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Section Eight company Registration

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Section Eight Company Registration

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Section 8 Company Registration

The procedures and requirements for establishing a Section 8 Company closely mirror those of a limited company, encompassing all the rights and obligations associated with such a limited company. The primary distinction lies in the prohibition of using the terms "Section 8" or "Limited" in the company's name.

Registering a Section 8 Company follows the same process as incorporating an "NGO, Trust, or a Co-operative Society" under the Companies Act 2013.
Additional criteria must be met to secure a license from the central government under Section 8 of the Companies Act, 2013.
This license essentially authorizes the omission of Private/Public Limited from the company's name. With this authorization, the company becomes eligible for specific exemptions from legal provisions and enjoys concessions in taxation.
If the intended Section 8 Company is registered as a private limited entity, a minimum of 2 directors is required. However, for a "public limited Section 8 Company," a minimum of 3 directors is mandatory.

Documents Required

For Directors/Shareholders

Copy of PAN Card
Aadhaar Card
Address Proof (Bank Statement, Electricity Bill, Telephone Bill)
2 Passport Sized Photographs

For Registered Office

Ownership Proof (House Tax etc.)
Utility Bill (Electricity Bill, Gas Bill)
Address Proof (Bank Statement, Electricity Bill, Telephone Bill)

Benefits of Section 8 Company Registration

Being designated as a Non-Profit Organization (NPO) doesn't preclude the company from generating profits or income. It simply means that while the company can accrue benefits, the promoters are not permitted to personally profit from these gains. Profits cannot be distributed among the promoters, and all earnings must be dedicated to advancing the company's objectives.

Nevertheless, specific exemptions and advantages are provided to an "NGO or NPO" under Section 8 of the Companies Act 2013. Donors contributing to a Section 8 Company are entitled to claim Tax Exemption against their contributions.

Some of the advantages include:

Distinct Legal Identity: A Section 8 Company possesses a separate legal entity status, distinct from its members. Its legal standing is independent of its individuals, and the company maintains perpetual existence with organized operations and increased flexibility.
Zero Stamp Duty: A Section 8 Company is exempted from the obligation to pay stamp duty on both "MoA and AoA" of the private or public limited organization, a requirement for the registration of other company structures.
No Minimum Capital Requirement: There is no specified minimum capital requirement for a Section 8 Company in India. The capital structure can be adjusted at any stage based on the evolving needs of the company. This implies that it can be formed without any share capital, and funds required for business operations can be obtained through donations and/or subscriptions from members and the public.
Name: A "Section 8 Company" is not obliged to include "Limited" or "Private Limited" in its legal name. It can be registered with names such as "Foundation, Association, Society, Council, Organization, Club, Charities, Academy, Institute, and Federation."
CARO:Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
Tax Benefits:Several tax benefits are extended to Section 8 Companies in India.
Credibility: Section 8 Companies are considered more reliable than other charitable associations. They are governed by the Companies Act and are closely regulated. For instance, the mandatory annual audit or amendments to the "MOA and AOA" cannot be made arbitrarily at any stage or circumstance.
Exemption for Donors: Individuals contributing to a Section 8 Company are eligible for tax exemptions under sections "12A and 80G" of the Income Tax Act.
Membership: An enrolled partnership firm can become a member in its individual capacity and acquire a Directorship.

Eligibility

Objects of the Company:

Promotion of Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of Environment, or any other similar objective.

Utilization of Profits or Income:

Intention to apply any profits or other income in furthering the specified objects.

Dividend Prohibition:

Explicit prohibition on the payment of dividends to its members.

Founding Motive:

Created by individuals with a non-profit motive.

Social Dedication:

Focus on societal improvement rather than profit-making.

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

Under: Companies Act, 2013.
License: License to be applied to MCA.
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.
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)].
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.
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.
Initial Capital: Whatever amount of initial capital has been proposed for the Company, it must get invested in the Company within 2 months.
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).
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.
Annual Compliance: Annual filing of “accounts, statements, and the returns of the company with the ROC” is necessary to meet the compliances required.
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: Registration with CA Saheb

Provide details through our online questionnaire, including Name, Address, Proposed Company Names, Director Information, Authorized Capital, etc.

Step 2: Obtain DIN & DSC

File applications with ROC for Director Identification Number (DIN) and Digital Signature Certificate (DSC). First, apply for DSC, and once received, submit Form DIR-3 for DIN. Attach attested ID Proof, Address Proof, and a passport-sized photo for each Director.

Step 3: Name Approval

Share name preferences, and we'll conduct a Company Name Search. After your approval, apply for a unique name through the "Reserve Unique Name" (RUN) facility. Propose a maximum of 2 names initially in Form INC-1, with 1 resubmission if rejected.

Step 4: Apply for License & COI

Apply for the Section 8 License using Form INC-12 with the Central Government. Submit "MoA" in Form INC-13, "AoA," and Declaration of CA/CS/CWA in Form INC-14. Send the Declaration by Directors or Applicant in Form INC-15. The Certificate of Incorporation (COI) will be issued, including the unique CIN.

Step 5: Operational Status

After completing all processes and successfully registering your Section 8 Company, apply for PAN and TAN using Forms INC-7, 8, 9, 10, 22, DIR-2, and 12 with the ROC. We will prepare and promptly send them to you. Your Section 8 Company is now operational.

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:

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.
Equity Funding: A “Section 8 Company” can also raise funds by issuing new equity shares at a higher value.
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.

Note: CA Saheb is owned and operated by a consultancy firm and in no way represent any relation to any government body or http://www.udyogaadhar.gov.in

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 “Ca Saheb”, 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.

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