Section-8 Company

Section 8 Company Registration – An Overview

A Section 8 company registration under the Companies Act, 2013 or a Section 25 Company as per the Companies Act,1956 is an organisation registered with an objective of promoting the fine arts, science, literature, or knowledge sharing for a purposeful matter or for charity. Section 8 companies are regulated through the Companies Act, 2013. These are the limited companies established under the Companies Act. The Government grants these companies an exclusive license under Section 8 Companies Act. There are three main conditions for granting the license.

• The company should be registered for charitable purposes
• Income and profits should be used towards these objects
• The company should not pay any dividend to its members.

Benefits of Section 8 Company Registration

• Tax Exemption: Section 8 companies enjoy 100% tax exemption as their profits are utilised for charitable purposes, providing a significant tax advantage.
• No Minimum Capital Requirement: Section 8 entities have the flexibility to adjust their capital structure according to their growth, eliminating the need for a minimum capital requirement.
• No Stamp Duty: Section 8 companies are exempt from paying stamp duty during the registration process, reducing the cost of establishment.
• Separate Legal Entity: Section 8 companies have a separate legal identity and perpetual existence, enhancing credibility and providing autonomy.
• Increased Credibility: Strict legal compliance frameworks ensure that Section 8 companies hNo Title Required: Section 8 companies have the freedom to choose a name without the requirement to add the term ‘Section 8’ to their name, allowing for greater naming flexibility.ave a higher level of credibility and trustworthiness compared to NGOs and trusts.
• No Title Required: Section 8 companies have the freedom to choose a name without the requirement to add the term ‘Section 8’ to their name, allowing for greater naming flexibility.

Donations/Funding of Sec 8 Company

Section 8 company registration may accept public donations but is not permitted to obtain capital through deposit Some of the methods it can use to raise money are listed below:

• Foreign Donations: Only after registering under the FCRA (Foreign Contribution Regulation Act of 1976) are foreign donations permitted. FCRA licence applications are only accepted three years following the registration date. However, you may request a prior clearance from the commissioner if certain extremely urgent international donations are required
• Funding for Equity: Sec 8 company may potentially be able to raise money by issuing new equity shares at a premium
• Donations Made Domestically: There are no restrictions on domestic donations. But a proper mechanism must be put in place to prevent situations of money laundering.

Requirements for Sec 8 Companies Registration Online

For Section 8 Company Registration procedure, the following criteria must be fulfilled:

• Governed By: Companies Act, 2013
• Members: Minimum of 2 Directors/Shareholders
• Important Documents: MoA, AoA and financial statements
• Board: Directors
• Property Management: All the properties belonging to a company are vested in the name of the company. These can be sold in conformity to the provisions mentioned in the Companies Act, 2013. The Act says the sale can be done with prior consent of the Company Board of Directors, when they pass a resolution regarding the same.
• Closure or Winding up of a company : The property and funds of the society, upon its dissolution ( as per the society by-laws) and settlement of all liabilities & debts, may not be equally distributed among the company members. Rather, the same can be transferred or given to some other company, preferably with similar objects.
• Annual Compliance: The company must ensure its annual compliance by filing its annual returns and annual accounts with the RoC.

Name Approval of Section 8 Company Registration

The name provided for the section 8 company incorporation should be short, simple, unique, include the right suffix, project the motif of the NGO and so on. It is necessary to officially register and approve the company’s name. This assists in avoiding any copyright concerns and ensures that no other section 8 companies have already been registered under the same name. To obtain approval, a Form INC-1 application must be submitted to the company’s Registrar (Central Registration Centre – CRC of Ministry of Corporate Affairs). The applicant will need to submit six unique names for name approval in order to reduce the likelihood of name recurrence. Following approval, the name is valid for up to 60 days. The recommended names must include words like foundation, association, forum, council, chambers, etc. in accordance with the Company (Incorporation) Rules, 2014 in order to be accepted as a legitimate section 8 company name.

Eligibility Criteria for Sec 8 Company Registration

• An Individual or HUF or limited Company is eligible to start a Section 8 company registration in India
• Two or more persons who will act as a shareholder or Director of the company should fulfil all the requirements and compliances of the Section 8 Company registration
• At least one of the directors shall be a resident of India. However, a firm may be a member of the company registered under this section
• The objective should be the promotion of sports, social welfare, the advancement of science and art, education and financial assistance to lower income groups
• The surplus generated must be used for meeting the principal objective of the section 8 company registration
• Founders, members, and directors of the company cannot draw any remuneration
• There should be no direct or indirect distribution of profits to the company’s directors and members
• The business should have a defined three-year project plan and vision.

Mandatory legal requirements for Section 8 Company

The following are the mandatory legal requirements for a Section 8 Company in India:

• Memorandum of Association (MOA): The MOA is a legal document that outlines the constitution of the company. It must contain the following information:
  The name of the company
• The registered office of the company
• The objects of the company
• The liability of the members of the company
• The association of the members

Articles of Association (AOA): The AOA is a legal document that governs the internal management of the company. It must contain the following information:

• The rights and duties of the members of the company
• The powers of the directors of the company
• The procedures for holding meetings and passing resolutions
• The procedures for winding up the company

Digital Signature Certificate (DSC): A DSC is a digital signature that is used to authenticate electronic documents. All directors of a Section 8 Company must have a DSC.

Purpose of NGO Section 8 Company Meaning

A non-governmental organisation (NGO) is a non-profit organisation that is independent of any government. NGOs are typically involved in social welfare activities, such as poverty alleviation, education, and healthcare.
A Section 8 Company is a type of company that is incorporated under Section 8 of the Companies Act, 2013. Section 8 Companies are non-profit companies that are established for charitable purposes.

Forms Required for Section 8 Company Registration

The following forms are required for Section 8 Company registration:

• Form INC-11: This form is used to apply for incorporation of a Section 8 Company.

• Form INC-12: This form is used to provide information about the directors of the company.

• Form INC-13: This form is used to provide information about the subscribers to the Memorandum of Association.

• Form INC-14: This form is used to provide information about the registered office of the company.

• Form INC-15: This form is used to provide information about the Memorandum of Association and Articles of Association of the company.

Annual Compliances of Section 8 Company

Section 8 Companies are required to comply with the following annual compliances:

• File an annual return with the Ministry of Corporate Affairs (MCA): The annual return must contain information about the company’s activities, financial performance, and governance.
• File a statement of accounts and solvency with the MCA: The statement of accounts and solvency must contain information about the company’s assets, liabilities, income, and expenses.
• Get their accounts audited: Section 8 Companies with a turnover of more than ₹ 40 lakhs or capital contribution of more than ₹ 25 lakhs are required to get their accounts audited by a chartered accountant.
• File an income tax return: Section 8 Companies are required to file an income tax return even though they are not taxed on their profits.

The registration fee for a Section 8 Company in India is ₹ 2,500.
Additional Information

• Section 8 Companies are not allowed to distribute dividends to their members
• Section 8 Companies are required to have at least two directors and two members
• Section 8 Companies are required to have a minimum paid-up capital of ₹ 1 lakh.

Key Points about Section 8 Company

• NGOs in India can be registered under the Registrar of Societies or as a non-profit entity under Section 8 Company of the Companies Act, 2013
• Section 8 Companies cannot utilise profits for purposes other than charitable objectives and cannot distribute them among shareholders
• Section 8 Companies are similar to the former Section 25 Companies under the Company Act 1956. They are now recognised as such under the prevailing legislation
• Compliance with the Companies Act 2013 is mandatory for Section 8 Companies, including maintaining books of accounts, filing returns with the Registrar of Companies (ROCs), and complying with GST and IT Act regulations
• Any changes to the charter documents, such as the Articles of Association (AoA) and Memorandum of Association (MoA), require government consent.

Documents Required for Registration of Section 8 Company

• DSC and DIN of the Directors.
• Objectives and proposed work of the company.
• Financial statements like assets and liabilities, the projection for five years etc.
• Directors personal documents.
• Registered office address documents viz. rental agreement or sale deed in the name of the company, utility bills not older than two months.

Online Section 8 Company Registration – A Detailed Process

There are three major steps in incorporating a Section 8 company apart from the document collection, preparation and drafting. They are:

• Reserve Unique Name (RUN) is a form filed for reserving a name for a new company or for changing its existing name. This is the first step of incorporating a section 8 company.
• A section 8 company registration shall usually have words like Foundation, Federation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation, Chamber of Commerce, Development, Association, etc.
• The name so approved shall be valid for 20 days

• This step is the most crucial in the process of incorporation
• The name approval shall be valid at the time of applying for the RD 1 license
• RD 1 license is a license granted under section 8 of companies act as they work on a specific objective which is for the upliftment of arts, science, commerce, environment, etc., and the profit they earn shall also be used towards their objectives. All crucial documents like the MoA, AoA, financial statements and other declarations are filed at this stageThe license so approved shall be valid for 30 days.

• Both the name and the license shall be valid at the time of filing the SPICe form
• This is the final stage of section 8 company registration where the documents relating to the registered office like the rental agreements and utility bills are filed along with the RD-1 license and the name approval certificate.

Section 8 Company Compliances

• A Section 8 company has to comply with the annual compliances like other companies
• In case of non-compliance, the company will be treated as a dormant company and it can be struck off from the register
• A section 8 company registration is also required to do the CSR compliances and the CSR must be done.

If the Section 8 Company Registration violates the Act’s legal requirements, the Government will revoke it. The licence may be revoked if the Company’s goals are mishandled or inconsistent with the ones that were established. A firm or other entity that violates the rules will be subject to a fine that starts at ₹10 lakh and can reach ₹1 crore. The Company’s Officers & Directors who violate the terms will be subject to a fine of at least ₹25000 and up to ₹25 lakh, or both.

There is a general notion that a Section 8 company need not pay tax as they work towards the welfare of the public at large. But this is not true. A Section 8 company, like any other legal entity, is liable to pay tax. In order to be exempted from Tax, a Section 8 company is required to obtain certification for the said exemptions such as Section 12 A, 80G etc. from the Income Tax Authorities.

Section 8 Company Registration Fees

• Company Name Reservation: ₹1000/-
• Digital signature registration & DIN: ₹3000/-
• Notary and stamps: ₹2000/-
• MoA & AoA & Government Fees & Incorporation Fees: ₹6000/- to ₹8000/-
• Professional Fees: ₹8000/- to ₹10000/-