Ashish Garg & Associates Section 8 Company

Section 8 Company

Section 8 Company Registration

What is a Section 8 Company? – Companies Act, 2013

A Section 8 Company is a type of non-profit organization in India registered under the Companies Act, 2013, which aims to promote social welfare, charity, education, religion, environmental protection, or any other objective beneficial to the public. These companies are granted specific exemptions under the law, allowing them to work for public benefit without the intention of earning profits. The surplus generated by a Section 8 Company is reinvested in furthering the objectives of the company rather than being distributed among its members or shareholders.

Overview of Section 8 Company Registration

Section 8 Company registration refers to the process of legally establishing a company that operates for charitable, educational, or social purposes under the provisions of the Companies Act, 2013, specifically Section 8. These companies can be registered as either private or public companies, but their income must be used solely for the promotion of their objectives.

Key features of Section 8 companies:

  • Non-Profit Objective: Focus on social, charitable, or community goals.
  • Tax Exemptions: Section 8 companies are eligible for tax exemptions under the Income Tax Act.
  • No Distribution of Profits: Profits, if any, must be used to advance the company’s objectives and not distributed to its members or shareholders.

Key Points about Section 8 Company Act

  1. Non-profit Nature: The company must operate with the intention of promoting social welfare, charity, science, religion, art, or any other public utility service.
  2. No Profit Distribution: Any profits earned by the Section 8 company must be reinvested into the company’s objectives and cannot be distributed as dividends.
  3. License Requirement: Before registration, a Section 8 company requires a license issued by the Registrar of Companies (RoC) under Section 8 of the Companies Act, 2013.
  4. Minimum Members: A minimum of two members are required for a private Section 8 company, and a minimum of seven members are required for a public Section 8 company.
  5. Limited Liability: Like other companies, the liability of the members is limited to their shareholding in the company.

Benefits of Opening a Section 8 Company in India

  1. Tax Exemption: Section 8 companies are eligible for various tax exemptions under the Income Tax Act, particularly under Section 12A and 80G.
  2. Limited Liability: Members of the Section 8 company have limited liability, ensuring their personal assets are protected.
  3. Corporate Structure: Being a company, Section 8 entities benefit from the recognition of being a separate legal entity, improving credibility and public trust.
  4. Eligibility for Grants and Donations: These companies are eligible to receive grants and donations from individuals, organizations, and the government.
  5. Recognition and Credibility: A Section 8 company is often viewed as more credible compared to a trust or society, making it easier to attract donors and investors.
  6. Flexibility in Management: Section 8 companies can have a more structured governance system, with the flexibility to operate in various sectors including education, healthcare, and public welfare.

Mandatory Legal Requirements for Section 8 Company

  1. Non-Profit Objective: The company must operate with objectives promoting art, science, research, sports, education, religion, charity, etc.
  2. Incorporation as a Private or Public Company: The company must be registered as either a private limited company or a public limited company.
  3. No Dividend Distribution: The company cannot pay dividends to its members, as the earnings must be used solely for the welfare activities of the organization.
  4. Minimum Members:
    • Private Section 8 Company: Minimum 2 members.
    • Public Section 8 Company: Minimum 7 members.
  5. Directors:
    • A minimum of 2 directors for a private company and 3 directors for a public company.
    • Directors must be individuals, and at least one of the directors must be an Indian resident.

Documents Required for Section 8 Company Incorporation

  1. Proof of Identity:
    • PAN card, Aadhaar card, passport, voter ID of all the directors and members.
  2. Proof of Address:
    • Utility bills (electricity, water, etc.) or bank statement not older than 2 months of the registered office.
  3. Photographs:
    • Passport-sized photographs of all the directors and members.
  4. Memorandum of Association (MOA): A document outlining the company’s objectives.
  5. Articles of Association (AOA): A document outlining the internal management rules and regulations.
  6. Director Identification Number (DIN): DIN for all proposed directors.
  7. Digital Signature Certificate (DSC): DSC for all proposed directors for online submission of forms.
  8. Registered Office Proof:
    • Ownership documents or rent agreement for the registered office of the company.
    • No Objection Certificate (NOC) from the owner (if the office is rented).

Section 8 Company Incorporation Process

The incorporation process for a Section 8 company involves the following steps:

  1. Obtain Digital Signature Certificate (DSC): All proposed directors must obtain a DSC for signing electronic documents.
  2. Obtain Director Identification Number (DIN): Apply for DIN for all proposed directors.
  3. Name Approval: Apply for approval of the name through the RUN (Reserve Unique Name) form or through SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus).
  4. Draft MOA and AOA: Prepare the Memorandum of Association and Articles of Association, outlining the objectives, internal rules, and regulations of the company.
  5. Apply for Section 8 License: Before registering the company, apply for a license under Section 8 of the Companies Act. This involves submitting an application to the Registrar of Companies (RoC) with supporting documents.
  6. Submit Incorporation Forms: After obtaining the Section 8 license, submit the SPICe+ form along with the necessary documents for incorporation.
  7. Certificate of Incorporation: Once the application is approved, the Registrar of Companies (RoC) will issue a Certificate of Incorporation along with the Section 8 license.
  8. Post-Incorporation Formalities:
    • Apply for PAN and TAN.
    • Open a bank account in the name of the Section 8 company.
    • Comply with statutory filings and maintain proper records as per the Companies Act.

Key Points to Remember

  • Section 8 companies cannot distribute profits to their members or shareholders.
  • They must use any surplus earnings for the company’s objectives.
  • Section 8 companies can be registered as private or public limited companies.
  • They enjoy tax exemptions, making them suitable for charitable, educational, and social organizations.
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