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Section 8 Company Registration

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Definition
Important Points
Process
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FAQ

Section 8 Company


A company licensed under section 8 of the companies act, 2013 for promotion of research, social work, etc. is called a section 8 company.



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.

Section 8 Company Registration


The process and necessities of a Section 8 Company are actually equivalent to a limited company. Including all the rights and commitments that accompany such a limited company. The main viewpoint where they differ is that a Section 8 Company can’t utilize the words “Section 8” or “Limited” in it’s name.

  • ✔ The process of registering a Section 8 Company is same as incorporating an “NGO, Trust, or a Co-operative Society” under the Companies Act 2013.
  • ✔ An extra necessity must be fulfilled for obtaining a license from the central government under Section 8 of the Companies Act, 2013.
  • ✔ The license, basically, allows them to delete Private/Public Limited from their name. With this permit, the company becomes eligible for the specific exclusions from provisions of law and has concessions in the charge.
  • ✔ If the proposed Section 8 Company has been enrolled as a private limited than at least 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 Directors/Shareholders

  • ✔ Copy of PAN Card
  • ✔ Aadhaar Card
  • ✔ Address Proof (Bank Statement, Electricity Bill, Telephone Bill)
  • ✔ 2 Passport Sized Photographs

For Registered Office

  • ✔ Ownership Proof (House Tax etc.)
  • ✔ Utility Bill (Electricity Bill, Gas Bill)
  • ✔ Address Proof (Bank Statement, Electricity Bill, Telephone Bill)

Benefits of Section 8 Company Registration


Being an NPO or Non-profit Organization does not imply that the Company can’t make a benefit or income. It just implies that the Company can earn benefits however the promoters are not to profit from those benefits. The benefits can’t be disseminated among the promoters. All incomes must be applied to advancing the objective of the company.

Still, certain exclusions and advantages have been accommodated to an “NGO or an NPO” under section 8 of the Companies Act 2013. The donors contributing towards a Section 8 Company are eligible to confirm the Tax Exemption against these gifts.

Some of the advantages are:

  • ✔ Distinct Legal Identity: A Section 8 Company is a separate legal entity and is different from it’s members. It’s legal standing is not the same as it’s individuals. The Company has a never-ending presence, alongside having organized operations and greater adaptability.
  • ✔ Zero Stamp Duty: A Section 8 Company is excluded from the necessity of paying stamp duty on both “MoA and AoA” of the private or public limited organization, which is relevant for enrollment of other sorts of company structures.
  • ✔ No Minimum Capital Requirement: No base capital limit has been referenced for a Section 8 Company in India. Also, the capital structure can be changed at any phase according to the growing necessities of the company. This suggests that it may be formed without any share capital. The funds necessary for carrying the business operations can be brought in the form of donations and/or subscriptions from members and the general public.
  • ✔ Name: A “Section 8 Company” does not need to add Limited or Private Limited, to it’s legal name. It may be enrolled with names like “Foundation, Association, Society, Council, Organization, Club, Charities, Academy, Institute, and Federation.”
  • ✔ CARO: Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
  • ✔ Tax Benefits: Many tax benefits are granted to Section 8 Companies in India.
  • ✔ Credibility: Section 8 Companies are more dependable than any other type of altruistic associations. They are represented by the Companies Act and are managed carefully. For example, the necessity of a required yearly review, or the “MOA and AOA” can’t be modified at any stage or circumstance.
  • ✔ Exemption to the donors: Those donating to a Section 8 Company are eligible for tax exemptions under section “12A and 80G” of the Income Tax Act.
  • ✔ Membership:An enlisted partnership firm can turn into a member in it’s individual capacity and acquire a Directorship.

LegalRaasta Offers


“LegalRaasta” offers to assist you in all the matters of company registration. Let our expert team handle the complex procedure of “completing papers, selecting and searching availability of name, logo or trademark designing, trademark registration, etc.” While you can concentrate on matters of business operations requiring your attention. We will stand by you through each and every stage of its incorporation. For any queries on related topics, you can consult our experts’ team.

Our package includes:

DIN for 2 Partners
Digital Signature For 2 Directors
Name search & approval
MOA/AOA
Registration Fees
Company Pan Card

Eligibility


  1. Objects of a Section 8 Company must be the promotion of “Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of Environment, or any other such object.”
  2. The Company intends to apply it’s profits, if any, or other income in promoting these objects.
  3. It intends to prohibit the payment of any dividend to it’s members.


A Section 8 Company is created by those who do not wish to earn profit from this venture. Rather they want to dedicate themselves to improve some parts of the social structure.

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

Process of Section 8 Company Registration


Step 1: Get Registered with LegalRaasta

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 with their details, Authorized Capital, etc.


Step 2: Get DIN & DSC

Applications would be filed with the ROC to obtain DIN and DSC for the Directors and should be duly signed. First, We need to apply for DSC. Once it has been received, Form DIR-3 is to be filed with the ROC to get their 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 Company Name Search. After your approval of the 3 options, 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 Government. The right format to use is Form INC-12. It is to be sent with “MoA” in Form INC-13. “AoA” and Declaration of CA/CS/CWA are to be sent in Form INC-14. Declaration by Directors or Applicant is to be sent in Form INC-15.
COI or Certificate of Incorporation is 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 in Forms “INC-7, 8, 9, 10, 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.

Important Points


Minimum Requirement

  • A Section 8 Company gets incorporated by the MCA.
  • All requirements of the Companies Act 2013, such as the minimum number of Directors and Shareholders, etc. must be met with.


Charitable Object

  • Section 8 Companies can be established for non-profit objectives only. Any profit earned or income received by this Company is not to be distributed among its members.
  • This implies that the income will either be reinvested in the business or utilized for the progress of its main objects, i.e. charitable purpose.


Management Team

Unlike other Trusts which are governed by the Trustees as per a Trust Deed, the operations of Section 8 Companies are managed by the Board of the Directors as per their “MoA and AoA”.


Companies Act, 2013

A “Section 8 Company” must follow the provisions prescribed under the Companies Act, 2013, such as “Maintaining Book of Accounts, Audits, Return Filing, Board Meetings, etc”.


MoA & AoA

A Section 8 Company shall not make any changes to the provisions of it’s “MoA & AoA” without seeking approval from the Central Government first.


Voting Rights

The voting rights of the shareholders of a Section 8 Company are based on the number of shares held by them. Similar to that of any other company.


Income tax

The Company has to follow the provisions of the Income Tax Act.


GST Registration

If Section 8 Company comes under the purview of the GST Act, it must get registered with GST.


Conversion

It may not convert itself to any other kind of company structure without complying with conditions, as applicable.


Donations/Funding of Section 8 Company


Section 8 Company is not allowed to raise capitals by way of deposits but they can accept donations from the general public. Below are some of the ways by which it can raise funding:


Note: LegalRaasta is owned and operated by a consultancy firm and in no way represent any relation to any government body or http://www.udyogaadhar.gov.in

Name Approval


The name of your Section 8 Company is the first impression to the world. It’s selection, therefore, is very important. It should stand out, yet be easy to remember, attractive, relevant, and indicative. Here are some points you can keep in mind when choosing the name of your company.

Suffix:

The name of your “Section 8 Company” shall include the words “Association, Federation, Chambers, Confederation, Council, Electoral trust Foundation, Forum, and other such words.” But there is no need to add the word Limited or Private Limited to its name.


Meaningful:

The name of your Section 8 Company should indicate the principal objects of the Company as set out in its “MoA”. For example, “Aware Health and Research Foundation or Nagarjuna Agricultural Research and Development Institute” are Section 8 Companies. And their names indicate the kind of work undertaken by them. This helps in branding and goodwill.


Offensive:

The proposed name should not fall in the range of undesirable names as specified in Rule 8 of Companies (Incorporation) Rules, 2014. The name of your section 8 company should not be abusive, against the customs and beliefs of any religion, and it should not contain words or phrases which are used as a slur and are offensive to a particular group of people.


Short & Simple:

The name should be brief and not too long. Moreover, it should be easy to pronounce. A person should be able to recall the name.


Unique:

You are not allowed to name your Company to be exactly the same or identical as of an existing company name or trademark or for which a trademark has been applied. At “LegalRaasta”, you can check if the name which you are proposing matches someone else’s or not.


Indicative:

Every name need not indicate the objects of the company, compulsorily, but when there are some indication of objects in the name, then it shall conform to the objects mentioned.

Forms Required


S.No

Particulars
SPICE + PART A Name Approval
SPICE + PART B Incorporation Application,License,PAN and TAN
INC-9 An affidavit from each Director and subscriber of the MoA
INC-13 Memorandum of Association (MoA)
INC-14 Declaration from a practicing Chartered Accountant or Company Secretary
INC-15 Declaration by each Subscriber of MOA (On duly notarized Non- judicial stamp paper of Rs. 100/-)
INC-22 Notice of Location of the registered office
DIR-2 Consent of Directors to act on behalf of the Company
DIR-3 Application to ROC to get DIN
DIR-12 Appointment of Directors of the Company

 

Compliances


If a Section 8 Company fails to comply with the legal provisions, then the central government may revoke the license issued under the given act.

In case of revocation, the company may get wind-up. Or it may be simply asked to change its name by adding either “Private Limited or Public Limited”.

And the assets remaining after clearing debts and liabilities of such a Company shall be transferred to some other Section 8 Company having similar objects.

If the operations of the Company are found to be conducted fraudulently or in violation of the objects of the Company or unfavorable to public interest then, also, the license can be revoked.

If a company defaults in complying with the provisions of the Act, then it shall, without prejudice to any other action under the provisions of this section, be punishable with a fine which shall not be less than Rs.10 lakhs and may get extend to even Rs.1 crore. The Directors and all other officers of the company, found in default, shall be punishable with imprisonment for a term which may extend to 3-years, or with a fine of not less than Rs.25, 000 that too may extend to Rs. 25 lakhs, or both. Provided that it is proved that the operations were conducted fraudulently.

Then every officer in default shall be liable for action.

Any such order shall not be passed unless the company has been given a reasonable opportunity of being heard.

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Frequently Asked Questions


Company formed for the promotion of a social cause be it for “charity, education, industry, sport, etc.” is called a section 8 company. • Income and profits earned by this company should be used for purpose or object to promote the cause for which the company was set up. • No dividend shall be paid to it’s members.

A Section 8 Company is at first to be registered in the same way as a limited company. After the registration procedure, it needs to obtain a license from the Central Government to be registered under this Section. This license is provided on the basis of the Company’s objectives which have been mentioned in “MoA and AoA” and some other criteria. “LegalRaasta” provides services and assistance to help you conveniently get your business registered as a Section 8 Company.

Our fees to register a Section 8 Company start from only Rs.12,999/- Being the lowest fees charged, for the long list of services and consultancy provided. The applicable fee, vary from company to company, depending on the structure and other factors.

The main goal of “LegalRaasta” is to give you a hassle-free experience. Therefore, the process to get your Section 8 Company registeration, has been simplified too. 1. Just get registered with us in the form provided above. By answering a few simple questions. 2. We'll apply for DIN & DSC for the Directors. The application will need their passport-sized photographs, attested ID & Address proof. 3. Based on your requirements and preferences, we'll suggest unique names (not matching any existing ones) for your Company. Once you give us a go-ahead, we'll apply for the name approval. 4. We'll apply for the license under Section 8 from Central Government. Along with that, we will obtain the COI (Certificate of Incorporation). 5. On receipt of the License, we'll apply for and send you the PAN & TAN on receipt.

The below documents are needed for the registration of the Section 8 Company: • DSC & DIN of the Directors. • Director's ID proof and Address proof. • Objectives and projected work of the Company. • Financial statements like assets and liabilities, the proposal for 3-years, etc. • Registered office address documents.

Yes, A Section 8 Company can be converted into a private limited company after taking approval from ROC.

The annual compliances that need to be met by a Section 8 Company are the same as other normal companies which are registered under the Companies Act. 1. Conducting 2 Board Meetings, at least, in a year. 2. Mandatory audit of the Books of Accounts. 3. Annual returns, along with other e-filing forms such as MGT-7, AOC-4, etc. 4. Income tax returns. 5. Additional compliances to fulfill the registration under section 12AA, 80G, of the Income Tax Act, applicable to donations, etc.

No. A promoter of NPOs cannot be employed as a paid employee of the Company.

Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been done. FCRA license can only be applied after 3-years from the date of registration. However, if some really urgent foreign donations are necessary, then you may apply for prior permission from the commissioner.

Yes, a Section 8 Company can invest in another company. This can be done to meet the objectives of it’s formation.

Yes, a section 8 company can form a subsidiary company which plans to make profits.

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