How To Secure Section 8 Company Registration?

A Non-Profit Organization (NPO), also known as a Section 8 Company, is a type of company that was established under the Companies Act of 2013 with the purpose of advancing charitable goals including social welfare, science, research, sports, commerce, education, the arts, and religion. Unlike other companies, the income generated by a Section 8 Company cannot be used for paying dividends to its members. Instead, it must be used to further its charitable goals. The companies seeking for Section 8 Company Registrations are granted an incorporation certificate by the central government and must adhere to stringent regulations.

This guide will walk you through the complete process of Section 8 Company Registration, ensuring you have all the information you need to establish your non-profit organization.

Eligibility for Section 8 Company Registration:

To qualify for Section 8 Registration, an individual or an association of individuals must have the following objectives:

1. Promote Specific Activities: The company should aim to promote activities such as science, commerce, education, art, sports, research, religion, charity, social welfare, and environmental protection.

2. Reinvestment of Profits: All profits and income generated after incorporation must be reinvested to promote the company’s objectives.

3. No Dividend Payouts: The company must not intend to pay any dividends to its members.

Incorporation of a Section 8 Company:

The Companies Act, 2013, outlines the procedure for Section 8 Company Registration. The process involves submitting an application in Form No. INC.12 along with the following documents to the Registrar of Companies (ROC).

Required Documents:

1. Digital Signature Certificate (DSC): This is required for all the directors.

2. Memorandum of Association (MOA) and Articles of Association (AOA): Draft MOA and AOA in Form No. INC – 13, signed by the subscribers.

3. Declarations:

• Form no. INC-14: Declaration by an advocate, chartered accountant, company secretary, or cost accountant that the draft MOA and AOA comply with Section 8.
• Form INC-15: Each applicant's declaration on the form.

4. Affidavits and Declarations (Form INC-9): From the first directors and each subscriber, notarized on the relevant state's stamp paper.

5. Financial Estimates: Projected income and expenditure for the next three years.

6. Identity and Address Proofs: Passport size photographs, Aadhaar card, passport, or voter ID of the members.

7. Director Identification Number (DIN): For all proposed directors.

Simplified Process of Section 8 Company Registration

To simplify the incorporation process, the Companies (Incorporation) Sixth Amendment Rules, 2019, eliminated the need for filing Form no. INC 12. Now, the incorporation of Section 8 Companies can be done using the SPICe+ form.

Steps to Register a Section 8 Company Using SPICe+ Form

1. Reserve a Company Name: This can be done through part A of the SPICe+ form.

2. Fill Part B of the SPICe+ Form: Complete the form with all necessary details.

3. Submit the Form: The License Number for the Section 8 Company will be issued during the incorporation process.

For Companies with Existing License Numbers:

If a company already has a License Number, stakeholders can file the SPICe form directly. It’s important to note that form processing may take some time.

Advantages of Section 8 Company Registration:

Integrity and Credibility: Section 8 Registration ensures the organization operates with high integrity and commitment to its goals, as it is approved by the Union government.

Trustworthiness: Due to stringent regulations, Section 8 Companies are perceived as trustworthy by internal and external stakeholders.

Government Grants and Subsidies: Section 8 Companies are eligible for grants and subsidies from the government and other institutions, enhancing their ability to achieve their objectives.

Exemptions and Reliefs for Section 8 Companies:

Companies Act, 2013

Section 8 Companies enjoy several exemptions and reliefs under the Companies Act, 2013:

1. Directorship Limits: Directorship in a Section 8 Company does not count towards the limit on the number of directorships specified under Section 165 of the Act.

2. General Meetings: They can conduct general meetings with a notice of 14 days instead of 21 days.

3. Board Meetings: They are required to hold at least one meeting every six months instead of four per year.

4. Recording of Minutes: They have relaxed requirements for recording minutes of meetings.

5. Independent Directors: They are not required to appoint independent directors.

6. Company Secretary: They are not required to appoint a qualified company secretary.

7. Committees: They are not required to appoint a Nomination and Remuneration Committee or a Stakeholders Relationship Committee.

Number of Directors and Board Meetings:

Directors:

Section 8 Companies are required to have at least:

1. Three Directors: For public limited companies.
2. Two Directors: For private limited companies.

There is no maximum limit prescribed for directors in a Section 8 Company Registration. However, they must have at least one resident director who has stayed in India for a minimum of 182 days in the previous calendar year.

Board Meetings:

Section 8 Companies must conduct at least one board meeting within every six months. The quorum for these meetings is either eight directors or one-fourth of the total strength of the board, whichever is less. However, there must be a minimum of two members present.

Compliance for Section 8 Companies:

Annual Compliance

1. Appointment of an Auditor: Within 30 days of incorporation, an auditor must be appointed for a term of five years.

2. Statutory Registers: Maintain registers of members, loans, charges, and directors as required under the Companies Act, 2013.

3. Board Meetings: At least one meeting every six months.

4. Statutory Audit: Conduct an annual audit of financial statements by a Chartered Accountant.

5. General Meeting Notices: Issue notices for general meetings with at least 14 days’ notice.

6. Annual General Meeting (AGM): Must be held once a year within six months of the end of the financial year.

7. Board Reports: Submit board reports including financial statements in Form AOC-4.

8. Financial Statements: File audited financial statements in E-FORM AOC-4 within 30 days of the AGM.

9. Annual Return Filing: File Form MGT-7 within 60 days of the AGM.

10. DIN KYC: Ensure all directors complete their KYC by September 30th each year.

11. GST Annual Return: File GSTR-9 by December 31st.

12. Tax Audit Report: File Form 10B by September 30th.

13. Income Tax Returns: File Form ITR-6 by October 31st.

Monthly and Quarterly Compliance:

1. GSTR-1:

• Monthly by the 11th for businesses with an annual turnover exceeding Rs 5 crore or not opting for the QRMP scheme.
• Quarterly by the 13th for those opting for the QRMP scheme.

2. GSTR-3B:

• Monthly by the 20th for businesses with an annual turnover exceeding Rs 5 crore or not opting for the QRMP scheme.
• Quarterly by the 24th for those opting for the QRMP scheme.

3. TDS Returns:

• Quarterly returns due on July 31, October 31, January 31, and May 31.

Additional Compliance:

Section 8 Companies may have additional compliance requirements depending on their activities, such as:

1. Donations and Funding: If the company receives donations, it must comply with Sections 11, 80G, and 12A of the Income Tax Act to claim tax exemptions.

2. Director’s Approval (Form DIR-2): Within 30 days of a director’s appointment.

3. Return of Appointment (Form MR-1): Within 60 days of appointing a managing director or other key managerial personnel.

4. Provident Fund (PF): Mandatory for companies with 20 or more employees, with returns due monthly by the 25th.

5. Employee State Insurance (ESI): Mandatory for companies with 10 or more employees earning less than Rs 21,000 per month, with returns due monthly by the 15th.

Common Misconceptions About Section 8 Company Registration:

1. Affidavits Required: There is a misconception that directors need to submit affidavits in Form INC-15. However, self-declarations are accepted if properly executed.

2. MOA and AOA Notarization: There is no mandatory requirement to notarize the Memorandum and Articles of Association.

3. Government Fees: Contrary to popular belief, the stamp duty for Section 8 Companies is neutral when compared to other companies.

Conclusion

Section 8 Company Registration is an essential step for individuals and associations aiming to promote charitable objectives. This comprehensive guide outlines the process, from understanding eligibility requirements to meeting compliance obligations. By following these steps, you can ensure your Section 8 Company operates legally and effectively, contributing positively to society.

Remember, the process of Section 8 Registration is not only about compliance but also about demonstrating your commitment to transparency and accountability. With the you are looking to start a Section 8 Company, LegalRaasta can assist you with every step of the registration process, ensuring compliance with all legal requirements. Contact us for a smooth and hassle-free Section 8 Company registration experience.