Section 8 Company
Easily setup a sole proprietorship with registrations, LEDGERS and business bank account.
Benefits
- Fewer legal formalities than LLP.
- Associated with the GST and income tax departments.
- Full control over the business for the sole proprietor.
- No separate business tax filings.
- Easy to disassemble.
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Section 8 Company Registration and Types in India
A Section 8 Company is what we generally call a Non-Governmental Organisation (NGO) or a Non-Profit Organisation (NPO) established for charitable purposes and social welfare. Section 8 Company registration provides your purpose a legal identity with several benefits and falls under the Companies Act, 2013.
What Is a Section 8 Company?
A Section 8 company promotes social welfare, education, arts, commerce and other aspects. It must exist to serve the community and reinvest its profits back into achieving its social objectives. It can also be registered under the Societies Registration Act, of 1860 and the Indian Trusts Act, of 1882.
A trust contains a trust deed and is administered by the trustees. A society has a Society Conveyance Deed and is managed by a committee, directors or trustees. The Section 8 Company contains MoA and AoA and is administered by a Board of Directors.
The registrar of state governs a trust. Thus, it falls under the state government. Similarly, a registrar or an assistant registrar governs the societies according to the state. Whereas, the Section 8 company is governed by the Central Government. Section 8 Company registration is more beneficial than registering a trust or a society.
Section 8 Company Registration in 5 Steps
Most steps are the same as that of registering an LLP or a Pvt. Ltd. Company. However, Section 8 Companies in India have different motives. Before beginning with Section 8 Company registration, ensure that you have the required documents and that your company fulfils the eligibility criteria .
Step 1:
Apply for a DSC via the DIR-3 form on the MCA portal.
Step 2:
Apply for a DIN for every proposed director by filling out the DIR-3 form.
Step 3:
Choose a name that reflects your company’s mission and isn't already registered by another company. Fill out the INC-1 Form for the same.
Step 4:
Once the name gets approved, apply for a license for your Section 8 Company by filling out the INC-12 Form. This form helps an existing company transform into a Section 8 company.
Step 5:
Fill out the application for incorporation of section 8 company via Form INC-32 with the MoA and the AoA of the company.
Step 6:
MCA will issue you the certificate of incorporation of Section 8 company in the INC-16 form.
Documents to Register Section 8 Companies in India
- Self-attested copy of PAN.
- DSC, Address proof, DIN and identity proof of all directors.
- MoA and AoA signed by all subscribers.
- Declaration by the initial directors and subscribers and that of unregistered companies.
- Registered office address proof.
- Copy of Certificate of Incorporation (COI) of a corporate body owned by an NRI.
- Declaration by all subscribers and initial directors of not being guilty of an offence.
- Nominee’s consent via INC-3.
- Declaration of following of compliances via the INC-14 Form by the Company Secretary, Cost Accountant and CA.
- Declaration of following of compliance via the INC-15 Form by the directors, managers and secretary.
- Address and identity proof of all subscribers and nominees.
- Correspondence address if the company does not have an official address.
- A copy of the rental agreement (if applicable).
If you are ready with all required documents, you may proceed with the Section 8 Company Registration Process.
Is the Section 8 Company Registration Process Confusing You?
Eligibility Criteria for Incorporation of Section 8 Company
The eligibility criteria ensure the proposed Section 8 Company operates for genuine social welfare purposes.
- You need at least eight people for incorporation of a Section 8 Company.
- A minimum of two directors and a maximum of 200 directors for a private limited company. In the case of a public limited company, a minimum of three directors is required and it has no upper limit. However, the Section 8 companies might not add ‘private limited’ or ‘public limited’ after their names.
- Registration of a Section 8 Company has no minimum capital requirement.
- You cannot distribute profits generated by a Section 8 Company as dividends to the members. You may only use the profits for social missions.
- The company's Memorandum of Association (MOA) should clearly outline its social objectives. Changes in it should be approved by the central government.
- There are generally no restrictions on the nationality of members or directors. However, foreign nationals should comply with additional regulations.
- You cannot form a Section 8 Company for your benefit or that of another individual or group.
- The Section 8 Company must follow the Income Tax Act, Companies Act of 2013 and GST Law and file annual returns.
Benefits and Challenges to Section 8 Companies in India
| BENEFITS | CHALLENGES |
|---|---|
|
An established legal structure for social causes.
|
Limited funding opportunities due to no distribution of profits. |
|
No minimum capital requirement, simple registration and no stamp duty. |
Providing quality education is a challenge where the staff does not get paid. |
|
Tax exemptions are provided for the donations. |
Rigorous compliance process with annual filings and audits. |
|
Flexibility in structure and governance as described in the AoA. |
Reliant on external funding sources. |
|
Members have control over the organization's direction and have limited liability. |
Government approval is required for amendments to the MoA. |
|
Can attract grants and donations and is a separate legal entity. |
May struggle with financial sustainability if solely reliant on donations. |
Conclusion
Section 8 Company registration is not so tedious, but the requirements to form the Section 8 Companies in India are. Its formation requires a minimum of 2 directors with no upper limit. However, profit distribution is restricted and it has certain ongoing compliance requirements. Thus, consult with a professional for a smooth registration process and adherence to regulations.
FAQs
Who Can Form a Section 8 Company?
A minimum of eight people (not minors) without specific background requirements can form a Section 8 Company in Maharashtra. The member can be an NRI too.
Which Forms Define the Purpose of the Section 8 Company?
Form DIR 12, Form INC 22, Form SPICe+ and Form INC-12 are the forms that define the purpose of the Section 8 Company.
What Will Happen if the Section 8 Company Does Not Comply with the Regulations?
If a Section 8 company violates the objectives, the Central Government will revoke the license of the company. Depending on the offence, you will end up paying a penalty.
What Annual Compliances Should a Section 8 Company Follow?
A Section 8 Company should file income tax returns, annual statements and financial statements. It should conduct at least two board meetings in a year and maintain books of accounts.
What Are the Non-Profit Objectives for a Section 8 Company?
Some non-profit objectives for a Section 8 Company are research, education, protection of the environment, religion and other related activities.
