As per Companies Act 2013 of India, a Section 8 company is basically a non-profit charitable organization. It is an establishment that is set up for charitable purposes. Since it comes under a Non-Governmental Organization (NGO), its aim is not to earn profits.
The Section 8 Company falls under a private limited company with regards to all its commercial and for the purpose of earning profits.
The Companies Act defines a Section 8 company as one of the companies that works with the objectives to promote areas of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection and other objectives.
A Section 8 Company is established due to the several ways it proves to benefit the society as a whole. Some of the ways it helps the society and people living in all sections of the society are by providing basic amenities to the people who do not receive them.
The Government has mentioned some steps which need to be followed for a proper registration of a Section 8 Company in India:
- Selection of a name for the NGO. The name that is decided must be filed for reservation through the Reserve Unique Name facility made available on the MCA website.
- The next step is the preparation of the Memorandum of association(MOA) and Articles of Association (AOA) of the company along with some important documents like the Profit and Loss Statement, Statement of assets and liabilities, a report describing the functions and activities of the company.
- File incorporation application in the SPICe Form along with the required documents.
- After proper evaluation of the application Certificate of Incorporation along with the license will be issued.
The registration process of Section 8 Company can be easily done online by following certain steps:
- Prepare DSC and fileName Approval
The first step in the registration of a Section 8 company registration is to prepare a Digital Signature Certificate (DSC). The company needs to apply for the Digital Signature Certificate (DSC) immediately after deciding that they want to start a company.
Section 8 companies must consist of words like Foundation, Society, Association, Council, Club, charities, Academy, Federation, Chamber of Commerce, Development or anything similar.
- Filing an application for Section 8 Company registration license from Regional Director, MCA (INC-12)
After approving the name of the company, the next step is to apply for Section 8 company registration license from the Regional director.
The regional director reviews the objectives and grants a permit for Section 8 Company registration. Regional Director generally takes 15 days to release a license to run as a section 8 company.
- Filing of different forms of Section 8 Incorporation on MCA Website
After receiving approval from the regional director, the company proceeds to file the section 8 company registration application with the necessary documents before ROC.
Once all verifications are provided to ROC, the ROC will issue a Certificate of Incorporation with a Company Identification Number (CIN).
- Submitting MoA and AoA files
Once the company receives the License, it needs to draft the Memorandum of Association (MoA) and Article of Association (AoA) in order to file section 8 company registration applications.
The Objective of the company will be detailed in the MoA and the rules.
- Incorporation and allotment of PAN, TAN and Bank Account
The company needs to submit the application form to the ROC office along with PAN, TAN and bank account ready while Section- 8 Company registration in India.
The cost for the Registration of Section 8 company registration is as mentioned below:
- DSC & DIN – 3000
- Company Name Reservation – 1000
- MoA and AoA & Government Fees & Incorporation fees - Rs 6000-8000
- Notary and Stamps – 2000
- Professional Fees- 8000-10000
- A copy of the PAN card and ID proof that must include Passport, Driving license, Voter ID) of all the promoters/directors
- Address proof of the specified documents - Telephone Bill or receipt, Electricity Bill, Bank Statement
- Passport size photos of all the promoters/directors
- Rent agreement if the office is situated in a rented building
- NOC from the owner of the office
- Utility bills of the registered office
Some benefits of registering Section 8 company are mentioned in brief:
- Exemptions from Tax: A Section 8 company do not have follow the rules mentioned in the Income Tax Act.
- Tax Benefits: There are various tax benefits under the Section 8 Company Registration in India.
- Flexibility while holding meetings – At the time of deciding the date, time and place for annual general meetings, it can be done according to their convenience – they can decide any date, time and place for conducting meetings.
- Holding general meetings at a short period of notice, majorly within 14 days instead of 21 days for limited companies.
- No minimum capital required - There is no minimum capital required for a Section 8 Company Registration in India.
- Voting rights - The voting rights of the member of the company depends on the number of shares contributed by them.
- No stamp duty needed– No stamp duty is made obligatory on the incorporation of Section 8 Company in India as it is against the provision of the paying for a stamp duty on the Memorandum of Association(MOA) and Articles of Articles(AOA) of a private limited company.
- Separate Legal Identity: Section 8 Company registration has a separate legal entity. As a result of the incorporation, Itgains a distinct legal identity from its members.
- Credibility: Section 8 Company has more credibility than any other type of a charitable organization. It is under the provision of the Companies Act which demands a compulsory audit on an annual basis.
- Exemption to the donators: As per Section 80G, the exemption is approved and granted to the donators if the section 8 company is registered as perSection 80G.
Eligibility criteria for a Section 8 company registration are as follows:
- An Individual or any private limited Company
- Two or more individuals should be a shareholder or Director of the company and they are supposed to fulfill the requirements and compliances of Section 8 Company registration.
- At least one of the directors must be a resident of India.
- The profits earned must be used for meeting the principal objective of section 8 company.
- Founders, members, and directors of the company cannot take any amount of remuneration in any form of cash or kind.
- No profit should be distributed amongst the members and director of the company in a direct or indirect manner.
- The company should have a vision, goals regarding the company and project plans specified at least for the next three years.
Since a Section 8 falls under an NGO, it serves the same significance as that of an NGO:
- Strengthens local sections of society
- Makes important contributions to the society by resolving certain major society related issues
- Encourages healthy population by minimizing diseases, hunger.
