An Overview of Section 8 Company Registration
In India, a Section 8 Company is a specific type of Company which is registered for the promotion of science, education, charity, social welfare, art, environment etc. It aims to apply all its income profits or other earnings in promoting this objection, and it pays no dividend or income to its members. Section 8 Companies are limited companies which are incorporated under the Companies Act and they may have been registered either as Public Limited or Private Limited Companies. In comparison to Society & Trust, Section 8 Company has more benefits and this type of Company has more credibility among Government Departments, donors & other stakeholders.
Important Points Regarding Section 8 Company in India
- A Section 8 Company is bound to fulfil the provisions of the Companies Act, 2013. In view of this, these companies are mandated to direct the books of account, file returns with ROCs;
- This Company is similar to the Section 25 Company under the erstwhile Companies Act, 1956. According to the prevailing company Act, Section 15 is now acknowledged as Section 8;
- An NGO can be incorporated under the Registrar of Societies or a Non-Profit entity under the Section 8 company of the Companies Act, 2013;
- Such companies have no authority to change the charter documents such as MOA & AO without consent from the Government. Moreover, they must also comply with the IT Act & GST Laws.
Benefits of Section 8 Company Registration in India
Following are some primary benefits of Section 8 Company Registration in India:
1. Distinct Legal Identity: Section 8 Company in India has a separate legal entity that is different from its members. Its legal standing is also different from its members. The Company has its existence till perpetuity along with having all organised operations and greater flexibility.
2. Zero Stamp Duty: A Section 8 Company is exempted from the requirement of paying stamp duty on the Memorandum of Association and Articles of Association of the private or public limited companies. Such a requirement is applicable for the registration of all other kinds of company structures.
3. No Minimum Capital Requirement: No minimum capital limit has been previously mentioned for a Section 8 Company in India. The capital structure of any company may be altered at any stage as per the growth requirements of the day to day business of the Company. This also implies that a company can be formed without any kind of share capital. The funds necessary for carrying out the business operations can be brought, later on, in the form of donations and/or certain subscriptions from the members and general public at large.
4. Exemption to the donors: The people donating to a Section 8 Company are always eligible for certain tax exemptions under Section 12A and 80G of the Income Tax Act of India.
5. Membership: Any registered partnership firm can also become a member in its individual capacity and obtain Directorship of a Section 8 Company in India.
6. Name: Section 8 Company is not required to suffix the words Limited or Private Limited next to its registered legal name. It can be registered with certain names that have words like Club, Association, Society, Council, Charities, Foundation, Institute, Academy, Organisation, and Federation.
7. Tax Benefit: For a Section 8 Company in India, there are many tax benefits that are granted to them.
8. Credibility: Section 8 Companies generally are more reliable than all other forms of charitable organisations working in India. They are governed by the Companies Act, 2013, and are regulated very strictly. Such as the essential requirement of a mandatory annual audit, or the Memorandum of Association and Articles of Association cannot be altered at any stage or in any kind of situation. The rules on managing the day to day profits and losses of the Company make such companies more trustworthy.
Eligibility Criteria for Section 8 Company Registration in India
- A person, HUF (Hindu Undivided Family) is eligible to commence a Section 8 Company in India;
- For the incorporation of Section 8 Company in India, there must be at least 1 director who should be an Indian Resident in this Company;
- Directors, Founders, Members Directors of the Company cannot draw any remuneration in any form of cash or kind;
- 2 or more individuals who will act as Directors or Shareholders should fulfil all the compliances & requirements of the Section 8 Company Registration under the Act;
- The Company's objective must be one or more of the these, such as the promotion of social welfare, science, art, sports, education & financial help to lower-income groups;
- No profit should be distributed to the directors & members of the Company directly or indirectly.
Basic Pre-Requirements for the Incorporation of Section 8 Company
Following are some basic requirements needed before Section 8 Company Registration:
- Directors and Members: If the Section 8 Company is to be registered as a Private Limited Company, at least 2 directors are required and if the Section 8 Company is to be registered as a Public Limited Company, a minimum of 3 directors are required. The maximum number of members is 200 are required in a Private Limited Company, whereas for a Public Limited, there is no such limit.
- Capital Requirement: There is no capital requirement for the Section 8 Company Registration.
- Name of the Company: NGOs are established as a Section 8 Company in India no need to use the words "Limited" or "Private Limited" in their name.
- Management: This Company is managed by the BoDs (Board of Directors) as per the AoA (Articles of Association) & MoA (Memorandum of Association) of the Company, unlike other trusts that the Trustees manage as per the Trust Deed.
- Company’s Objectives: Entities with non-profit objectives are eligible to apply for Section 8 Company Registration. Any profit generated by this Company is used to serve its underlying objectives such as charitable purposes or reinvested in the Company, and the profit of such entities is not for its members in any form.
Different Forms Required for Section Company Registration
Application for Incorporation
Application for License
MoA (Memorandum of Association)
Declaration from a Practising CA
Declaration from each person making the application
License to register or incorporate as a Section 8 Company
The situation of registered office
Consent to Directors
Application to Registrar of Company to get DIN (Director Identification Number)
Appointment of Directors
Documents Required for Section 8 Company Registration
Following are some vital documents required for incorporation of Section 8 Company:
- Office address proof;
- Digital Signature Certificate (DSC);
- Identity & resident proof of nominees & subscribers;
- Articles of Association (AoA) & Memorandum of Association (MoA);
- Copy of latest utility bills such as mobile bills, gas bills, electricity bills, or water bills;
- Consent of Nominee (INC-3);
- Identity proof & residential proof of the applicant;
- Copy of Certificate of Incorporation of an overseas body corporate (if any);
- A resolution was passed by the promoter company;
- Declaration by the 1st director and subscriber (Affidavit not required);
- Declaration of unregistered companies.
- Proof of business place;
- Evidence of appointment regarding the Authorised Signatory for GSTIN;
- Managing Committee as well as Acceptance Letter;
- Specimen Signature of Authorised Signatory for EPFO;
- Authorisation Letter or Resolution copy passed by Board of Directors;
- Identity proof related to Authorised Signatory for the opening of an account in a designated bank.
Procedure for the Incorporation of Section 8 Company
Step 1: Obtain DSC: First, the applicant needs to obtain a DSC; it serves as a digital tool for signing various online forms and scanned copies of documents. It is used by the authorised signatory of the Company, such as the Partners Directors, Managing Directors etc. Swarit Advisors will help you in obtaining DSC.
Step 2: File SPICe+ Form: The next vital step is to go to the MCA website and create an account. Then, the applicant is required to select SPICe+ Form and this would lead the applicant to a brief e-form which entails two parts, A & B.
Part A is for the applicant to register the Company's name and Part B of this form provides some important services such as – Company Incorporation, GSTIN Allotment, DIN Allotment, TAN & PAN Allotment, EPFO Allotment, ESIC Allotment, the opening of bank account for the Company, Professional Tax Registration (only for Maharashtra).
Step 3: Upload Vital Documents: After that, you need to upload all the vital documents mentioned above and pay the prescribed fees.
Step 4: Issuance of Certificate: If the Registrar of Company is satisfied with the forms submitted, they will issue a Certificate of Incorporation along with a Unique CIN (Company Identification Number).
Annual Compliances of Section 8 Company
- Mandatory audit report;
- ITR filing;
- Conduct at least 2 board meetings in a year;
- An annual return has to be filed every year with other e-filing forms like MGT-7;
- Filing of financial statement in Form AOC-4;
- Additional compliances to fulfil the registration like 80G, 12AA, etc.;
- Preparation of financial statements;
- Maintenance of Books of Accounts.
Penalty for Non-Compliance
The Government will cancel the Section 8 Company Registration if it fails to obey the legal provisions of the Act. If the Company's objectives are conducted falsely or in violation of the objectives for which it is established, the license can be cancelled. If a company or entity defaults in complying with the provisions, the Company shall be punishable with a fine of Rs. 10 lakh and may extend to Rs. 1 crore. The Officers & Directors of the Company in default of the provisions shall be punishable with a fine not less than Rs. 25000/- which may extend to Rs. 25 lakh or both.
FAQs on Section 8 Company
Yes, GST is applicable to a section 8 company.
A person can incorporate a section 8 company as a public or private limited company.
Yes, a section 8 company can pay remuneration to its director.
The steps involved are Apply for Name; Application under Form RD 1; Notice in Newspaper; and Issuance of License.
One can check the status by visiting the official MCA portal.
No, there is no need to appoint an Independent Director.
There is no minimum and maximum limit prescribed for the number of directors.
No, a Section 8 company cannot issue Bonus Shares its member.
Yes, a section 8 company can appoint a Woman Director.
Yes, section 135 of the Companies Act, i.e., CSR, is applicable to a section 8 company.
Yes, a section 8 company needs to comply with the provisions of Secretarial Audit.
No, an OPC cannot convert itself into a Section 8 Company.
Yes, a Partnership Firm can get itself converted into a Section 8 company.
No, a section 8 company cannot maintain its books of account on a Cash basis.
Yes, it is necessary for section 8 company to obtain FCRA Registration to accept Foreign Contribution.
Yes, a section 8 company can hold another company.
All types of business format except OPC can become a member in a section 8 company.
No, there is no need to use “Private Limited” or “Limited” as a suffix in a section 8 company.
Yes, a Section 8 company can carry out Advisory and Consulting Services.
No, one can only amalgamate with a Section 8 Company.
No, a Section 8 Company cannot issue Redeemable Preference Shares.
Yes, the Provisions of Cost Audit are applicable to a Section 8 Company.
Yes, the Provisions of Internal Audit are applicable to a Section 8 Company.
Yes, a Section 8 Company can extend its Objective beyond India.
Yes, a Section 8 company can issue Bonus Shares to Employees.