Section 8 Company Registration

Section 8 Company Registration
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In India, a Section 8 Company functions as an NGO dedicated to advancing various fields such as art, science, education, sports, and charitable activities. Unlike Trusts or Societies, profits generated by Section 8 Companies are reinvested to support their stated objectives rather than being distributed to company members. The registration process for a Section 8 Company falls under the jurisdiction of the Ministry of Corporate Affairs (MCA), distinguishing it from Trusts and Societies, which are governed by State Government Registrars. Opting for Section 8 Company registration through Taxneu offers distinct advantages over Trusts and Societies. The Section 8 structure enhances credibility with government departments, stakeholders, and potential donors. At Taxneu, our proficient team ensures a seamless registration process for your Section 8 Company. With expertise in documentation, application filing, and efficient incorporation, we alleviate your concerns, making the entire process smooth and effective.

Important Points Regarding Section 8 Company in India

Following are some vital points about Section 8 Company in India:

  1. NGOs in India can be registered under Registrar of Societies or as a Non-Profit entity under Section 8 Company of the Companies Act, 2013;
  2. Compliance with Companies Act is compulsory for Section 8 Company, including Filing returns with the ROCs, maintaining books of accounts, & complying with GST and IT Act Regulations;
  3. Section 8 Company in India cannot utilise profits for purposes other than charitable objectives & cannot distribute them among shareholders of the Company;
  4. Any alterations to the Charter Documents like AoA & MOA require consent from the Government;
  5. Section 8 Companies are identical to the former Section 25 Companies Under the Companies Act 1956 and now, they are recognized as such under the prevailing legislation.

Advantages of Section 8 Company Registration

Following are the advantages of Section 8 Company Registration in India:

  1. Separate Legal Entity: These types of companies in India are considered as a separate legal entity, which means that they can own property, sue or be sued in their name, and enter into contracts.
  2. More Trustworthy & Credibility: Due to its non-profit nature, Section 8 Companies are often viewed as more credible & trustworthy than other types of Companies.
  3. Nil Stamp Duty: These Companies are exempted from paying stamp duty on their Registration Documents.
  4. Minimum Share Capital: These companies don’t have any minimum capital requirement.
  5. No Minimum Capital is Required: In India, Section 8 Companies do not have a minimum capital requirement and they can adjust their capital structure as per their growth and give them more flexibility.
  6. Exemption to Donors: Tax exemption is only allowed to the donations received by the Section 8 Company under Section 12A & 80G of the Income Tax Act.

Eligibility Criteria for Section 8 Company Registration in India

Following is the eligibility criteria for Section 8 Company Registration in India:

  1. At least 1 Director is required and he or she should be a resident of India;
  2. HUF, an individual is eligible to commence a Section 8 Company in India;
  3. The objective of the Company should be one or more of the following – the advancement of science & art, social welfare, promotion of sports/arts, and financial support to lower-income groups;
  4. 2 or more individuals who will act as Directors/Shareholders should fulfill all the compliance & requirements of the Section 8 Company Registration under the Companies Act;
  5. Directors, founders, and Members Directors of the Company cannot draw any remuneration in any form of cash or kind;
  6. No profit should be shared or distributed among the Directors & members of the Company indirectly/directly.

Requirements for Section 8 Company Registration

Following are some vital requirements for Section 8 Company Registration:

  1. Directors: For Section 8 Company Registration in India, a minimum of 2 Directors are required.
  2. Capital Requirement: There is no minimum paid-up capital for the Registration of Section 8 Company. NGOs in India established as a Section 8 company need not use the words Private Limited or Limited in their name.
  3. Management: Section 8 Company is managed by the BoD (Board of Directors) as per AoA & MoA of the Company, unlike other Trusts that are handled by the Trustees as per the Trust Deed.
  4. Regulation under various Acts: Section 8 Company needs to follow the Rules & Regulations prescribed under the Companies Act, 2013. It needs to file returns & maintain Books of Account with ROCs. Section 8 Company can’t make any alterations to the provisions of Memorandum of Association (MoA) & Articles of Association (AoA) without prior consent of the Central Government and it should follow the provisions of the GST Law & Income Tax Act.
  5. Charitable Objects: In India, Section 8 Companies are registered with non-profit objectives. The AoA & MoA must mention the purpose for which it is set up. Any profits earned by the Section 8 Company is utilised for the furtherance of its main objectives i.e., charitable purposes in the Company. The profits will not be distributed among its members.
  6. DSC and DIN: DSC or Digital Signatures of all the proposed Company’s Directors are necessary for the Registration because the forms for the Registration process are filed online & should be digitally signed. Apart from DSC, you need to apply for DIN for the Directors and the application for allotment of DIN must be filed in Form DIR-3 or along with the SPICe+ Form for the Registration.

Documents Required for Section 8 Company Registration

Following are some crucial documents required for Registration of Section 8 Company:

  • Identity/Address proof of Directors or Shareholders:
  1. Passport size photographs of Directors/Shareholders;
  2. Copy of DL or Voter ID;
  3. Copy of latest bank statement & utility bills;
  4. Copy of Aadhar Card;
  5. Copy of Passport (In case of NRI or Foreign National).
  • Address proof of Registered Office:
  1. Copy of latest electricity bill or water bill or gas bill (not older than 2 months);
  2. In case of rented office, Rent Agreement is required;
  3. NOC from the property owner.
  • Other Documents:
  1. MoA & AoA;
  2. Consent of Nominee (INC-3);
  3. DSC (Digital Signature Certificate);
  4. Declaration by the 1st Director Subscriber (an affidavit is not required);
  5. Copy of Incorporation Certificate of an overseas corporate body (if any);
  6. A Resolution passed by the promoter company;
  7. Declaration of unregistered companies;
  8. Residential & identity proof of subscribers & nominees.

Procedure for Section 8 Company Registration

Following is the step-by-step procedure for Section 8 Company Registration:

Step 1: Obtain DSC & DIN: First, the applicant needs to obtain a Digital Signature Certificate of the proposed Directors. Once they receive DSC, file Form DIR-3 with ROC for obtaining DIN. The identity & address proof should be attached for getting DSC. Once DIR-3 is approved, the Registrar of Companies will allot a DIN to the proposed Directors.

Step 2: Filing of INC-12 Application Form: After getting DSC and DIN, the next step is to file Form INC-12 with the Registrar of Companies to apply for a Licence under Section 8 Company along with the attachment of the required documents. Once the form is approved, a Licence under Section 8 Company will be issued in Form INC-16.

Step 3: Filing of SPICe+ Form: After getting License under Section 8, you need to file SPICe+ Form with the Registrar of Companies (ROC) for the Registration along with the vital documents.

Note: Once the Registrar of Companies is satisfied with the forms submitted, he or she issues a CoI (Certificate of Incorporation) along with a Unique CIN.

What are the Annual Compliances for Section 8 Companies in India?

Following are the annual compliances for Section 8 Company:

  1. Mandatory Audit Report;
  2. Maintenance of Books of Accounts;
  3. ITR filing;
  4. Conduct a minimum of 2 board meetings in a year;
  5. Preparation of Financial Statements;
  6. Filing of financial statements in Form AOC-4;
  7. An Annual Return is to be filed every year with other e-filing forms like MGT-7;
  8. Additional compliance to fulfil the Registration like 12AA, 80G, etc.

Penalties for Non-Compliance

As per the Companies Act, if the Company fails to comply with the legal provisions, then the Central Government will cancel the License for Section 8 Company. If the Company’s objectives are conducted fraudulently or in violation of the objectives for which it is established, the licence can be cancelled. In case a Company fails to comply with the provisions of the Companies Act, then the Company will be punishable with a fine not less than Rs. 10 lakhs & may extend to Rs. 1 crore. The Officers & Directors of the Company in default of the provisions will be punishable with a fine not less than Rs. 25,000 which may extend to Rs. 25 lakhs or both.

FAQs

  1. What is a Section 8 Company?

A Section 8 Company is a non-profit organisation established for promoting charitable or not-for-profit objectives.

  1. What are the key objectives of a Section 8 Company?

The primary objectives include promoting arts, science, commerce, education, social welfare, religion, charity, or any other useful public purpose.

  1. Can a Section 8 Company distribute its profits to members?

No, a Section 8 Company cannot distribute its profits to members. All income must be utilised for its objectives.

  1. Is it necessary to add “Limited” or “Private Limited” to the company’s name?

Yes, the company’s name must include “Limited” or “Private Limited” as per the type of Section 8 Company.

  1. How many directors are required for registration?

A minimum of two directors is required for a Section 8 Company.

  1. Is there a minimum capital requirement for Section 8 Company registration?

No, there is no minimum capital requirement.

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

Registration typically takes 20-60 days, depending on the processing time of government authorities.

  1. What documents are needed for registration?

Documents include identity proof, address proof, PAN card, and No Objection Certificate from the landlord for the registered office.

  1. Can foreign nationals be directors in a Section 8 Company?

Yes, foreign nationals can be directors, but at least one director must be an Indian resident.

  1. Is there an age limit for directors in a Section 8 Company?

There is no age limit for directors in Section 8 Companies.

  1. What are the compliance requirements after registration?

Section 8 Companies must file annual returns, financial statements, and comply with tax regulations.

  1. Can a Section 8 Company be converted into a for-profit company?

No, a Section 8 Company cannot be converted into a for-profit company.

  1. Can a Section 8 Company own property and assets?

Yes, it can own property and assets in its name.

  1. Is it mandatory to conduct an annual general meeting (AGM)?

Yes, an AGM must be held within six months from the end of the financial year.

  1. Can a Section 8 Company be dissolved voluntarily?

Yes, it can be dissolved voluntarily by following the legal procedures.

  1. What is the penalty for non-compliance with Section 8 Company regulations?

Non-compliance can lead to penalties, fines, or even cancellation of registration, so it’s crucial to adhere to the rules.

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