Benefits of Section 8 Company Registration

Being an NPO or Non-profit Organization does not imply that the Company can’t make a benefit or income. It just implies that the Company can earn benefits however the promoters are not to profit from those benefits. The benefits can’t be disseminated among the promoters. All incomes must be applied to advancing the objective of the company.

Still, certain exclusions and advantages have been accommodated to an “NGO or an NPO” under section 8 of the Companies Act 2013. The donors contributing towards a Section 8 Company are eligible to confirm the Tax Exemption against these gifts.

Some of the advantages are:

âœ” Distinct Legal Identity: A Section 8 Company is a separate legal entity and is different from it’s members. It’s legal standing is not the same as it’s individuals. The Company has a never-ending presence, alongside having organized operations and greater adaptability.
âœ” Zero Stamp Duty: A Section 8 Company is excluded from the necessity of paying stamp duty on both “MoA and AoA” of the private or public limited organization, which is relevant for enrollment of other sorts of company structures.
âœ” No Minimum Capital Requirement: No base capital limit has been referenced for a Section 8 Company in India. Also, the capital structure can be changed at any phase according to the growing necessities of the company. This suggests that it may be formed without any share capital. The funds necessary for carrying the business operations can be brought in the form of donations and/or subscriptions from members and the general public.
âœ” Name: A “Section 8 Company” does not need to add Limited or Private Limited, to it’s legal name. It may be enrolled with names like “Foundation, Association, Society, Council, Organization, Club, Charities, Academy, Institute, and Federation.”
âœ” CARO: Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
âœ” Tax Benefits: Many tax benefits are granted to Section 8 Companies in India.
âœ” Credibility: Section 8 Companies are more dependable than any other type of altruistic associations. They are represented by the Companies Act and are managed carefully. For example, the necessity of a required yearly review, or the “MOA and AOA” can’t be modified at any stage or circumstance.
âœ” Exemption to the donors: Those donating to a Section 8 Company are eligible for tax exemptions under section “12A and 80G” of the Income Tax Act.
âœ” Membership:An enlisted partnership firm can turn into a member in it’s individual capacity and acquire a Directorship.

Eligibility

Objects of a Section 8 Company must be the promotion of “Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of Environment, or any other such object.”
The Company intends to apply it’s profits, if any, or other income in promoting these objects.
It intends to prohibit the payment of any dividend to it’s members.

A Section 8 Company is created by those who do not wish to earn profit from this venture. Rather they want to dedicate themselves to improve some parts of the social structure.

Other than the conditions laid down in it’s definition above, the following criteria must be fulfilled for registering as a Section 8 Company:

âœ” Under: Companies Act, 2013.
âœ” License: License to be applied to MCA.
âœ” Directors: A Minimum of “2 Directors for a Private Limited Company and 3 Directors for a Public Limited Company” must be there. More than that can be appointed after passing a special Resolution in a general Meeting.
âœ” Indian Resident: 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, according to [(Section 149(3)].
âœ” Subscribers to MoA: If the Company is proposed to be incorporated as a private company or a public company respectively, it’s “MoA” must have at least 2 or 3 subscribers.
âœ” MoA & AoA: Decide about the name to be applied for, objects to be carried out by the Company, planned registered office address, number of Directors and promoters, authorized capital, and number of shares to be subscribed by each promoter. They must mention the plan laid-out to meet the social objectives. The ROC (Registrar Of Company) is entitled to ask about it.
âœ” Initial Capital: Whatever amount of initial capital has been proposed for the Company, it must get invested in the Company within 2 months.
âœ” Property Management: The ownership of the property lies in the name of the Company and it can only be sold as per the rules mentioned under the Companies Act. (Ex: With the consent of the Board of Directors in the form of a resolution).
âœ” Dissolution:The Section 8 Company may wind-up only by following the bye-laws of the society. Upon dissolution and after settling all debts and liabilities, the funds and property of the society are not to be distributed among the members of the company. Instead, the remaining funds and property would be transferred to some another Section 8 Company, one that has a similar object.
âœ” Annual Compliance: Annual filing of “accounts, statements, and the returns of the company with the ROC” is necessary to meet the compliances required.
âœ” Documents: All the Directors must have their valid DIN (Director’s Identification Number) & DSC (Digital Signature Certificate).

Process of Section 8 Company Registration

Step 1: Get Registered with LegalRaasta

You are required to fill in your details, online, in our simple questionnaire given above. It contains Name, Complete Address, Proposed Names for the Company, Number of Directors with their details, Authorized Capital, etc.

Step 2: Get DIN & DSC

Applications would be filed with the ROC to obtain DIN and DSC for the Directors and should be duly signed. First, We need to apply for DSC. Once it has been received, Form DIR-3 is to be filed with the ROC to get their DIN. A passport-sized photograph attested ID Proof, and Address proof of the Director is to be attached to these applications.

Step 3: Name Approval

You suggest your preferences and we’ll conduct Company Name Search. After your approval of the 3 options, we’ll apply for a unique name for your Company. Name availability has to be checked in the “Reserve Unique Name” or RUN facility.

A maximum of 2 names is to be proposed, initially, in Form INC-1. If rejected 1 resubmission is allowed. Both times in separate formats.

Step 4: Apply for License & COI

We will apply for the Section 8 License with the Central Government. The right format to use is Form INC-12. It is to be sent with “MoA” in Form INC-13. “AoA” and Declaration of CA/CS/CWA are to be sent in Form INC-14. Declaration by Directors or Applicant is to be sent in Form INC-15.
COI or Certificate of Incorporation is proof that the company has been created. The unique CIN (Company Identification number) is also mentioned in this.

Step 5: Your Section 8 Company is now operative

As soon as all the processes have been completed and your Section 8 Company has been registered, we’ll apply for your PAN and TAN. It is done in Forms “INC-7, 8, 9, 10, 22, DIR-2, and 12” with the ROC, along with the required documents. We’ll get them ready, and will send them to you immediately.

Important Points

Minimum Requirement

A Section 8 Company gets incorporated by the MCA.
All requirements of the Companies Act 2013, such as the minimum number of Directors and Shareholders, etc. must be met with.

Charitable Object

Section 8 Companies can be established for non-profit objectives only. Any profit earned or income received by this Company is not to be distributed among its members.
This implies that the income will either be reinvested in the business or utilized for the progress of its main objects, i.e. charitable purpose.

Management Team

Unlike other Trusts which are governed by the Trustees as per a Trust Deed, the operations of Section 8 Companies are managed by the Board of the Directors as per their “MoA and AoA”.

Companies Act, 2013

A “Section 8 Company” must follow the provisions prescribed under the Companies Act, 2013, such as “Maintaining Book of Accounts, Audits, Return Filing, Board Meetings, etc”.

MoA & AoA

A Section 8 Company shall not make any changes to the provisions of it’s “MoA & AoA” without seeking approval from the Central Government first.

Voting Rights

The voting rights of the shareholders of a Section 8 Company are based on the number of shares held by them. Similar to that of any other company.

Income tax

The Company has to follow the provisions of the Income Tax Act.

GST Registration

If Section 8 Company comes under the purview of the GST Act, it must get registered with GST.

Conversion

It may not convert itself to any other kind of company structure without complying with conditions, as applicable.

Donations/Funding of Section 8 Company

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

âœ” 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.
âœ” Equity Funding: A “Section 8 Company” can also raise funds by issuing new equity shares at a higher value.
âœ” Domestic donations: There is no limitation to domestic donations. But to avoid money laundering cases, a proper system must be laid down to keep them in check.

Name Approval

The name of your Section 8 Company is the first impression to the world. It’s selection, therefore, is very important. It should stand out, yet be easy to remember, attractive, relevant, and indicative. Here are some points you can keep in mind when choosing the name of your company.

Suffix:

The name of your “Section 8 Company” shall include the words “Association, Federation, Chambers, Confederation, Council, Electoral trust Foundation, Forum, and other such words.” But there is no need to add the word Limited or Private Limited to its name.

Meaningful:

The name of your Section 8 Company should indicate the principal objects of the Company as set out in its “MoA”. For example, “Aware Health and Research Foundation or Nagarjuna Agricultural Research and Development Institute” are Section 8 Companies. And their names indicate the kind of work undertaken by them. This helps in branding and goodwill.

Offensive:

The proposed name should not fall in the range of undesirable names as specified in Rule 8 of Companies (Incorporation) Rules, 2014. The name of your section 8 company should not be abusive, against the customs and beliefs of any religion, and it should not contain words or phrases which are used as a slur and are offensive to a particular group of people.

Short & Simple:

The name should be brief and not too long. Moreover, it should be easy to pronounce. A person should be able to recall the name.

Unique:

You are not allowed to name your Company to be exactly the same or identical as of an existing company name or trademark or for which a trademark has been applied. At “LegalRaasta”, you can check if the name which you are proposing matches someone else’s or not.

Indicative:

Every name need not indicate the objects of the company, compulsorily, but when there are some indication of objects in the name, then it shall conform to the objects mentioned.

Forms Required

S.No	Particulars
SPICE + PART A	Name Approval
SPICE + PART B	Incorporation Application,License,PAN and TAN
INC-9	An affidavit from each Director and subscriber of the MoA
INC-13	Memorandum of Association (MoA)
INC-14	Declaration from a practicing Chartered Accountant or Company Secretary
INC-15	Declaration by each Subscriber of MOA (On duly notarized Non- judicial stamp paper of Rs. 100/-)
INC-22	Notice of Location of the registered office
DIR-2	Consent of Directors to act on behalf of the Company
DIR-3	Application to ROC to get DIN
DIR-12	Appointment of Directors of the Company

Compliances

If a Section 8 Company fails to comply with the legal provisions, then the central government may revoke the license issued under the given act.

In case of revocation, the company may get wind-up. Or it may be simply asked to change its name by adding either “Private Limited or Public Limited”.

And the assets remaining after clearing debts and liabilities of such a Company shall be transferred to some other Section 8 Company having similar objects.

If the operations of the Company are found to be conducted fraudulently or in violation of the objects of the Company or unfavorable to public interest then, also, the license can be revoked.

If a company defaults in complying with the provisions of the Act, then it shall, without prejudice to any other action under the provisions of this section, be punishable with a fine which shall not be less than Rs.10 lakhs and may get extend to even Rs.1 crore. The Directors and all other officers of the company, found in default, shall be punishable with imprisonment for a term which may extend to 3-years, or with a fine of not less than Rs.25, 000 that too may extend to Rs. 25 lakhs, or both. Provided that it is proved that the operations were conducted fraudulently.

Then every officer in default shall be liable for action.

Any such order shall not be passed unless the company has been given a reasonable opportunity of being heard.

Section 8 Company Registration

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Procedure of GST Registration

Fill the simple application form provided on our website.

Send your documents that are required according to your category of business.

We will file all your forms on behalf of you along with the declaration.

As soon as we will get your GST number, we will send you by E-mail.

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