity and address proof will be needed for all the directors and the shareholders of the company to be incorporated. Listed below are the documents that are accepted by MCA for the online Section 8 company registration process:

  1. Identity and Address Proof of Directors and Shareholders
  • Scanned copy of PAN Card (Passport in case of Foreign Nationals & NRIs)
  • Scanned copy of Voter’s ID/Passport/Driver’s License (Any one)
  • Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill of the individual (Any one, not older than two months)

Please note that for the foreign nationals, apostilled or notarized copy of the passport has to be submitted mandatorily. All documents submitted should be valid and genuine.

  1. Registered Office Proof

For online company registration in India, the company must have a registered office in India. Following documents needs to be mandatorily provided while giving Registered Office details:

  • Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill in case you own property
  • Scanned copy of Notarized rental agreement
  • Scanned copy of No-objection certificate from the property owner

Important to Note: Your registered office can be a commercial space or can be your residence too.

Registration Process

Though the process of registering a Section 8 Company has now become simple, but still assistance from a professional is advised to complete the various complex forms and filing them within time. Moreover, the government portals and language are a bit on the difficult side, too.

Registration SEVA is an expert in Section 8 company Incorporations, with over 8 years of experience in the field and successfully registering number of Section 8 Companies. Our operations are spread all over India.

Here are the following steps required to incorporate a section 8 company

Step 1: Apply for Digital Signature Certificate (DSC)

Since the process is completely online, hence all those authorised signatories/directors who needs to sign the online incorporation documents must apply for Digital Signature Certificate.

Step 2: Apply for Director Identification Number (DIN)

DIN can be applied along with the company registration application form i.e. SPICE -32. However, maximum 3 Directors can obtain DIN along with SPICE 32.

In case the subscriber is already holding a valid DIN, and the particular provided have been updated as on date of application and the declaration to this effect is given in the application, the proof of identity and residence need not be attached.

Step 3: Apply for Name Approval through RUN

For the name approval step, an application is filed in the prescribed Form RUN (Reserve Unique Name) with the Ministry of Corporate Affairs. Please note that a minimum of 2 names at the time of incorporation are proposed.

Step 4: Submitting Final Incorporation Documents

Earlier, Form INC 12 was used to obtain a Section 8 license, but now with effect from 7th June, 2019, this requirement is no more applicable. So, the Process of Incorporation of Section 8 Companies is now simple as the process of incorporation of other Companies. Section 8 Companies can be incorporated filing SPICe. Licence no. for a section 8 company shall henceforth be allotted at the time of incorporation itself. Apart from SPICe, the following documents need to be filed:

  • Memorandum of Association (MOA) and Articles of association (AOA) of the Company in prescribed format (Form no. INC – 13) where the photographs of subscribers are affixed.
  • A Declaration is to be attached in Form no. INC-14 (on the stamp paper, duly notarized) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with.
  • An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
  • A declaration (in Form no. INC-15) on stamp paper duly notarized by each of the persons making the application and
  • Form no. INC-9 from each subscriber and first directors.

Step 5: Receiving Certificate of Incorporation and License and opening Bank Account

After approval of incorporation documents, you will receive your Certificate of Incorporation including your Section 8 License, Company Identification Number (CIN) along with PAN and TAN of your company. Post this you can open a bank account on the name of your company and can launch your business.

Annual Compliances for Section 8 Company

Take a note of the following compliances which must be adhere to:

  • At least 2 Board Meetings in a year
  • Mandatory audit of the Books of Accounts.
  • Annual returns, along with other e-filing forms such as MGT-7, AOC-4, etc.
  • Income tax returns.
  • Additional compliances to fulfil the registration u/s12AA, 80G, of the Income Tax Act, applicable to donations, etc.

How can we help in getting registration?

Our services include the following:

  • Assured Name approval from the Ministry of Corporate Affairs (MCA)
  • Regular updates during the incorporation process
  • DSC’s and DIN for subscribers and directors
  • Filling of company incorporation e-forms with the MCA
  • Drafting objective, Memorandum of Association (MOA) and Article of Association (AOA)
  • PAN and TAN
  • Business plan guidance
  • The legal agreement, corporate drafts set, letters on requirement basis.

FAQ

01. Who can apply for registration of a Section 8 Company?

Any person or an association of persons intending to register a company for objects specified below canopt to apply for registration of Section 8 Company.The following have to be proved to the satisfaction of theCentral Government that:

(a) its objects include promotion of commerce, art, science,sports, education, research, social welfare, religion,charity, protection of environment or any such otherobject;

(b) the company after incorporation intends to apply itsprofits, if any, or other income in promoting such objectsonly; and

(c) the company intends to prohibit the payment of any dividend to its members.

02.Who is authorized to issue license to Section 8 Companies?

Registrars of Companies of respective jurisdictions are delegated with the powers of Central government to issue license to Section 8 Companies.

03. What is the meaning of persons or association of persons as mentioned in Section 8?

The term “person” is not defined under the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that “person” shall include any Company, or association or body of individuals, whether incorporated or not. Therefore, such a person can be natural or a legal person. Even a partnership firm can be a member of Section 8 Company.

04. How many directors are required to form a Section 8 company?

Minimum 2 directors are required to form a Section 8 company amongst which at least 1 must be an Indian citizen.

05. Is it necessary to have non-profit motive to register a section 8 company in India?

Yes. It is mandatory to have a not for profit motive of the organization.

06. What is the minimum capital required to register a Section 8 company?

There is no minimum capital is required to establish a section 8 company.

07. What is the procedure for incorporation of a Section 8 Company?

To incorporate a Section 8 Company, an application shall be made to the Registrar of Companies and including the following documents:

  1. Draft Memorandum of Association (MOA) and Articles of association (AOA) of the Company in prescribed format (Form no. INC – 13) where the photographs of subscribers are affixed.
  2. A Declaration is to be attached in Form no. INC-14 (on the stamp paper, duly notarized) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with.
  • An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
  1. A declaration (in Form no. INC-15) on stamp paper duly notarized by each of the persons making the application and v. Form no. INC-9 from each subscribers and first directors, on appropriate stamp paper of the State and duly notarized.

08.Can a One Person Company (OPC) be incorporated as or convert into a Section 8 Company?

No, Rule 3 of the Companies (Incorporation) Rules, 2014 prohibits a one-person company to be incorporated as section 8 company or to convert into a Section 8 Company.

09. Can section 8 companies be a holding company of another company?

Yes, section 8 company can promote another company andbe a holding company of another company.

10. Is there any relaxation of stamp duty payment?

Payment of stamp duty is governed by Indian Stamp Act, 1899 as adopted by the respective state. Some states provide relaxation for payment of stamp duty at the time of incorporation. However, no relaxation is provided by any state on issue of share certificates.