SECTION 8 COMPANY REGISTRATION
SECTION 8 COMPANY REGISTRATION
What is a Section 8 Company (formerly Section 25 Company?
Section 8 Companies are governed by the Indian Companies Act, 2013, and administered by the Ministry of Corporate Affairs (MCA) through the Registrar of Companies (ROC). Whereas Companies Registered under section 8 are restricted to using the term “Limited” is “Private Limited”.the companies registered under section 8 cannot be treated as a small companies.
A Section 8 Company is also referred to as a non-profit company authorized under Section 8 of the Companies Act for the promotion of research, social welfare, religion, charity, trade, arts, science, sports, education and environmental protection or any other purpose, provided that any profits or other income shall be applied exclusively for the promotion of the objects of the company and no dividend shall be distributed to the members.
What are the 5 benefits of a Section 8 company? :
1.Tax exemption: The main benefit of Section 8 Company is tax exemption whereas The donor can enjoy tax exemption on their donation to the Section 8 Company. This Kind of benefits like exemptions are granted to the section 8 company because they were established for the purpose of charitable objectives so they enjoy the benefit of tax exemption under income tax act.
These kinds of benefits attract more donors or individuals to support the social and charitable companies registered under Section 8 of Companies Act 2013.
2. Separate legal entity: Like the Private Limited and the Public Limited company, the Section 8 Company is a separate legal entity. As a separate legal entity this kind of companies like non profit organization can enjoy the benefit of limited liability and perpetual succession whereas due this advantage the directors and members of section 8 company can shield themselve and protect their personal assets for company debt and obligation .
Section 8 companies with the major power of separate legal entities can hold the properties and handle the contracts in his own name.. This made an individual to act without fear and free from other personal Risk.
3. No minimum capital: Unlike a Private Limited Company which requires a minimum paid up capital of Rs.1,00,000/-, but there is no such minimum capital requirement for registering a section 8 company under the Companies Act 2013; because the section 8 company mainly focus on the charitable goals and can raise the funds when they needed this kind of flexibility in financial requirement attracts more donors and diverse range of individual to fund for betterment of society without constrained paid up capital.
4. No stamp duty: Unlike other companies (Private Limited or Public Limited) where stamp duty is a mandatory cost associated with the incorporation of companies, whereas there is no such stamp duty required for the incorporation of a Section 8 Non-Profit Company. This reduces the financial burden, time and process of registration. This encourages the non profit organization to involve themselves more in the charitable initiatives than focusing on the financial burden
5. No suffix is required on the title: Normally the Private Limited and Public Limited companies have to add a suffix to the status, e.g. XYZ Travels Private Limited or ABC Technologies Public Limited, but in Section 8 companies it is not mandatory. This advantage simplifies the time consumed in the naming process and allows him to focus more on the charitable initiatives.
Overall these five benefits provided the non profit organization registered under section 8 of companies act granted with both legal and financial advantages.
Profit making of Section 8 company :
Companies Registered under Section 8 of companies act,2013 can make profit but where the real question arises that section 8 companies are non profit organization but they made profit out of the sources then that profit can be only used for company development and charitable purposes but the profit cannot shared as a dividend among the members of the company.
There are certain ways that section 8 companies raise funds and make profit:
By way of donation from individuals and organizations section 8 companies make the profit and use for their charitable and development purposes.
- The section 8 company involve themselves in the trading activities by transportation and sale of goods and profit arises out these activity will be used for the same purpose as mentioned above
- By providing services to the public and clients by conducting educational workshops and seminars by charging a fee and the funds developed from these services can be useful for companies to reach their motive.
- By investing in the stocks, shares and bonds in the name of the company and income arising from those investments can be treated as a profit.
Documents required for Section 8 Company Registration
- Identity proof like PAN card or passport of the directors
- Address proof such as Aadhar card, driving license, passport or voter ID of the directors
- Passport Size Photographs
- Proof of office premises such as utility bills, property tax receipts or lease agreement
- NOC from the landlord
- Memorandum of Association (MOA) and Articles of Association (AOA)
- Declaration letter and consent letter
- Digital Signature Certificate (DSC) and
- Director Identification Number (DIN)
Advantages of an indemnity agreement :
There are certain advantages of the indemnity agreement are,
- Protection from loss : It safeguards the person from the loss or the damages and it helps to recover the business by getting the compensation from the buyer or the beneficiary.
- Coherence to the party : The indemnity agreement which provides the clear overview about the business, responsibility, obligations, terms and conditions, durations which act as security for the parties.
- Legal compliance: The indemnity agreement which is legally binded by the provisions of the contract law, which helps the person or the business as a protection.
- Act as evidence : This agreement which acts as evidence to the court which helps to prove the claims and recover the damages for the breach which were caused by the other party legally. This agreement helps to sue in the court for the legal claims.
Section 8 Company Registration Procedure :
Step 1: Apply for a Digital Signature Certificate (DSC):
Unlike trusts and societies, a digital signature of the directors is required to register a Section 8 company. A Digital Signature Certificate is nothing more than the electronic signature of the directors, which helps to prevent fraudulent activity through the signature. The DSC is granted from authorities who are certified by the Ministry of Corporate Affairs
For DSC application the directors need to submit the address proof details with signed application to the authorized authority.once DSC is obtained the directors the direction the directors can sign using the digital signature like for incorporation application and other forms.
Step 2: Apply for a Director Identification Number (DIN):
The directors of the company must apply for a Director Identification Number by submitting Form DIR – 3 is mandatory to ensure that the directors are not insolvent or involved in fraudulent activities. It also helps to keep a record of the directors’ details. A person can only obtain one DIN and thus be a director of twenty companies.
Step 3: Obtain name approval from the ROC:
Choosing a unique and perfect name for the company is crucial step in section 8 Company Registration Process and the chosen should not be similar and identical name to the existing company and the approval form for the name must be submitted to the registrar of companies after that name approval application can be made through MCA portal after submitting the document to authority and ROC will review and approves name if ithe name satisfy the guidelines provide by the authority after approval. It is necessary for the section 8 company to proceed for incorporation after name approval.
Step 4: Drafting MOA & AOA:
The drafting of Memorandum of Association (MOA) and Article of Association (AOA) by a solicitor is the most important part of registering a Section 8 company because it defines structure and internal regulation and objective of the company.
- Memorandum of Association:The MOA contains basic information about the company, such as the company’s name, registered office address, objects, terms and conditions, etc.
- Article of Association: The AOA contains information about the internal administration of the company, such as the appointment and removal of directors, holding of meetings, retirement of directors, transfer of shares, etc.
These documents drafted by the solicitors are important to mention basic and internal details of the company with legal requirements once all done these documents need to be submitted along with incorporation to the Registrar of Companies(ROC).
Step 5: Certificate of Incorporation:
After getting approval for all the relevant forms like MOA and AOA from the Registrar of Companies the directors need to file incorporation documents to the ROC. Once verification is done, the certificate of incorporation will be issued. Thereafter, the directors must apply for PAN and TAN, other licenses and open a separate bank account for the company’s transactions.
Conclusion:
Finally if you are interested in social welfare and help to develop the nation with charitable acts you can establish a non profit Organization and register that company under Section 8 of Companies Act 2013. Where you can get the access of fundings and enjoy the benefits of tax exemption and other advantages by building the name and reputation of your organization. Therefore the organization runs with the non profit motive even though the profit that arises can be used for companies development and charitable purposes but not shared as a dividend among shareholders.
FAQ
FAQ SECTION 8 COMPANY REGISTRATION:
1. Whether Section 8 Company can be Holding company of other Companies.
Yes The Companies Registered under Section 8 company be a holding company of other companies, and the companies that are eligible to convert themselves into Section company are.
- Any companies that are registered under companies act 2013, 1956
- Partnership firm
- Limited liability partnership
- Co-operative society
- Trust registered under Trust Act
But the sole proprietorship company cannot register as a section 8 company because section 8 companies cannot be treated as small companies.
2. Can a section 8 company can alter the MOA or AOA ?
- Name and the parties involved
- Obligations of each party
- Nature of the damages or the loss
- Extent of coverages
- Limitation and exception
- Termination
3. What is the main motive of starting a Non profit organization under section 8 of Companies Act, 2013?
The main motive of starting a Non profit organization under section 8 of Companies Act, 2013 for Giving back: Many aspiring and successful entrepreneurs are interested in 'giving back' to society. This is something for people who enjoy working for charity with their own businesses. It is about promoting commerce, the arts, science, sport, education, research, social welfare, religion, charity and environmental protection.
4.Can A foreign Nationals or NRIs be appointed as Directors to Section 8 companies in India?
The indemnity agreement which helps him from the losses or the damages. It is necessary used for the following business those are,
- Business contracts.
- Real estate transactions.
- Construction contracts.
- Rentals and lease.
- Event works and other activities.
- High risk services.
For the following businesses the indemnity agreement is necessary.
Yes the foreign nationals and NRIs can appointed as directors to the section 8 company in India but need to full the requirements prescribed by the authorities and it is necessary to obtain the director identification Number (DIN) and Digital Signature Certificate(DSC) with these necessary documents the NRIs and Foreign National can be a director of the companies which are registered under Section 8 of Companies Act.
An indemnity agreement is a contract that protects the party or the company from the specific loss or risks from the damages of the other party in the particular transactions which they involved. This agreement which gave the guarantee the compensation availability in case of the damage occurred to the party. It helps to recover from the loss of the business. It is also called the no fault agreement or hold harmless agreement.
SECTION 8 COMPANY REGISTRATION
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