Every Detail Regarding Section 8 Company Registration
The three legal corporate structures available to non-profit organisations in India are trusts, societies, and section 8 companies.
Indian Trusts are not governed by a single national legislation, while Indian Societies are subject to a variety of institutional and legal frameworks depending on the state, but Section 8 businesses are governed by the 2013 Companies Act, which is the same law throughout.
A Section 8 Company is formed, managed, and held accountable under this rigorous act, which makes it more strictly controlled and overseen than trusts and societies and recognised internationally.
A Section 8 Company is what?
A section 8 company is one that:
• Was established to further any of the following: business, the arts, the sciences, education, research, sports, charity, social welfare, religion, or environmental preservation.
• It plans to use all of its earnings, including profits and other revenue, to further these goals.
• There are no dividends or earnings for members.
The word “limited” will not be appended to the names of these limited companies because they are limited companies registered under the Companies Act. Both “private limited incorporation” and “public limited businesses” could have been registered for them.
Section 25 Company is a former iteration (under the Companies Act of 1956). Non-profit organisations (NPOs) and non-governmental organisations (NGOs) are referred to legally as “Section 8 Companies.”
Section 8 Companies are authorized to operate from anywhere in India.
Eligibility for Section 8 Company Incorporation
In addition to the three bullet points listed in the definition section above, the following requirements must also be fulfilled in order for a Section 8 Company to be registered:
What statute governs registration: 2013 Companies Act
Directors: For a private limited company, there must be a minimum of two directors, and for a public limited company, there must be three.
Indian resident: According to Section 149(3), at least one director must be an Indian resident who spent at least 182 days there in the year prior.
Subscribers to the MoA: The MoA must have at least two or three subscribers in order for the Business to be established as a private limited registration or public company.
Determine the name that will be applied for, the purposes that the company will pursue, the intended location for its registration office, the number of Directors and promoters, the authorised capital, and the number of shares that each promoter will subscribe for in the MoA and AoA.
They must mention the plan implemented to achieve your social goals. The ROC (Registrar of Companies) is qualified to make an inquiry.
Initial capital: The company must invest the proposed initial capital within two months of its incorporation.
Property management: The real estate is a corporate asset that may only be disposed of in accordance with the provisions of the Companies Act, such as with the Board of Directors’ consent in the form of a resolution.
Dissolution: The Section 8 Company may only be dissolved in accordance with the bylaws of the society. After the company dissolves and all obligations and liabilities have been settled, the funds and property of the society are not to be distributed among the members of the company. Instead, another Section 8 Company with a similar objective would get the remaining money and assets as a gift or transfer.
Annual compliance: The business is required to submit annual accounts, statements, and returns to the ROC in order to maintain the established compliances.
Each Director must possess a valid Director’s Identification Number (DIN) and DSC (Digital Signature Certificate).
Documents needed for Section 8 Company Incorporation
You need the following documents for incorporating a Section 8 company:
- Documents Requirement for the Registration of Section 8 Company
- Digital Signature Certificate
- Memorandum of Association
- Articles of Association
- Passport Size Photographs
- Members’ Id Proof such as Aadhar Card, Passport, Voter Id
- Details of Director (When the Members Are Other Companies/LLPs)
- Address Evidence
- Director Identification Number
Forms required for Section 8 Company Registration
You need to fill out the below-mentioned forms in the table below for registering as a Section 8 Company:
S.No. Form Purpose
1. INC-1 To submit a name approval request to the ROC
2. INC-7 Company Incorporation Application
3. Declaration of INC-8 PAN and TAN application
4. Declarations on Form INC-9 from each Director and MoA signatory
5. INC-12, which is used to request a Section 8 Company licence
6. INC-13 Articles of Association (MoA)
7. INC-14 Declaration from an Active Company Secretary or Chartered Accountant
8. Each MOA Subscriber’s INC-15 Declaration (on properly notarized non-judicial stamp paper costing Rs. 100/-)
9. INC-16 The Companies Act of 2013’s Section 8 issues a permit to conduct business as a company.
10. INC-22 Notice of the location of the registered office
11. DIR-2 Directors’ consent to represent the business
12. DIR-3 Request to ROC to Receive
Annual Section 8 Company compliance
Similar yearly compliance requirements for regular companies incorporated under the Companies Act apply to Section 8 Companies.
• Planning at least two board meetings annually.
• A necessary audit of the financial records.
• Annual returns and other electronic filing forms like MGT-7, AOC-4, etc.
• Additional observances to satisfy the registration requirements set forth in sections 12AA, 80G of the Income Tax Act, which apply to gifts, and other applicable provisions.
Section 8 Company Registration Benefits
Being a non-profit organisation (NPO) does not prevent the business from turning a profit or generating cash. Simply enough, it indicates that while the business may profit, the promoters won’t.
The promoters are not permitted to split profits. The purpose must be promoted with all proceeds. However, Section 8 of the Companies Act 2013 provides some exemptions and privileges for both “NGO and NPO.”
But Section 8 Companies also receive a number of advantages:
1. A Separate Legal Entity
Article 8 A separate legal entity from its members is the company. In addition to having more organised operations and more flexibility, the company is eternal.
2. No stamp duty.
The Memorandum of Association (MoA) and Articles of Association (AoA) of a private limited company or public limited company, which are necessary for the registration of other forms of company structures, are not subject to stamp duty for Section 8 Companies.
3. There isn’t a minimal capital need
For a Section 8 company, there is no minimum capital requirement in India. Additionally, the capital structure can always be modified to accommodate the changing needs of the business.
As a result, it can be established without any share capital. The money needed to run the business can then be raised by subscriptions from members and the general public, as well as through charitable donations.
A Section 8 corporation does not need to have a name suffix such as “Public Limited” or “Private Limited” next to its legal name.
These companies can be registered with names such as “Society, Association, Council, Charities, Club, Foundation, Institute, Academy, Federation, and Organisation”.
5. The necessity of CARO
Requirements for businesses For Section 8 Companies, the Auditor’s Report Order (CARO) does not apply.
6. Tax advantages
In India, Section 8 Companies are eligible for a number of tax advantages.
Article 8 Compared to other charity organisations, businesses are more reliable. They are rigorously governed and subject to the Companies Act. such as the requirement for an annual audit, which cannot be altered under any circumstances.
The rules for managing the company’s profits and losses make these companies credible.
8. Donor exemption
Sections 12A and 80G of the Income Tax Act provide tax benefits for contributors to Section 8 companies.
A registered partnership firm may become a member and be elected to the board as a director.
Process of Section 8 Company Registration
The following actions must be taken in order to register as a Section 8 Company:
Step #1. Obtain a DSC from the prospective Section 8 Company Directors as the first step. Send Form DIR-3 to the ROC post getting a DSC to request a DIN. You must present identification and address evidence in order to get a DSC.
Step #2: After the DIR-3 is authorised, the ROC will provide the prospective directors a DIN.
Step #3: Submit Form INC-12 to the ROC together with the paperwork listed in one of the earlier sections to apply for a licence for the Section 8 company.
Step #4: Following approval, by Form INC-16 will be given a license under Section 8.
Step #5: After getting the licence, submit the SPICe+ Form and the paperwork listed in one of the earlier sections to the ROC for incorporation.
The ROC will provide a Certificate of Incorporation along with a unique Company Identification Number if the forms are approved (CIN).
Section 8 Fees for Company Registration
The following is a list of the costs associated with registering a Section 8 Company:
- Reservation of the company name costs Rs. 1,000; DSC & DIN cost Rs. 3,000.
- Rs. 2,000 for notary and stamps
- Government fees, incorporation fees, and MoA and AoA fees: Rs. 6,000 to Rs. 8,000
- Professional costs range from Rs. 8,000 to Rs. 10,000.
Questions and answers about Section 8 company registration
Is the request for approval from the federal government required?
Yes, in order to register a section 8 corporation in India, we must get the central government’s authorization or approval. CG permission is needed before section 8 company registration.
What is the duration of the Company’s registration?
A corporation that has been incorporated will continue to operate and exist as long as the annual compliances are consistently met. The corporation will go dormant and eventually risk being stricken off the register if annual compliances are not met. For a period of up to 20 years, a struck-off firm may be reinstated.
What does the Director Identification Number actually mean?
All existing and potential directors of a company are given a Director Identification Number, which serves as a special identification. For all presently serving and prospective Directors, a Director Identification Number is necessary. A person is only permitted to have one Director Identification Number, which has no expiration date.
Foreign nationals and NRIs are permitted to act as directors of Section 8 companies?
Yes, an NRI or foreign national may serve as a director in a Section 8 company after getting a Director Identification Number. On the Board of Directors, however, there must be at least one Indian resident.
Does completing the registration process require a digital signature?
A digital signature is the only reliable and trustworthy technique to submit a document electronically. The digital signatures of the signer who is authorised to sign the documents are required for all e-form filings on the MCA Portal.
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