How to Register Section 8 Company: Purpose of Section 8 Company
What is Section 8 Company..?
A Section 8 Company is an organization which is similar to a Trust registered under the Central Government’s Ministry of Corporate Affairs as a Non-Profit Organization (NPO). The objective of the company is to promote ‘arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, religion’ and it plans to apply its profits, if any, or any other income in promoting its objectives. It functions just like a limited company which includes all the rights and regulations that come with such a company. However, it differs from a company in one critical aspect, i.e. it cannot use the words “Limited” or “Section 8” in its name.
Section 8 companies have improved business credibility among donors, other stakeholders and also Government departments. It has many benefits when compared to a Trust like better legal standing and greater recognition.
Register your Section 8 Company Through Taxcure India
Purpose of Section 8 Company
- Commerce
- Art
- Science
- Sport
- Education
- Research
- Social welfare
- Religion
- Charity
- Protection Environment
History of Company with Charitable purpose
The concept of Section 8 companies was introduced in Companies
Act 1913 that permitted companies with charitable objects etc. to
be registered without the words ‘Limited’ or ‘Private Limited’.
The restriction was that the Companies were permitted to use the
profits only for the purpose for which the company was promoted
and there was a prohibition on distribution of dividend.
Who can apply for registration of a Section 8 Company?
Any person or an association of persons intending to register
a limited liability company for objects specified below can
opt to apply for registration of Section 8 Company.
The following have to be proved to the satisfaction of the
Central Government that
its objects includes promotion of commerce, art, science,
sports, education, research, social welfare, religion,
charity, protection of environment or any such other
object
the company after incorporation intends to apply its
profits, if any, or other income in promoting such objects
only; and
the company intends to prohibit the payment of any
dividend to its members.
Benefits of Section 8 Company
- Credibility
- No minimum Capital
- Tax Benefits – Tax Deduction – Tax Exemption
- Separate Legal Entity
- Zero stamp Duty
- Transfer Ownership
- No Title Required
Forms Required for Section 8 Company Registration
- SPICE+ – Application for incorporation of company
- INC 12 – Application for License
- INC 13 – Memorandum of Association
- INC 14 – Declaration from a Practicing CA
- INC 15 – Declaration from each person making the application
- INC 16 – License to incorporate as section 8 company
- INC 22 – Situation of Registered office
- DIR 2 – Consent of Directors
- DIR 3 – DIN
- DIR 12 – Appointment of Directors
List of Required Documents for Section 8 Company
- Members Names
- PAN of All Members
- Aadhar of All Members
- Photo of all members
- Mobile no of all members
- Email of all members
- Company Name
- Light Bills (for address)
Registration Process of Section 8 Company
- Step 1 – Apply DIN – DSC
- Step 2 – Once the DIR-3 is approved, the ROC will allot a DIN to the proposed directors.
- Step 3 – File Form INC-12 with the ROC to apply for a licence for the Section 8 company along with the attachment of the required documents as mentioned above.
- Step 4 – Once the form is approved, a license under section 8 will be issued in Form INC-16.
- Step 5 – After obtaining the license, file the SPICe+ Form with the ROC for incorporation along with the required attachments as mentioned above. If the ROC is satisfied with the forms submitted, he issues a Certificate of Incorporation along with a unique Company Identification Number (CIN). The Ministry of Corporate Affairs (MCA) issued an integrated incorporation form INC-32. A company can now be incorporated online by filling the Simplified Proforma for Incorporating Company Electronically (SPICe) form in Form INC-32 (using Digital Signature Certificate of the Director) along with (eMoA) in Form INC-33 and (eAoA) in Form INC-34.
FAQ
-
Are there any prescribed criteria with respect to Minimum
and Maximum number of directors in a Section 8 Company?The prescription under section 149(1) of Companies Act 2013
as to having Minimum of three directors for public limited
company and two directors for private limited company and
maximum of fifteen directors is not applicable to section 8
company and thus there is no prescription with respect to
minimum or maximum directors in a section 8 Company.
However, second proviso to section 149(1) requires a woman
director in prescribed class of companies. Also section 149(3)
requires every company to have a resident director. -
Whether a Section 8 Company can issue bonus shares?
No, a Section 8 Company is prohibited from issue of bonus
-
Can Section 8 company earn money?
In conclusion, section 8 companies can indeed make a profit. By increasing the number of people in their housing units, providing additional services, and investing their funds, these companies can generate more income than they receive from the government.
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Can Section 8 company pay salary?
Generally, Section 8 companies are expected to reinvest their profits back into the organization to further their charitable objectives. However, the Act does allow for the payment of reasonable remuneration to directors or officers for their services.
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What is the difference between a Section 8 company and an NGO?
An NGO is typically funded by individual donations, corporate sponsorships, grants, or a combination of all three. A Section 8 Company, in contrast, may receive funding from the government, as well as other sources. An NGO is formed to pursue a mission, typically charitable.
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Is Section 8 company tax free?
Tax on Surplus Income: While Section 8 companies are exempt from income tax under Section 12A, any surplus income not utilized for charitable purposes is taxable. If a Section 8 company generates profits from its activities that are not applied for charitable purposes, such income is subject to regular income tax.
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What is the minimum capital for a Section 8 company?
No minimum capital: There is no minimum capital requirement for a Section 8 company incorporation and the capital structure of Section 8 can be altered at any time as per the growth requirement of the company.
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What is the difference between a Section 8 company and an NGO?
Members: A Section 8 company can have a minimum of two members, and there is no maximum limit. The members can be individuals or entities. The members do not receive any dividends, as the profits or income of the company are used for promoting its objectives.14 Mar 2023
