Section 8 company

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How to Start a Section 8 company

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About Section 8 Company

Registering your NGO as a section 8 company has many perks compared to registering as a trust or a society. A Section 8 Company is a specific form of Company which is incorporated for the promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of environment or any such other object. It intends to apply all its profits, income, or other earnings, in promoting these objects. Pays no dividend or income to its members. These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name. They may have been registered either as “private limited or public limited companies”. Section 25 Company (under Companies Act, 1956) is a prior version. Section 8 Companies are a legal form of “Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs)”. A Section 8 Company has the authority to work anywhere in the country.

What is the process for registering Section 8 Company?

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 with such a limited company. The only aspect where they differ is that a Section 8 Company cannot use the words “Section 8” or “Limited” in it’s 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 there of seeking a license from the central government under Section 8 of the Companies Act, 2013.

  • The license, essentially, permits them to delete Private/Public Limited from their name. With this license, 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 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.

Detailed Process for Section 8 Registrtion

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There are three major steps in incorporating a Section 8 company apart from the document collection, preparation and drafting. They are

STEP 1: Run Approval:

  • Reserve Unique Name (RUN) is a form filed for reserving a name for a new company or for changing its existing name. This is the first step of incorporating a section 8 company.

  • A section 8 company shall usually have words like Foundation, Federation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation, Chamber of Commerce, Development, Association, etc.

  • The name so approved shall be valid for 20 days

STEP 2: RD 1 License:
  • This step is the most crucial in the process of incorporation.

  • The name approval shall be valid at the time of applying for the RD 1 License.

  • RD 1 license is a license granted under section 8 of companies act as they work on a specific objective which is for the upliftment of arts, science, commerce, environment, etc., and the profit they earn shall also be used towards their objectives. All crucial documents like the MoA, AoA, financial statements and other declarations are filed at this stage.

  • The license so approved shall be valid for 30 days.

STEP 3: Spice Form:
  • Both the name and the license shall be valid at the time of filing the SPICe form.

  • This is the final stage of incorporating the section 8 company where the documents relating to the registered office like the rental agreements and utility bills are filed along with the RD-1 license and the name approval certificate.

Documents Required

  • DSC and DIN of the Directors.

  • Objectives and proposed work of the company.

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

  • Directors personal documents.

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

  • Passport size photograph of Director.

  • Photo ID Proofs of Directors.

  • Self declaration about your directorship in other companies.

  • No objection Certificate from the owner of the property of the property

  • Address proof of the directors.

  • Specimen Signatures.

  • Rent agreement of your registered office.

What Are the Benefits of Registering Section 8 Company

Benefits-of-Registering-Section-8-Company.png

The following are the advantages of incorporating a Section 8 company over other modes of registering an NGO:

  • It has organised operations and greater flexibility.

  • Avoids meticulous registration process and no physical presence required.

  • No requirement of a 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.

  • Distinct Legal Identity: Section 8 Company is a separate legal entity and is different from it’s members. The Company has perpetual existence. Along with having organized 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 Requirement: o 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 it’s legal name. It can be registered with names such as “Association, Society, Council, Club, Charities, Foundation, 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 organizations. They are governed by the Companies Act and are regulated strictly. Such as the requirement of a 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 it’s individual capacity and obtain Directorship.

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

  • Registration 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.

  • 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 [(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 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 your 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 be 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 given or transferred to some other Section 8 Company, someone that has a similar object.

  • Annual Compliance: There must be Annual filing of accounts, statements and returns of the company with the ROC, in order to adhere to the set compliances.

  • Documents: All the Directors must have their valid DIN (Director’s Identification Number) & DSC (Digital Signature Certificate).

Why Legaltax?

  • Service provided by the Legaltax is one of the best compared to other organizations.

  • Just tell us little bit about your business and you will have the registered trust deed in 20 working days 9subject to the government approval). It’s that simple. In addition to yours, we will be handling around 500 requests per month.

  • We make your interaction 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.

  • Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we'll try to ensure that your doubts are cleared before they even arise.

FAQ's

No there is as such no limits.
The other alternatives are to start a Trust or a Society based on the objectives of your NGO.
The property of the company vests in the name of the Company and the same can be sold as per the rules mentioned under the Companies Act, (Eg: With the consent of the Board of Directors in the form of a resolution).

Step 1: Get Registered with Legal Tax
You are required to fill in your details, online, in our simple questionnaire given above. It contains Name, Complete Address, Proposed Names for the Company, Number of Directors and their details, and Authorized Capital, etc.

Step 2: Get DIN & DSC
Applications will be filed with the ROC to obtain DIN and DSC for the Directors, which will be duly signed. We need to apply for DSC, first. Once it has been received, Form DIR-3 is to be filed with the ROC to get the “DIN”. A passport-sized photograph, attested ID Proof, and Address proof of the Director is to be attached to these applications.

Step 3: Name Approval
You suggest your preferences and we’ll conduct a coherent “Company Name Search”. After you choose a name among the three options which we will provide, then we’ll apply for a unique name for your Company. Name availability has to be checked in the “Reserve Unique Name” or RUN facility.A maximum of 2 names is to be proposed, initially, in Form INC-1. If rejected 1 resubmission is allowed. Both times in separate formats.

Step 4: Apply for License & COI
We will apply for the Section 8 License with the Central Govt. The right format to use is Form INC-12. It is to be sent with the “MoA” in Form INC-13. “AoA”, Declaration by CA/CS/CWA in Form INC-14, Declaration by Directors or Applicant in Form INC-15, Name Approval Letter, and a 3-year estimate of future income & expenses. And also apply for the COI. As the “COI” or Certificate of Incorporation is a proof that the company has been created. The unique CIN (Company Identification number) is also mentioned in this.

Step 5:Your Section 8 Company is now operative
As soon as all the processes have been completed and your Section 8 Company has been registered, we’ll apply for your PAN and TAN. It is done via Forms INC-7, 8, 10, 9, 22, DIR-2, and 12 with the ROC, along with the required documents. We’ll get them ready, and will send them to you immediately.

  • Registration under Companies act with the registrar of companies makes the company a legal entity.

  • Government regulations to manage the profits and losses of the company makes the company trustworthy

  • Company is managed by the board of directors through MoA and AoA and not by other bodies.

  • Section 8 Company Tax benefits: It is a non-profit organization that is why they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits. They avail benefits under section 80G of the Income Tax Act, 1961. They also are required to pay less stamp duty as compared to other organizations.

  • Sec 8 Company in India can be registered with names that contain words like Association, Foundation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation.

  • To apply for TAN, PAN and Bank Account.

If any company wants to the promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object then it can register itself under section 8 of companies Act 2013.This kind of company is called as Section 8 company.
No, Section 8 Company registration is an Online process so it can be followed offline.
Minimum two directors are needed.
Yes.It is mandatory to have a not for profit motive of the organization.
  • DSC and DIN of the Directors.

  • Objectives and proposed work of the company.

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

  • Directors personal documents.

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

  • Passport size photograph of Director.

  • Photo ID Proofs of Directors.

  • Self declaration about your directorship in other companies.

  • No objection Certificate from the owner of the property of the property.

  • Address proof of the directors.

  • Specimen Signatures

  • Rent agreement of your registered office.

  • Service provided by the Legaltax is one of the best compared to other organizations.

  • Just tell us little bit about your business and you will have the registered trust deed in 20 working days 9subject to the government approval). It’s that simple. In addition to yours, we will be handling around 500 requests per month.

  • We make your interaction 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.

  • Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we'll try to ensure that your doubts are cleared before they even arise.

You can get section 8 application form on LegalDocs website.
It is necessary to have at least one Indian resident as director of the company.
No minimum capital is required to establish a section 8 company.

The key characteristics of an NGO section 8 company are:

  • 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 is earned during 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 of specific objects of NGO. Further there is restriction on declaration of profits as dividend to members.

  • Minimum two shareholders;

  • Minimum two Directors (Directors and shareholders can be same person);

  • At least one Director shall be resident in India;

  • No Minimum capital required;

  • Income-tax PAN is a mandatory requirement in case of Indian nationals;

  • Any one of the Identity Proof (Voter ID/Aadhar Card/Driving License/Passport); Passport is mandatory requirement for proof of identity in case of foreign nationals;

  • Any one Proof of Residence (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);

  • Registered Office address proof (rent agreement along with latest rent receipt and copy of latest utility bill in the name of 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 a Director and Promoters, any documents establishing the ownership such as Sale Deed/House Tax receipt etc along with the no objection certificate.

Digital Signature is the only secure and authentic way that a document can be submitted electronically. All filings of e-forms on MCA Portal are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.

Under the plan you can obtain 2 class II digital signatures along with E-token, having a validity of 2 years.

In Expertise, you already have a DSC, our experts will offer you some concession accordingly on the above package.
Any individual/organization can become the member of Section 8 Company including foreigners/NRI’s.
The incorporation process gets completed on obtaining the license and issue of incorporation certificate under section 8 of Companies Act 2013, (earlier section 25 of Companies act 1956). The whole process of company incorporation can be closed less than 15 days. The time taken also depends on relevant documents provided by the applicant and speed of approvals from government. To ensure speedy registration, please pick a unique name for the proposed Company and make sure you have all the required documents prior to starting the registration process.
In addition to registration, a non-profit engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):
  • A place of work in a restricted area (like a tribal area or a border area requires a special permit – the Inner Line Permit – usually issues either by the Ministry of Home Affairs or by the relevant local authority (i.e., district magistrate).

  • To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.

  • To employ foreign staff, an Indian non-profit needs to be registered as a trust/society/company, have FCRA registration and also obtain a No Objection Certificate. The intended employee also needs a work visa.

  • A foreign non-profit setting up an office in India and wanting staff from abroad needs to be registered as a trust/society/company, needs permission from the Reserve Bank of India and also a No Objection Certificate from the Ministry of External Affairs.

  • Under this plan ClearTax will help you register your NGO as a section 8 company. Our customer support will help you connect with an expert who shall advise you on applicability of other registration required. The additional registrations services(such as shop & establishment act registration etc) shall not form part of the plan and will be charged separately.

Below are the charges applicable for DIN, DSC and other government forms:

  • DIN-Director Identification Number (2 Nos): Rs.1000

  • DSC-Director Identification Number(2 Nos): Rs.2000

  • RUN Form (Name Approval): Rs.1000

  • INC 12 Form (Registration under section 8): Rs. 2000

  • AoA-Article of Association: Rs.1000 (up to Rs.10 lakh of authorized capital)

  • MoA-Memorandum of Association: Rs.5000

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