All You Need to About Section 8 Company Registration

Section 8 Company
Shivam Narwal
| Updated: Mar 31, 2023 | Category: Section 8 Company

An organisation created with the intention of advancing social welfare, philanthropic causes, or any other non-profit mission is referred to as a Section 8 Corporation, commonly known as a Non-Profit Company. It is a business that was founded with no thought of making a profit and only with the intention of advancing trade, the arts, sciences, religion, charitable causes, or any other worthwhile goal. The Ministry of Corporate Affairs oversees Section 8 Companies, which were created under the 2013 Companies Act. Everything you need to know about Section 8 Company Registration will be covered in this blog.

Section 8 Company Registration Process

These are the steps involved in registering a Section 8 Company:

  1. Obtain Digital Signature Certificate (DSC): The first step in the registration process is to obtain a Digital Signature Certificate (DSC[1]) for the proposed directors of the company. A DSC is an electronic form of signature that is used to sign the documents required for company registration.
  2. Obtain Director Identification Number (DIN): The next step is to obtain a Director Identification Number (DIN) for the proposed directors. A DIN is a unique identification number that is allotted to each director of a company.
  3. Name Reservation: The third step is to reserve a name for the company. The name must comply with the naming guidelines set by the Ministry of Corporate Affairs. Once the name is approved, it is valid for a period of 20 days.
  4. Memorandum of Association (MOA) and Articles of Association (AOA): The fourth step is to draft the Memorandum of Association (MOA) and Articles of Association (AOA) for the company. The MOA defines the objectives of the company, while the AOA lays down the rules and regulations for the management of the company.
  5. Incorporation: The final step is to file the necessary documents with the Registrar of Companies (ROC) for the incorporation of the company. The documents required for incorporation include the MOA and AOA, a declaration by a Chartered Accountant, and an affidavit from the proposed directors.

Documents Required for Section 8 Company Registration

The following documents are required for the registration of a Section 8 Company:

  1. Memorandum of Association (MOA): The MOA must contain the name of the company, its registered office address, the objects for which the company is proposed to be established, and the names of the subscribers to the memorandum.
  2. Articles of Association (AOA): The AOA must contain the rules and regulations for the management of the company.
  3. Declaration by a Chartered Accountant: A declaration by a Chartered Accountant is required stating that all the requirements of the Companies Act, 2013 and the rules made thereunder have been complied with.
  4. Affidavit from the proposed directors: An affidavit from each of the proposed directors stating that they are not disqualified to act as directors under the Companies Act, 2013 is required.
  5. Consent from the proposed directors: Consent from each of the proposed directors to act as directors of the company is required.

Benefits of Section 8 Company Registration

  1. Limited Liability: The liability of the members of a Section 8 Company is limited to the extent of their share capital contribution.
  2. Perpetual Succession: A Section 8 Company has perpetual succession, which means that it continues to exist even if its members change.
  3. Tax Benefits: Section 8 Companies are eligible for tax exemptions under various provisions of the Income Tax Act, 1961.
  4. No Minimum Capital Requirement: There is no minimum capital requirement for the registration of a Section 8 Company.
  5. Credibility: Section 8 Companies enjoy a higher level of credibility as they are established for non-profit purposes and are regulated by the Ministry of Corporate Affairs.
  6. Charitable Activities: Section 8 Companies are established for promoting charitable activities and are eligible for various grants and donations from the government and other sources.
  7. Easy Transferability of Ownership: The ownership of a Section 8 Company can be easily transferred by transferring the shares of the company.
  8. Recognition and Trust: Section 8 Companies are recognized and trusted by the public and other organizations due to their non-profit nature and objectives.

Eligibility Criteria for Section 8 Company Registration

To be eligible for Section 8 Company registration, the following criteria must be met:

  1. The company must have a non-profit objective.
  2. The company must have a minimum of two directors.
  3. The company must have a minimum of two shareholders.
  4. The company must not have any paid-up capital.
  5. The company must not distribute any dividends to its members.
  6. The company must apply its profits for promoting its objectives.

Differences Between Section 8 Company and Non-Profit Organization

Section 8 Company and Non-Profit Organization are two different types of entities that are established for non-profit purposes. The following are some differences between the two:

  1. Legal Structure: A Section 8 Company is a type of company that is registered under the Companies Act, 2013 and is governed by the Ministry of Corporate Affairs, whereas a Non-Profit Organization can be registered as a Trust, Society, or Section 8 Company.
  2. Governance: A Section 8 Company is governed by its Memorandum of Association and Articles of Association, whereas a Non-Profit Organization is governed by its Trust Deed or Bye-Laws.
  3. Tax Exemptions: Section 8 Companies are eligible for tax exemptions under various provisions of the Income Tax Act, 1961, whereas Non-Profit Organizations are eligible for tax exemptions under the Income Tax Act, 1961.
  4. Limited Liability: Members of a Section 8 Company have limited liability to the extent of their share capital contribution, whereas the liability of members of a Non-Profit Organization varies depending on its legal structure.

Procedure for Changing the Objectives of a Section 8 Company

If a Section 8 Company wishes to change its objectives, it must follow the following procedure:

  1. Convene a Board Meeting: The Board of Directors of the company must convene a meeting to discuss the proposed change in objectives.
  2. Pass a Special Resolution: The company must pass a special resolution to approve the change in objectives. The resolution must be passed by a majority of not less than three-fourths of the members present and voting.
  3. File Form MGT-14 with the ROC: The company must file Form MGT-14 with the Registrar of Companies within 30 days of passing the resolution.
  4. File Form INC-27 with the ROC: The company must file Form INC-27 with the Registrar of Companies within 30 days of filing Form MGT-14.
  5. Update MOA and AOA: The company must update its Memorandum of Association and Articles of Association to reflect the change in objectives.

Conclusion

A Section 8 Company is a unique type of organization that is established solely for the purpose of promoting social welfare, charitable activities, or any other non-profit objective. The registration process for a Section 8 Company is relatively straightforward, but it is important to ensure that all the necessary documents and requirements are met. Once registered, a Section 8 Company can enjoy various benefits, such as limited liability, perpetual succession, tax benefits, and credibility.

Moreover, a Section 8 Company is an excellent platform for individuals who want to contribute to society and make a positive impact on their community. By establishing a Section 8 Company, one can undertake various charitable activities and help those in need. Additionally, Section 8 Companies are recognized and trusted by the public and other organizations due to their non-profit nature and objectives.

In today’s world, where corporate social responsibility and sustainability have become essential aspects of any organization, a Section 8 Company provides an opportunity to not only fulfill these obligations but also to make a meaningful difference in the world. Hence, if you have a non-profit objective in mind and want to make a positive impact, consider registering a Section 8 Company and be a part of the change that you want to see in the world.

Also Read: A Complete Procedure for Section 8 Company Registration

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Shivam Narwal

Shivam Narwal, a motivated final year BBA LLB law student at Chandigarh University, has started his legal career at Swarit Advisors as a legal researcher. With a strong focus on thorough and accurate research, Shivam is dedicated to delivering exceptional results. Throughout his studies, he has shown a deep understanding of the legal system and a drive to excel in the field of Law. 

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