Section 8 Company Registration

About Section 8 Company Registration

Section 8 Company is a nonprofit organization in India under the Companies Act, 2013. It is for the advancement of purposes which are charitable in nature including education, art, science, sports, the advancement of religion, and the care for environment and the welfare of the society. A Section 8 Company is a company that differs from others in that it cannot pay dividends to its members, as any profit earned must be used to promote its objectives.

Referred to as Section 8 Companies, these legal entities mirror the hallmarks of a non-government organization (NGO) but are instead regulated by the Companies Act, 2013, thus formalizing their character and making them a legal entity. Such companies are sometimes called as a company with charitable objectives or a non-profit company.

Essential Features of a Section 8 Company

Non-Profit Nature:

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.

All profits generated must be utilized exclusively to further novus’ goals and cannot be distributed to members.

Limited Liability:

A part of a Section 8 business incorporates restricted responsibility, which implies that individuals' own resources aren't tried in the occasion the organization incurs debts or liabilities.

There are no capital requirements:

Section 8 Company does not require minimum paid-up capital as in the case of other companies.

Tax Exemptions:

Income Tax Exemption For Section 8 Companies: According to the Income Tax Act, 1961, Section 8 Companies are given tax exemptions under Section 12A and 80G.

Name:

A Section 8 Company shall not be registered without the inclusion of the word “Foundation” or “Association” or “Society” or “Council” or “Charity” in the name of the Company.

Objectives of a Section 8 Company

A company shall be formed under section 8 for the promotion of one or more of the following charitable purposes:-

• Education: Facilitating literacy, skill-building, and educational programs.

• Art & Culture: Preserve culture, art and heritage

• Science and Tech: Promoting scientific research and innovation.

• Education: Raising awareness about education.

• Religion: Promoting religious activities and institutions.

• Social Welfare: Relief to the poor, underprivileged and marginalized sections of society.

• Preservation of Natural Resources: Advocating for nature conservation

There are advantages of a Section 8 Company

• Legal Recognition: Being a legally recognized entity a Section 8 Company has more credibility and trust.

• Tax Benefits: Section 12A (exemption on income) and 80G (tax deduction to donors)

• Limited Liability: Members have no personal liability for the debts or liabilities of the company.

• Access to Funding: May accept donations, grants, and funding from individuals, corporations, and government agencies.

• Perpetual Existence: Which means that the company still exists even when its members or directors change.

• No minimum capital requirement: The paid-up is not required to maintain a minimum amount.

Disadvantages of a Section 8 Company

• Limitations on Distribution of Profits: Profits cannot be distributed between members and must be used to promote the company’s objectives.

• Compliance Requirements: Required to follow compliance under the Companies Act, 2013 which includes the filing of annual returns and financial statements.

• Complex Registration Process: However, it is more challenging to register than trusts and societies.

• Personal use: Do not work in the for-profit, commercial sector.

Who is eligible to be a Section 8 company?

• Individuals: A Section 8 Company can be formed any individual or a group of individuals. They can form a Section 8 Company with other trusts, societies, or legal entities.

• Foreign Nationals: Foreign nationals can be directors or members, but if any foreign funding is to be received, adherence to the Foreign Contribution Regulation Act (FCRA) must be ensured.

Guidelines to Register Section 8 Company in India

Step 1: Get a Digital Signature Certificate (DSC)

Directors and subscribers can obtain the Digital Signature Certificate (DSC) for signing the online registration forms.

DSC can be applied through certified agencies such as NSDL or eMudhra.

Step 2: Apply for a Director Identification Number (DIN)

A Director who does not already hold a DIN is required to obtain one.

DIN means Director Identification Number. It can be applied by filling out Form DIR-3 on the MCA (Ministry of Corporate Affairs) portal.

Step 3: Name Approval

Fill up the form SPICe+ (Part A) in the MCA portal for name approval.

The name should be in a form that is charitable in nature (e.g., “ABC Education Foundation”)

The name given must be unique and satisfy the naming rules.

Step 4: Prepare Memorandum of Association (MOA) and Articles of Association (AOA)

MOA and AOA preparation: Prepare its memo references and Article references, in which company objectives, rules, and regulations are mentioned.

The MOA shall include but not limited to the following clauses:

Title 1: Name of the company

Registered Office Clause: Give the location of its registered office.

Active Member, Registered Charity (Company No. 04106652, Charity No. 1084838) Object Clause: Charitable objectives of the company.

Clause of liability — limited liability of members

Authorized Capital (if any) asset clause:

Applying for a License in Terms of Section 8

Step 2: Form INC-12 with the ROC for license under Sec 8

I would submit the Documents listed in the next step:

MOA and AOA.

Declaration from a practicing professional (CA/CS/CMA).

The projected income and expenditure statement for 3 years

Written evidence of registered office address (e.g., rent agreement, utility bill).

Identity of directors and members.

Step 6: Filing the Articles of Incorporation

On grant of the license, proceed with the filing of Form SPICe+(Part B) for the incorporation of the company.

Enclose the following document:

• Approved MOA and AOA.
• You are the directors and subscribers.
• Documentation of registered office address.
• Declaration and approval of Directors

Step 7: Payment of Fees

MCA portal for online payment of registration fees and stamp duty.

The amount of the fees is based on the companies authorized capital.

Stage 8: Validate And Approve

The application and documents will be verified by the ROC.

If all goes well, the ROC shall provide the certificate of incorporation, and a section 8 licence.

Ninth Step: PAN and TAN Application

Post the incorporation get a Permanent Account number (PAN) & Tax Deduction and Collection Account number (TAN) for the company.

SECTION 8 COMPANY REGISTRATION DOCUMENTS

• Identity proof of Board of Directors & Members:

• PAN card (a requisite for Indian citizens).

• Passport (if you are a foreign national).

• Proof of Address of Directors and Members:

• Voter Id, Aadhaar card, or Driving License.

• Feasibility study registered with the local district or city office.

• Proof of Registered Office address:

• Lease (if rented) or ownership certificates

• Utility bill (electric, water, or gas bill)

• No Objection Certificate (NOC):

• NOC of the registered office premises owner.

• MOA and AOA:

• Prepared and executed by directors and subscribers.

• Declaration by Active Member in Professional Field:

• Certified by a CA/CS/CMA.

• Earnings Statement for the Recovery:

• For the next 3 years.

• Post-Registration Compliances:

• Open a bank account: Open the bank account in the name of the company.

• This attach all the related documents mentioned here GST Registration: Register for GST if applicable.

• Seek tax exemptions under Section 12A and 80G of the Income Tax Act.

• Annual Returns: Prepare and submit annual returns and financial statements to the ROC.

• Maintenance of Books Maintain books of accounts and records.

Why do you register yourself as a Section 8 Company?

• Legal recognition: Grants the organization a legal recognition.

• Tax Benefit: Enjoys tax benefit as per Income Tax Act.

• Accountability: Improves accountability and trustworthiness with donors and stakeholders.

• Limited Liability: Members have no personal liability for the debts of the company.

• Perpetual succession: The firm does not cease even if the members change.