SECTION 8 COMPANY REGISTRATION

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.

WHAT IS SECTION 8 COMPANY ?

Section 8 company is a non profitable organisation that aims to support charitable activities, art, science, education, and sports. The profits of such companies are utilised for the pomoting the certain main purposes and those profits were not distributed among the members of the company. The main purpose of the section 8 company is to promote the non profit objectives.

A Section 8 Company is governed by the Indian Companies Act, 2013 and is administered by the Ministry of Corporate Affairs (MCA) through the Registrar of Companies (ROC).

DEFINITION OF SECTION 8 COMPANY UNDER COMPANIES ACT, 2013 :

According to Companies Act of 2013, Section 8 companies are defined as the organisations whose objectives promote the achievement of the arts, commerce, science, social welfare, religion, research, education, sports, charity, environmental protection and other similar goals. The profits earned by the company should be spent for the common goals and not shared by the company members themself.

ADVANTAGES OF THE SECTION 8 COMPANY :

There are various advantages for the section 8 company. Those are,

No stamp Duty : The section 8 company is not required to pay the stamp duty for the MOA and AOA for the non profitable organisation. No stamp duty imposed for Section 8 of the company incorporation in India.
Tax Benefits : Section 8 companies are involved in various common goals and maintaining charitable trust and institutions. Which have the access to the multiple tax benefits and tax exemptions. The tax exemption is granted to the donations of the funds which were received by the section 8 of the company under Section 12A and 80G of Income Tax Act, 1961.
Exempted from names : Section 8 companies are not required to have a suffix to the names like abc Private limited or AABB public limited company. It is not mandatory to have those suffix names in the Section 8 company.
No minimum capital : The section 8 company does not require any specified minimum capitals for the startup of the company. The funds and donations for the companies are donated by their members and the general public. The section 8 company should alter its structure of fund at any time.
Separate legal entity : Section 8 companies have a separate legal identity from their contributing members. This also has the perpetual existence and the entry and exit of the members will not affect the operations of the company.
Credibility : The framework of the section 8 companies is flexible and transparent in nature. This allows the company to get better credibility than others such as NGO, Trust and society.
Foreign Contributions : The section 8 companies are entitled to be registered under Foreign Contribution Regulation Act 2010, which helps to receive the donations and funds from the foreign contributors.

2010, which helps to receive the donations and funds from the foreign contributors.

DISADVANTAGES OF SECTION 8 COMPANY :

There are certain disadvantages of the section 8 company. Those are,

No profit distribution : The section 8 company does not like private or public companies, it does not involve any profit distributions among their shareholders. The profits should be allocated only for the public usages and charitable purposes.
Non Remunerated officers : The section 8 company does not allow to appoint any remunerated officers as their members. And this acts as a non profitable organisation. Profit is not a primary goal for the company objective.
Stringent compliances : The section 8 companies are bounded by various compliances and the various legal norms remain with the companies MOU and AOA.

ELIGIBILITY FOR THE REGISTRATION OF THE SECTION 8 COMPANY :

An individual person or HUF can start the section 8 company.
Even if the partnership can be the member of the company, at least one director should be the resident of india.
Already existing companies can be also eligible for the section 8 company registration. But it should act only for the public goals and charitable activities. Company does not involve any intention to make profit.
Founders, members, and directors of the company cannot draw any remunerations and no profits distributions.
The business plan should have a detailed three year project plan or any visions.

FORMS REQUIRED FOR SECTION 8 COMPANY REGISTRATION

NAME OF THE FORMS	PURPOSES
SPICE+	Application for the incorporation of the company
INC 12	Application for the licence of the company
INC 13	MOA (Memorandum of Association)
INC 14	Declaration from CA (Chartered Accountant
INC 15	Declaration from all the members
INC 16	Licence to incorporate
INC 22	Situations of Registered Office
DIR 2	Consents from the directors
DIR 3	Applications for ROC to DIN
DIR 12	Directors appointment of the company

PURPOSES OF THE SECTION 8 COMPANIES FORMS :

The Form INC 12 is filed for the granting of the licence to operate the section 8 company. Along with the form we need to attach the draft copy of the MOA and AOA of the company.

The formats for the MOA and AOA are detailly prescribed in the form INC 13. It includes all the members, descriptions and all the details should be involved.

ATTACHMENTS TO SUBMITTED WITH INC 12 FORM :

INC 13 MOA.
AOA copy.
INC 15 declaration with all the members of the section 8 company.
Next three year base plan of the company.
List of directors and promoters
Estimated income statements.

These are the required forms attached with the INC 12 form for the granting of the licence to the company.

SPICe+ form is used for the application for the incorporation of the company. In this form only the names should be declared for the approval. It recommends the applicant should choose the free names in the MCA portal for the section 8 company. In This portal it shows the list of names which helps to avoid the similar existing names to the company. Along with the form it contains all the necessary information about the company.

ATTACHMENTS TO SUBMITTED WITH SPICe+ FORM FOR INCORPORATION OF THE SECTION 8 COMPANY :

For the company incorporation the required documents are,

MOA which was signed by all the members.

Declarations from the members.
Form INC 14 and INC 15 from chartered accountant and each person of the company.
Address of the company.
Identity of proof like PAN card or passport of the directors

of the company.

Photocopies of all the members, directors and promoters.
Copy of the rental agreement or the lease agreement if the company id resigned in the rental property.
Digital Signature Certificate (DSC)
Director Identification Number (DIN)

These are the essential documents that should be attached with the SPICe+ form.

Form INC 22 is filed to issue the notice of the address of the company or the situation of the document in the registered office. If any correction is identified. It should be rectified and filed within 30 days for the incorporation of the company.

Form DIR 12 is filed for the application of the company. It should be filed within the 30 days from the date of the appointment of the directors of the company.

Every indemnity agreement should contain how the indemnitee should give the notice and claim, when any dispute arises between them. It should also give a brief detailed steps for the indemnitor to defend from the claims.

PROCEDURES FOR THE REGISTRATION OF SECTION 8 COMPANY :

Step 1 : Apply for a Digital Signature Certificate (DSC) :

For the registration of the company it is a completely online process which requires the digital signatures for further authentication of the process.

First we need to apply for the Digital Signature Certificate (DSC) of all the directors in the company. A Digital Signature Certificate is the electronic signature of the directors, which helps to easily authenticate the online process of registration and other signatures. The DSC is mandatory for all the directors and members of the company. It should be obtained from the official governmental certifying authorities such as the Ministry Of Corporate Affairs (MCA). Once we applied the digital signature within two days we can obtain the digital signatures for all the directors and members in the MCA after approval.

Step 2 : Get Directors Identification Number (DIN)

After obtaining DSC, We need to apply for the Directors Identification Number (DIN). It is a unique identification number which is issued by the ministry of corporate affairs. The form DIR 3 is used for obtaining the DIN and this form should be filed along with the DSC of the directors of the company. It helps to maintain the record of the directors.

Step 3 : Reserve company name

In this step we need to reserve the selected name for the company in the MCA portal. Which helps to avoid the rejection of names which are already existing or similar.The company should apply for reserving the names by submitting two proposed names in the Part A of SPICe+ form. If the names are not approved from the authoritative body, they shall reject the form. And the applicant must refile the new name for approval. Once the name gets approved within 20 days the company should file the Part B of SPICe+ form which contains the details of the company and directors with attached Digital signature. For the reservation of the selected name, we should file the form INC 12 to the Registrar of Companies (ROC), Along with the attachment of the required documents.

Once the form is approved by the authoritative body the licence is issued to the company in Form INC 16.

Step 4 : Draft MOA and AOA :

In this step we need to draft the Memorandum of association and Articles of Association for the section 8 company. Both MOA and AOA play an important role in defining the structure, internal regulation and objective of the company. Memorandum of Association deals terms and conditions of the company and the AOA contains information about the internal administration of the company. Form INC 13 is used to file for the approval of the MOA.

Step 5 : Verification and certification :

After getting the licence, approval from the MOA and AOA. We can file the SPICe+ form for the incorporation of the company along with the required documents to the ROC. The registrar of companies (ROC) in the Ministry Of Corporate Affairs, should examine the given document. Form INC 22 is used for knowing the situation of the document in the registrar of the company.

Once all the verification is done by the ROC. The certificate of Incorporation should be issued with the unique Company Identification Number (CIN) for the company by the ROC.

Apply for PAN and TAN :

Once the company gets incorporated, the directors must apply for a separate PAN for the company and TAN (Tax Deduction Account Number) for the company. The other specific licences and the company master data certificates should be collected from each authority by the director should open a separate bank account for the company’s transactions and accounting.

These are the process of registration of the section 8 companies.

PENALTY FOR NON COMPLIANCES :

There are certain penalties mentioned for the non compliances under the companies act. Those are,

The central government will cancel the section 8 company licence, when the company fails to comply with the legal provisions of the act or the objectives of the companies are not properly maintained and it involves any fraudulent activity.
If the company involves any profitable benefits to their members or the shareholders. Which is beyond by the nature of the act. The company will be punished with the fine amount which is not less than Rs. 10 lakhs and is extended to Rs.1 crore.
The directors and the members of the company who defaults the provisions of the act shall be punished with the fine amount which is not less than Rs 25,000 and is extended to Rs 25 lakhs or both.

ANNUAL COMPLIANCES OF SECTION 8 COMPANY :

The annual compliances of the section 8 companies are similar to other companies.

The annual returns of the company should be filed for every year with the Ministry of the corporate affairs (MCA).
The section 8 company should file the income tax return filings.
The company should maintain the book of accounts and auditing for every annual filings.
The company requires to conduct a minimum two board meetings in a year.
Financial statements should be filed under AOC 4 forms.
Additionally the company is required to fulfil the criterias in the Section 12AA, 80G of the income tax act inorder to be exempt from the tax.

FAQ

FAQ ON SECTION 8 COMPANY :

1. WHAT IS SECTION 8 COMPANY ?

2. WHY SECTION 8 COMPANY ?

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.

3. WHAT ARE THE PROCEDURES FOR THE REGISTRATION OF SECTION 8 COMPANY ?

Step 1 : Apply for a Digital Signature Certificate (DSC)

Step 2 : Get Directors Identification Number (DIN)

Step 3 : Reserve company name

Step 4 : Draft MOA and AOA

Step 5 : Verification and certification

4. WHICH FORM IS USED FOR GRANTING LICENCE ?

The Form INC 12 is filed for the granting of the licence to operate the section 8 company. Along with the form we need to attach the draft copy of the MOA and AOA of the company.

5. WHAT IS FORM INC 22 ?

Form INC 22 is used for knowing the situation of the document in the registrar of the company.

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SECTION 8 COMPANY REGISTRATION