Section 8 companies are Not-for-Profit organisations incorporated under the Companies Act, 2013. These companies do not operate with a prime business motive, and hence are different from the other class of companies.
The Companies Act, of 2013, had made provisions for a good variety of companies such as the public limited company, private limited companies, foreign companies, etc. However, the Section 8 companies stand quite distinguished from the others. Therefore, skimming through most faqs on section 8 companies can give a fair idea about them.
Who is eligible to apply for the registration of a Section 8 company?
An application for a section 8 company registration can be made by any person or an association of persons, provided:
- The object of the company is to further the ideals of arts, science, research, culture, education, and social welfare in general
- After the incorporation, the company uses its profits in promoting its objectives
- The company refrains from paying dividends or shares to its members.
Who comes under the definition or persons or association of persons mentioned in Section 8?
The Companies Act, 2013 does not define the term ‘persons’. Hence the definition can be inferred from Section 2 (41) of the General Clauses Act, 1897 which mentions that the term ‘persons’ may include individuals or associations of individuals and Companies.
What is the procedure to register a Section 8 company?
An application has to be made using Form INC-12 to the Registrar of Companies (RoC). The following documents are to be attached alongside the application:
- The Memorandum of Association (MoA) and Articles of Association (AoA) filed through Form INC-13 and Form INC-31 respectively with the Form SPICe-32
- A declaration duly notarised by an appropriate authority through Form INC-14
- The sources of income and the possible expenditure of the company
- A declaration through Form INC-15 duly notarised by the person making the application
- Form INC-9 to be furnished by the directors, on appropriate stamp paper and having it duly notarised
- A copy of the resolution of the board/members.
Who authorizes the license of a Section 8 company?
The Central government authorizes the Registrars of Companies of the respective jurisdictions to issue the license for a Section 8 company.
Does Section 8 allow a company with unlimited liabilities to be registered?
As per the Companies (Incorporation) Rules, 2014, only a company with limited liabilities can be registered under the Act.
Is it mandatory that only a company limited by shares can be incorporated under Section 8?
No. Section 8 accommodates both companies limited by shares or by guarantee, i.e with or without share capital.
Is it possible to register a Person Company (OPC) or convert one to a Section 8 Company?
No. The Companies Incorporation (Rules), 2014 forbids OPC to be incorporated or converted to a Section 8 company.
Is it possible to register a foreign company as a Section 8 company in India?
As per the Companies Act, 2013, a foreign company is a body corporate that is established outside India and operates its business in India, either directly or through an agent, physically or via electronic mode, and conducts its course of business in India.
On the other hand, a corporate company incorporated outside India to carry not-for-profit activities, cannot fall under the ambit of a foreign company, as there is no business activity that is being carried out. Therefore, the respective company cannot be termed as a foreign company.
However, within the norms of FEMA (Foreign Exchange Management Act, 1999) regulations, the company can institute branch offices.
Whether Trusts or Co-operative Societies can become a member or subscriber of a Section 8 company?
Yes. The Companies Act, 2013 does not prohibit a Trust or Co-operative Society from becoming a member of a Section 8 company.
Can contributions or financial aid be extended from overseas or non-residents to Section 8 companies?
The contributions made to Section 8 companies from overseas or non-resident Indians must bear compliance with the norms laid out under the Foreign Contribution and Regulation Act, 2010.
The contributions can therefore be received in accordance with the Companies Act, 2013 in addition to the Foreign Contribution and Regulation Act, 2010.
Hope these faqs on section 8 companies, gave you an idea.
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