Section 8 Company Registration: Overview
At present, Non-Governmental Organizations or Non-Profit organizations are playing a crucial role in the country's development. They have made a significant impact during the pandemic out of their servitude and flexible approach towards fulfilling their social objectives.
However, business organizations are generally considered to be running businesses with the sole purpose of earning higher profits. But, there are certain business entities, which are incorporated with the sole purpose of serving society and are commonly known as Non-Profit Organizations or Section 8 Companies.
Section 8 company is a company defined under the provisions of Section 8 of the Companies Act 2013, as a company ‘having objects such as ‘ promotion of arts, culture, commerce, arts, charity, education, religion, environment protection, social welfare, sports research and other similar objects and is required to be registered by the Registrar of Companies through the MCA portal.
Pre-requisites for Registering a Section 8 company-
- A section 8 company must be either registered as a “limited" company which may be either a public company or a private company depending upon the number of proposed directors (at least three in case of a public company and at least two in case of a private company) and members (at least seven in case of public company and at least two in case of private company) and will be exempted from the use of word “Private Ltd or Ltd” and instead uses “Foundation, Parishad, Forum etc.
- A section 8 company is compulsorily required to obtain a license from the Central Government at least before 180 days from the commencement of business operations, which allows them to delete names Public/Private Ltd from their words and makes them eligible to avail government grants and tax benefits.
- Section 8 companies are prohibited from distributing any business profits among their members in any manner. If there are profits left with the company, the same should be re-applied towards the chosen objectives by the company.
Read Our Article: Registration of Section 8 Company
- Such a company shall have at least one director who is an Indian resident for the fulfilment of legal compliances.
- Such a company shall expressly put one or more objectives include one or more purposes such as – encouragement to religion, sports, social welfare, advancement of science art or any similar field etc. in its Memorandum of Association.
- The company shall be prohibited from paying salaries or distributing any profits among its members, directors or management in any manner.
- Any two or more individuals or HUF can start a Section 8 company subject to fulfilling the prescribed conditions.
Section 8 Company Registration Process in India
- Log on to the online portal of the Ministry of Corporate Affairs (MCA) and create a login id and password for registration purposes.
- Prepare and collect necessary documents such as Rental Agreement (if the business premises have been rented), draft Memorandum & Articles of Association etc.
- Next, select and fill -up the SPICE+ from the portal that comes in two parts, Part A and Part B, which allows filling of various applications in one place for multiple purposes, including-
- Unique name reservation (proposing at least two names),
- DIN application for directors(upto three directors)
- ESI & EPF registration for employees,
- GST registration etc.,
- Along with documents as mentioned above and apply on the portal.
- On satisfaction of the fact that all the requirements for the registration of Section 8 Company have been complied with, the Registrar will grant a Certificate of Incorporation evidencing the company's registration.
- Finally, apply to the Union Government for allotment of license before commencing proposed business operations.
- Director Identification Number (DIN) for each of the proposed directors;
- DSC for at least two proposed directors;
- Scanned Copy of the duly prepared Memorandum of Association (MOA)& Articles of Association (AOA) for the proposed section 8 company;
- Passport size Photographs for each proposed director & member;
- Identification proof for proposed members & directors, i.e. Aadhar Card, Passport, Voter ID etc.
- Director details ;
- Proof of address of each proposed member and director;
- Copy of rental agreement, where the business premises have been rented.
Advantages Linked with Section 8 Company Registration
- Higher Sense of Public Trust - Since a section 8 company must obtain a license from the Central Government, it has higher reliability.
- Government Grants & Tax Exemptions- On receipt of a license to carry business operations from the Central Government, such company becomes eligible to receive government grants, and tax exemptions available to a Non-profit organization under section 80A & 12G of the Income-Tax Act 1961. to more funds could be available for fulfilling objectives of the company.
- Benefits for Directors - For the directors working in a Section-8 company, it is not counted for determining the total number of directorships held by the company as provided under section 165 of the Companies Act 2013.
- Lesser Compliances- Compared to other business entities, a section 8 company is subjected to lesser compliances such as relaxation in holding general meetings, lesser fillings etc.
- No requirement of Independent director or Board Committees: A section 8 company has been exempted from appointing any Independent director or making any Stakeholder Relationship Committee or Nomination & Remuneration company.
- No minimum capital requirement- Unlike other business entities, a section 8 company is exempted from fulfilling any minimum capital requirement to get itself registered.
- Benefit for donors- Any person (any individual or business entity) who donates to support the primary objectives of the company can also avail of tax exemption under section 80G of the Income-Tax Act 1961.
- Limited Liability & Perpetual Succession-Since a section 8 company is basically like a public/private company, it enjoys a separate legal identity apart from its members, offers limited liability to its members at the time of winding-up and further enjoys perpetual succession.
- Easier Incorporation-Though, a Non-profit organization could be registered as a trust or a society also. However, unlike these, the process of incorporation of a section 8 company is easier with its completely online procedure and no need to be physically present for registration purposes.
Read Our Article: All you need to know about Section 8 Company
Therefore, Non-profit organizations are playing a crucial role in the social, economic, and moral upliftment of the country by helping the Government of India fulfill gaps in the Government schemes. Smilechain Foundation, Nanhi Kali, Childcare, Helpage India, Childcare India Foundation, etc., are some of the popular Non-profit organizations that have worked tirelessly for supporting various good causes for multiple sections of the population in India and have been recognized worldwide for their work.
Section 8 Company Regsitration
You can register your company under section 8 of the Companies Act if it is for the promotion of research, education, science, art, commerce social activities etc. Get your company registered now with corpseed and enjoy various benefits and exemptions from tax liabilities.
Section 8 Company Compliance
After Section 8 Company incorporation, next legal complication from ROC is annual compliances. It’s mandatory for all Section 8 companies to file annual compliances. Sign up now for services and be rid of all your compliance concerns.
Private Limited to Section 8
When any private company drastically change its object from profit making to non-profit entity then it needs to file conversion application in order to get the non-profit making entity status as Section 8 Company. hassle free solutions.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.
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