INCORPORATE SECTION 8 COMPANY IN

30 Jun 2022

legaltax

HOW TO INCORPORATE SECTION 8 COMPANY IN DETAIL

 

OVERVIEW

The main purpose of registering a company as a Section 8 Company is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research etc.  To develop or incorporate a Section 8 Company, a minimum of two directors are required. There is no such requirement of minimum paid up capital in the case of Section 8 Company.

A non-profit organisation in India can be registered under the registrar of societies or as a Non-profit company under the Section 8 Company of the Company Act, 2013. The benefits of this Company are applied towards promoting the objectives of the company and not distributed as dividends to its shareholders.

A Section 8 Company is the same as the Section 25 Company under the old Companies Act, 1956. As per the new Companies Act of 2013, Section 25 has now become Section 8.  Section 8 Company format of an NGO is the most popular form of NGO in India. It is easy to register, run or manage a Section 8 Company in comparison to a Trust and a Society.

KEY FEATURES OF A SECTION 8 COMPANY:

  • OBJECT: It operates for common welfare of masses at large, for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
  • PROFIT EARNING: The objective is not to earn profit. If any profit earned during the course of its operation, the same is not to be shared among owners/members rather utilised for attaining the objects for which NGO was formed.
  • UTILISATION OF FUNDS AND EARNINGS: The profits, if any, or other income is used towards promoting specific objects of NGO. Further there is restriction on declaration of profits as dividend to members.

 

WHAT ARE THE MINIMUM REQUIREMENTS THAT ARE NECESSARY FOR SECTION 8 COMPANY:

  • Minimum two shareholders are mandatory for the incorporation of section 8 companies.
  • There must be Minimum of two Directors (Directors and shareholders can be the same person);
  • At least one of the Director shall be the  resident in India;
  • There is No requirement of Minimum capital
  • The Income-tax PAN is a mandatory requirement in case of the Indian nationals;
  • Any one of the Identity Proof be it Voter ID/Aadhar Card/Driving Licence/Passport is required; Passport is, however, a mandatory requirement for the proof of identity in case of the  foreign nationals;
  • Any one of the Proofs of Residence (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);
  • The Registered Office address proof (that is the rent agreement along with latest rent receipt and a copy of the latest utility bill in the name of the  landlord and a no objection certificate from the owner of the premises, in case the premises are rented);
  • In case the premises are owned by either the  Director and the  Promoters, any of the documents establishing the ownership such as Sale Deed/House Tax receipt etc along with the no objection certificate.

 

SECTION 8 COMPANY REGISTRATION:

The process and requirements of a Section 8 Company are exactly the same as laid down for a limited company, including all the rights and obligations that come from such a limited company. The only aspects where they differ is that a Section 8 Company cannot use the words ``Section 8 `` or''Limited `` in its name.

  • The process of registering a Section 8 Company is the same as of incorporating an NGO, Trust or Co-operative Society under the Companies Act 2013.
  • An additional requirement is seeking a licence from the central government under Section 8 of the Companies Act 2013.
  •  The licence, essentially, permits them to delete Private?Public Limited from their name. With this licence, the company becomes eligible for certain exemptions from the provisions of law and avail the benefit of concessions in the fee.
  •  If the proposed Section 8 Company has been registered as a private limited company then a minimum of 2 directors are required. But if it is a “public limited Section 8 Company” then a minimum of 3 directors must be there.

DOCUMENTS REQUIRED FOR SECTION 8 COMPANY INCORPORATION:

  1.   DSC and DIN of the Directors.

  2.  Objectives and proposed work of the company.

  3. Financial statements like assets and liabilities, the projection for five years etc.

  4. Directors personal documents

  5. Registered office address documents viz rental agreement or sale deed in the name of the company, utility bills not older than two months.

  6. Articles of Association (AOA) and Memorandum of Understanding (MOU).

  7. Declaration by the first directors as well as subscriber (Affidavit not required).

  8.  Copy of Certificate of Incorporation (COI) of an overseas body corporate (if any).

  9. A resolution passed by the promoter company.

  10. Consent of Nominee (INC-3).

  11. Resident and identity proof of the nominees and subscribers.

  12. Applicants identity as well as residential proof

  13.   Declaration of unregistered companies

FOR AGILE PRO:

  •   Proof regarding the principal place of business
  •  Evidence of appointment related to the Authorised Signatory for GSTIN
  •  Letter of Authorization of Resolution copy passed by BOD
  •   Managing Committee as well as Acceptance Letter
  •  Proof of identity related to Authorised Signatory for the opening of an account in designated bank
  •  Specimen Signature of Authorised Signatory for EPFO

PROCEDURE FOR INCORPORATING SECTION 8 COMPANIES:

STEP 1: APPLY FOR THE DESIRED NAME:

The first step in incorporating  a company is to reserve the name of the proposed company in part-A of SPICe Plus (SPICe+) form. In this form choose your business activity and file for two proposed names, if CRC will reject the proposed names then file again with the two new names within a certain time limit from the data of rejection (15 days).

STEP2: APPLY FOR DIGITAL SIGNATURE CERTIFICATE (DSC)

The process of incorporation of a Company is 100 percent online in India. Hence, we need to apply for a DSC (Digital Signature Certificate), which will be used for electronically signing the forms by proposed directors and proposed members respectively. DSC has to be mandatorily applied for each and every single member?shareholder and director of the Company.

STEP3: FILL THE APPLICATION FOR INCORPORATION (SPICe plus Form- SPICE+)

Once your name gets reserved under it will be valid for 20 days from the date of approval, within 20 days you have to fill-up the respective application form for the incorporation along with all the requisite attachments and documents uploaded online. SPICe+ is an advanced form combination of 8 forms in one. Through this proposed company can apply for at once:

·         Name reservation

·         Incorporation

·         Apply for DIN

·         TAN applicationEPFO registration

·         ESIC registration

·         GSTIN registration

Next step is to fill the part-B of SPICe + which will contain all the detail related to incorporating company like number, total number of directors and members Authorised share capital, paid-up capital, number of shareholders by name members, company registered address detail, directors and member detail and will required attachments for proof. Then draft the MOA (memorandum of association) and AOA (Article of Association) of the proposed company, then fill the required for EPFO and ESIC registration with detail, then Fill the AGILE form for procuring GSTIN. After filling all these attach the signature and then upload it on the MCA website.

For Section 8 Company applicants need to attach additional documents with SPICe+ form in part-B

·         The physical copy of MOA draft duly signed by members and witnesses

·         The physical copy of AOA draft duly signed by members and witnesses

·         Declaration I form INC-14 by any practising professional

STEP4: CERTIFICATE OF COMMENCEMENT OF BUSINESS

Once the application of incorporation of the company is approved and the Certificate of Incorporation is issued by the ROC, the Company shall file for seeking approval for commencing the business within 180 from the date of incorporation of the Company.

1.  Documents required for Incorporating Private Limited Company is as follow:

·         PAN card

·         Aadhar card

·         Photograph of the proposed director

2.  ID proof of proposed Directors and members (anyone):

·         Passport

·         Voter’s ID

·         Driving  Licence

3.  Address proof of proposed members and directors (anyone):

·         Telephone bill

·         Mobile bill

·         Bank statement

·         Electricity bill

4. Address proof for the principal place of business of the proposed company           (anyone)

·         Utility bill like telephone bill, electricity bill, gas bill, water bill

·         Rent agreement with rent slip

·         Proof of ownership
 

BENEFITS RELATED TO SECTION 8 COMPANY REGISTRATION:

  • Distinct Legal Identity: Section 8 Company is a separate legal entity and is different from its members. The Company has perpetual existence. Along with having organised operations and greater flexibility.

  • Zero Stamp Duty: A Section 8 Company is exempt from the requirement of paying stamp duty on the MoA and AoA of the private or public limited company, which is applicable for registration of other kinds of company structures.

  •  No minimum Capital Requirements: A minimum capital limit has been mentioned for a Section 8 Company in India and the Capital structure can be altered at any stage as per the growth requirements of the company. This implies that it can be formed without any share capital. The funds necessary for carrying the business operations can be brought, later, in the form of donations and/or subscriptions from members and the general public.

  • Name: Section 8 Company is not required to suffix “Public Limited or Private Limited”, next to its legal name. It can be registered with names such as “ Association, Society, Council, Club, Charities, Foundations, Academy, Institute, Organisation and Federation”.

  •  CARO: Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company

  •  Tax Benefits: For section 8 Companies in India, many tax benefits are granted.

  • Credibility: Section 8 Companies are more reliable than all other forms of charitable organisations. They are governed by the Companies Act and are regulated strictly. Such as the requirement of mandatory annual audit, and both the “MOA and AOA '' cannot be altered at any stage or situation. The rules on managing the profits and losses of the company make these companies trustworthy.

  • Exemption to the donors: Those donating to a Section 8 Company are eligible for tax exemptions u/s 12A and 80G of the Income Tax Act.

  • Membership: A registered partnership firm can become a member in its individual capacity and obtain Directorship.

Other benefits include:

  •  It has organised operations and greater flexibility.
  • Avoids meticulous registration process and no physical presence required.
  •   No requirements of minimum paid-up capital.
  • Seamless procurement of tax benefits under Section 12AA and 80G of the Income Tax Act.
  • Any partnership firm can be a member in its individual capacity and obtain Directorship.

 

WHAT ARE THE TOTAL EXEMPTIONS AND RELIEFS FOR SECTION 8 COMPANY

Companies Act 2013:

  • The directorship under section 8 companies shall not come under the computation of the ceiling towards the highest number of the directorships which has been mentioned beneath Section 165 of the Act.
  • Through furnishing the notice of not less than 14 exact days rather than 21 exact days a general meeting has been conducted.
  • Section 8 firms would conduct at least one meeting every 6 calendar months rather than holding 4 meetings for a year.
  • Recording of Minutes of General Meetings, Board Meeting along with additional resolutions shall not be subjected to apply upon the section 8 company. But the minutes of meetings might be recorded in 30 days of the outcome of the meeting towards the cases in which the firm articles furnished the confirmation through the method of circulation of minutes.
  • A company would be a member of a section 8 company.
  • Section 149(1) of the Act will not apply towards Section 8 companies as per the Section 8 company shall not need to hire an Independent director. From the reasons above the Audit committee under section 8 company will not be needed to have independent directors similar to its board members.
  • Section 8 firms shall not be needed to hire the qualified CS professional as its company secretary.
  • From the applicability of secretarial standards, the same gets privileged.
  • Section 8 firms shall not be needed to appoint a Nomination and Remuneration Committee and nor a Stakeholders Relationship Committee.
  •  

WHY TO CHOOSE LEGAL TAX OVER OTHER ORGANISATION:

  • WITHIN 20 WORKING DAYS: just tell us a little bit about your business and you’ll have the registered trust deed in 20 working days (subject to government approval). It's that simple. In addition to yours, we’ll be handling around 400 requests  every month.
  • GOOD CUSTOMER SERVICE: we make our interactions with the government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations and our customer service is always up to the mark.
  • ONE OF THE BEST TEAM: Our team of experienced business advisors are a phone call away, should you have any queries about the process. We always make sure that no such kind of issues arise to our customer and we better clear all the doubts before they even arise.

   WHAT LEGALTAX OFFERS: Legal Tax offers to assist you in all matters of company registration. Let our expert team handle the complex procedure of completing papers, selecting and searching availability of the name, logo or trademark designing, trademark registration, etc. While you can concentrate on matters of business operations which require your attention. We will stand by with you through each and every stage of the incorporation procedure. For any queries on related topics, you can consult with the CA/CS here.

 

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