Outline of Section 8 Company Registration
A corporation registered under Section 8 of the Companies Act of 2013 or under Section 25 of the Companies Act of 1956 is one whose main goal is to advance the humanities, sciences, literature, or knowledge sharing for charitable purposes. The Companies Act of 2013 governs Section 8 companies. These limited corporations were created in accordance with the Companies Act. Under Section 8 of the Companies Act, the Government provides these businesses an exclusive license. The license is subject to three primary requirements.
- The business has to be licensed for charitable purposes.
- These goals should be pursued using income and profits.
- The business shouldn’t distribute any dividends to its shareholders.
Benefits of Section 8 Company Registration
The following are some of the key advantages of registering a Section 8 company in India:
- Limited Liability: The liability of the members of a Section 8 company is limited to the extent of their shareholding in the company. This means that the personal assets of the members are not at risk in case of any liabilities of the company.
- Tax Exemptions: Section 8 companies are eligible for various tax exemptions and benefits under the Income Tax Act, 1961. This includes exemptions on income tax, capital gains tax, and dividend distribution tax.
- No Minimum Capital Requirement: There is no minimum capital requirement for registering a Section 8 company, making it an attractive option for startups and small businesses.
- No Stamp Duty: Stamp duty is not applicable on the incorporation of a Section 8 company, which reduces the overall cost of registration.
- Perpetual Succession: A Section 8 company has a separate legal identity and can continue to exist even in the event of the death, insolvency, or retirement of its members.
- Social Objectives: Section 8 companies are primarily formed for the promotion of charitable, social, or educational objectives, which helps to create a positive social impact.
- Easier Fundraising: Section 8 companies can raise funds easily from various sources, including government grants, donations, and philanthropic organizations, for their social or charitable purposes.
Donations/Funding of Sec 8 Company
Section 8 company registration may accept public donations but may not obtain capital by deposit. The following are some of the ways it can raise funds:
- Foreign Donations: Foreign donations are permitted only after registration under the FCRA (Foreign Contribution Regulation Act of 1976). FCRA license applications are only accepted three years after the date of registration. However, if certain extremely urgent international donations are required, you may request a prior clearance from the commissioner.
- Funding for Equity: A Section 8 company may be able to raise funds by issuing new equity shares at a premium.
- Donations Made in the United States: Domestic donations are not subject to any restrictions. However, a proper mechanism must be put in place to prevent money laundering situations.
Requirements for Online Registration of Sec 8 companies
The following criteria must be met for the Section 8 company incorporation procedure:
- Companies Act, 2013 governs.
- Members: A minimum of two directors/shareholders
- MoA, AoA, and financial statements are all important documents.
- Board of Directors
- Property Management: All of a company’s properties are vested in the name of the company. These may be sold in accordance with the provisions of the Companies Act of 2013. According to the Act, the sale can take place with the prior consent of the Company Board of Directors, who must pass a resolution on the subject.
- Closure or winding up of a company: The property and funds of the society may not be distributed equally among the company members upon its dissolution (as per the society by-laws) and settlement of all liabilities and debts.
Name Approval of Section 8 Company Registration
The name provided for the sec 8 company incorporation should be short, simple, unique, include the appropriate suffix, and project the motif of the NGO, among other things. The company’s name must be officially registered and approved. This helps to avoid copyright issues and ensures that no other section 8 companies have been registered under the same name. To obtain approval, a Form INC-1 application must be submitted to the Registrar of the company (Central Registration Centre – CRC of Ministry of Corporate Affairs). To reduce the likelihood of name recurrence, the applicant must submit six distinct names for name approval. The name is valid for up to 60 days after approval. The suggested names must include words like foundation, association, and so on.
Sec 8 Company Registration Eligibility Criteria
- A Section-8 company registration in India can be started by an individual, a HUF, or a limited company.
- Two or more individuals who will act as shareholders or directors of the company must meet all of the Section 8 Company registration requirements.
- At least one of the directors must be an Indian citizen. A firm, on the other hand, may be a member of a company registered under this section.
- The goal should be to promote sports, social welfare, scientific and artistic advancement, education, and financial assistance to low-income groups.
- The surplus must be used to achieve the primary goal of section 8 company registration.
- The company’s founders, members, and directors are not entitled to any compensation.
- Profits should not be distributed directly or indirectly to the company’s directors and members.
- The company should have a three-year project plan and vision.
Documents Required for Registration of Section 8 Company
- Memorandum of Association (MOA): It is a legal document that outlines the company’s objectives and scope of work. The MOA should be prepared in the prescribed format as per the Companies Act, 2013.
- Articles of Association (AOA): It is a legal document that defines the rules and regulations of the company. The AOA should also be prepared in the prescribed format as per the Companies Act, 2013.
- A declaration in Form INC-14: It is a declaration stating that all the requirements of the Companies Act, 2013, and the rules made thereunder have been complied with.
- A declaration by each of the subscribers to the memorandum in Form INC-9: It is a declaration stating that they have not been convicted of any offence in relation to the promotion, formation, or management of any company.
- Proof of identity and address of the subscribers and directors: The proof of identity could be a PAN card, passport, driving license, or voter ID card. The proof of address could be a recent utility bill or bank statement.
- Proof of registered office address: The proof of registered office address could be a rent agreement, lease agreement, or sale deed along with the latest utility bill or property tax receipt.
- A NOC from the owner of the registered office: If the registered office is not owned by the company, a NOC (No Objection Certificate) from the owner of the premises is required.
- Consent of the proposed directors in Form DIR-2: It is a declaration stating that they are not disqualified to act as directors under the Companies Act, 2013.
Section 8 Company Registration Process
Section 8 Company is a type of non-profit organization in India that is established for promoting art, science, sports, education, research, social welfare, religion, charity, and other similar objectives. Section 8 Company registration process involves the following steps:
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN) – The first step is to obtain DSC and DIN for all the proposed directors of the company. DSC is required for filing e-forms online, and DIN is a unique identification number issued to each director.
- Apply for Name Availability – The next step is to apply for name availability of the proposed company. The name should not be similar to any existing company or trademark.
- Draft Memorandum of Association (MOA) and Articles of Association (AOA) – MOA and AOA are the documents that define the objectives and rules of the company. These documents should be drafted as per the guidelines of the Companies Act, 2013.
- File e-Form with Registrar of Companies (ROC) – Once the MOA and AOA are drafted, the next step is to file e-form INC-12 with the ROC. This form contains details of the proposed company, directors, and shareholders.
- Obtain Certificate of Incorporation – If the ROC is satisfied with all the documents and information provided, it will issue a Certificate of Incorporation. This certificate is proof that the company has been legally registered and can commence its operations.
- Apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) – The final step is to apply for PAN and TAN. PAN is required for opening a bank account, and TAN is required for deducting and collecting taxes.
Section 8 Company Compliances
Section 8 Company, being a non-profit organization, is subject to certain compliance requirements under the Companies Act, 2013. Some of the key compliances that a Section 8 Company needs to fulfill are:
- Annual General Meeting (AGM) – The company should conduct an AGM once in a year, within six months from the end of the financial year. The purpose of the AGM is to approve the financial statements, appoint auditors, and conduct any other business.
- Financial Statements – The company is required to prepare and file its financial statements, including balance sheet, profit and loss account, and cash flow statement, with the Registrar of Companies (ROC) every year.
- Income Tax Return (ITR) – The company should file its income tax return every year, even if it has not earned any income. The due date for filing ITR is usually September 30th of the subsequent year.
- Audit – A Section 8 Company is required to get its accounts audited by a Chartered Accountant every year. The auditor will prepare an audit report, which should be attached to the financial statements while filing with the ROC.
- Compliance Certificate – The company should obtain a Compliance Certificate from a Company Secretary in Practice every year, certifying that the company has complied with all the provisions of the Companies Act.
- Other Compliances – Apart from the above, the company may also need to comply with other provisions of the Companies Act, such as maintaining statutory registers, filing of various forms with the ROC, and updating its registered office address.