Section 8 Company Registration Online in India

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 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 its name. All profits generated must be utilized exclusively to further the company's goals and cannot be distributed to members.

Limited Liability

A Section 8 Company incorporates restricted responsibility, which implies that members' own resources are not at risk in the event the organisation incurs debts or liabilities.

No Capital Requirements

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

Tax Exemptions

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 Technology: Promoting scientific research and innovation.
• 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.

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: The company continues to exist even when its members or directors change.
• No Minimum Capital Requirement: The paid-up capital 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: It is more challenging to register than trusts and societies.
• Personal Use: Does not operate in the for-profit, commercial sector.

Who is Eligible to be a Section 8 Company?

• Individuals: A Section 8 Company can be formed by 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 (Director Identification Number) can be applied by filling out Form DIR-3 on the MCA (Ministry of Corporate Affairs) portal.

Step 3: Name Approval

Fill up Form SPICe+ (Part A) on the MCA portal for name approval. The name should be charitable in nature (e.g., "ABC Education Foundation"). The name must be unique and satisfy the naming rules.

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

Prepare the MOA and AOA in which the company's objectives, rules, and regulations are mentioned. The MOA shall include the following clauses:

• Name clause: Name of the company
• Registered Office Clause: Location of the registered office
• Object Clause: Charitable objectives of the company
• Liability Clause: Limited liability of members
• Capital Clause: Authorized capital (if any)

Step 5: Apply for a License under Section 8

Submit Form INC-12 with the ROC for a license under Section 8, along with the following documents:

• MOA and AOA
• Declaration from a practicing professional (CA/CS/CMA)
• Projected income and expenditure statement for 3 years
• Proof of registered office address (e.g., rent agreement, utility bill)
• Identity proof of directors and members

Step 6: Filing the Articles of Incorporation

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

• Approved MOA and AOA
• Identity proof of directors and subscribers
• Documentation of registered office address
• Declaration and approval of directors

Step 7: Payment of Fees

Pay registration fees and stamp duty online through the MCA portal. The amount of fees is based on the company's authorized capital.

Step 8: Validate and Approve

The application and documents will be verified by the ROC. If all goes well, the ROC will provide the Certificate of Incorporation and a Section 8 licence.

Step 9: PAN and TAN Application

Post incorporation, obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the company.

Section 8 Company Registration Documents

• Identity Proof of Board of Directors & Members:
  • PAN card (requisite for Indian citizens)
  • Passport (for foreign nationals)
• Proof of Address of Directors and Members:
  • Voter ID, Aadhaar card, or Driving License
• Proof of Registered Office Address:
  • Lease (if rented) or ownership certificates
  • Utility bill (electric, water, or gas bill)
• No Objection Certificate (NOC): NOC from the registered office premises owner.
• MOA and AOA: Prepared and executed by directors and subscribers.
• Declaration by a Practicing Professional: Certified by a CA/CS/CMA.
• Projected Income and Expenditure Statement: For the next 3 years.

Post-Registration Compliances

• Open a bank account in the name of the company.
• 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.
• Maintain books of accounts and records.

Why Register Yourself as a Section 8 Company?

• Legal Recognition: Grants the organization legal recognition.
• Tax Benefit: Enjoys tax benefits as per the 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.

FAQ's

Q1. What is a Section 8 Company?

A Section 8 Company is an organization formed and registered under Section 8 of the Companies Act, 2013. Its profits are used for achieving its objectives, as it is formed to promote charitable purposes. It may not distribute profits to its members.

Q2. What are the objectives of a Section 8 Company?

The aims of a Section 8 Company must be charitable, including: advancing education, art, science, or sports; promoting religion, environment, or social welfare; and delivering aid to the poor and disadvantaged.

Q3. Who can form a Section 8 Company?

A Section 8 Company can be formed by any person, group of persons, or entities (like trusts and societies) who are eligible.

Q4. What are the key differences between a Section 8 Company and an NGO?

A Section 8 Company is incorporated under the Companies Act, 2013 and has a formal body structure comprising directors and members. An NGO can be registered in the form of a trust, society, or Section 8 Company — a Section 8 company is one of the legal forms an NGO can take.

Q5. How many directors and members are required at minimum?

A minimum of 2 directors and 2 members are required. The same people are allowed to be both directors and members.

Q6. How to register for a Section 8 Company?

1. Obtain Digital Signature Certificates (DSC) for directors.
2. Apply for DIN for each director.
3. Apply for name approval via Form SPICe+ (Part A).
4. Prepare the Memorandum of Association (MOA) and Articles of Association (AOA).
5. Submit Form INC-12 to apply for a license under Section 8.
6. Apply for formation via e-Form SPICe+ (Part B).
7. Receive Certificate of Incorporation and Section 8 License.

Q7. How long does it take to register a Section 8 Company?

Normally, it takes 15 to 30 days for the entire registration process, subject to the accurate filling of forms and the workload of the ROC.

Q8. What naming guidelines apply to a Section 8 Company?

The name must contain words such as "Foundation," "Association," "Society," "Council," or "Charity." It should represent the charitable side of the business and must be unique — not similar to any existing business entity or trademark.

Q9. Can the objectives of a Section 8 Company be changed later?

The objectives can be amended by amending the MOA and AOA. However, the new goals must also be charitable in nature.

Q10. Can a Section 8 Company pay salaries to its employees?

Yes, a Section 8 Company can give salaries to its employees including directors for the services rendered by them. However, the salaries must be reasonable and not excessive.

Q11. Can a Section 8 Company undertake commercial activities?

Yes, provided that the profits are only used to advance its charitable goals. It cannot distribute profits to its members.

Q12. Can a Section 8 Company be converted into another type of company?

Yes, it is possible for a Section 8 Company to be converted into another form of company (for instance, a private limited company) in accordance with provisions established by law and with approval from the ROC.

Q13. Can a Section 8 Company be dissolved?

Yes, the process of dissolution of a Section 8 Company can be either voluntary or by order of the National Company Law Tribunal (NCLT). Section 8 Companies may transfer their remaining assets to another Section 8 Company with the same objects.

Q14. Can a Section 8 Company have branches?

Yes, a Section 8 Company can open branches in India or outside India, subject to compliance with applicable laws.

Q15. Is it allowed to invest funds in a Section 8 Company?

Yes, a Section 8 Company can invest its funds in safe and secure instruments (like Fixed Deposits or Government bonds) to earn income for its charitable activities.