It is crucial to register a section 8 company. This will help to provide tax exemptions. Forming a section 8 company is a complex process. Learn who can form a section 8 company and how to register a section 8 company directly from the experts.
An individual or an organization can make a petition to the Registrar of Companies (ROC) using requisite aspects to form a firm under Section 8 of the Companies Act. Now, let’s see who can form a Section 8 company.
What Is a Section 8 Company?
The Companies Act distinguishes a Sec 8 company as one whose motive is to improve fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment safety, or other similar purposes. These corporations also use their revenues for achieving their goal and do not pay any income to their partners.
These corporations were recently defined under Section 25 of the Companies Act, 1956 with more or less the same requirements. The new Act has, however, specified more purposes that Section 8 companies can have. The representations of Section 8 companies include the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII). The goal of these firms is to enable the development of exchange and commerce.
Steps to Register Section 8 Company in India
Registering the Section 8 company can provide major tax benefits under Sections 12A and 80G of the Income Tax Act. The basic criteria of form a Section 8 company are that it is established for the non-profit intention and it prohibits the expenditure of separation. The revenue, if any, of Section 8 Company must be utilised for the objective for which Section 8 Company is established. Steps to register a section 8 company in India are discussed below:
- A petition for name availability has to be filed in the Reserve Unique Name (RUN) application for altering its existing name.
- The name of Section 8 Company shall comprise the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, and the like, etc.
- One can recommend a maximum of 2 names at a time and 1 resubmission is enabled in the RUN facility.
- Payments for RUN are ₹1000. It is advisable to connect the object section of the proposed corporation.
- Once the name is authorized it is useful for 20 days.
- Within this given time the RD 1 license has to be applied. The RD won license is valid for 30 days.
- Getting the digital signatures of the first company directors is the second step. A class 3 digital signature of initial subscribers and managers which are expected for documenting company incorporation aspects with the ROC.
- Documents like memorandum of association (MOA), and articles of association(AOA) should be drafted for the firm. MOA of Section 8 Company must be in form INC-13 while there is no configuration prescribed for AOA for Section 8 Company. MOA & AOA of the company shall be approved by each of the directors who shall refer to his name, address, definition, and employment in the existence of at least one bystander who shall witness the signature and shall also sign and add his name, address, description, and occupation.
- After receiving the permission, one may go along with the filing of the application SPICE. This should be filed within the validity period of both the name and RD 1 license. This is the final stage of incorporating the Section 8 company.
Eligibility Criteria for Section 8 Company
Minimum 2 People: 2 people are compulsory to hold the post of a shareholder/ director of the company. However, the number of shareholders may not go beyond 200
No Minimum Capital: There is no minimum capital requirement set, it is founded on business regulations. The registration payment is based on the percentage of capital.
One Resident Director: At least one of the directors must be a citizen of India and should reside in India.
Unique Name: Section 8 company name must be different and not similar to any other company or trademark.
Social or Welfare Object: Section 8 company firm should focus on the betterment of the following fields
- Marketing
- Science
- Art
- Research
- Education
- Social Welfare
- Religion
- Charity
- Protection of Environment
No Profit Distribution: Section 8 companies’ revenues should be used only for the objective on which it is formed. Other members of the company should not use the money for personal purposes.
Documents Required for Section 8 Company Registration
- Passport-size photos of the company members
- ID proof of all partners of the company
- List of directors and supporters
- Address proof of all managers and supporters
- Rent agreement (If rented premises)
- No objection certificate (NOC) from the landlord.
- Electricity bill or water bill with residence articles (if self-owned property).
Cancellation of License
Section 8 companies expect a commission of a license by the central government. All such licenses are revocable based on the following grounds
- The company’s contrived requirements of Section 8 terms of the license are disobeyed
- When its conduct is dishonest, or it fails to meet its own goals and public policy.
The government can just order the firm to be wound up or amalgamated with another related corporation under certain situations. The Government has to cross-verify with the corporation before passing the order.
Key Points about Section 8 Company
- Registration Options: Non-Governmental Organizations (NGOs) in India can be registered under the Registrar of Societies or as a non-profit entity under Section 8 Company of the Companies Act, 2013.
- Charitable Objective: Profit generated by Section 8 Companies cannot be used for anything other than charitable purposes. It cannot be divided among shareholders.
- Similar to Section 25: Section 8 Companies are the modern version of the erstwhile Section 25 Company under the Company Act 1956, now recognized as Section 8 Companies under the prevailing law.
- Legal Compliance: These companies need to follow the provisions of the Companies Act 2013. This includes maintaining accounts, filing returns with the Registrar of Companies (ROCs), and complying with GST and IT Act.
- Charter Documents Changes: Any changes to the Articles of Association (AoA) and Memorandum of Association (MoA) require government approval.
Benefits of Opening a Section 8 Company in India
The benefits of setting up a Section 8 Company extend beyond just doing good; they offer practical advantages too:
- Tax Exemption: Section 8 companies registered under section 12AA of the Income Tax Act enjoy 100% tax exemption. The profits earned from their charitable endeavours remain untaxed.
- Flexible Capital: Unlike public limited companies, Section 8 entities don’t have a minimum capital requirement. This flexibility is a boon for organizations evolving.
- No Stamp Duty: Section 8 companies are exempted from paying stamp duty for registration. This reduces the financial burden of setting up such an organization.
- Separate Legal Entity: These companies have a distinct legal identity just like any other registered company. They continue to exist even if the members change.
- Credibility Boost: The stringent legal compliances that Section 8 companies adhere to enhance their credibility. This distinguishes them from NGOs and trusts.
- Name Freedom: Unlike other structures, Section 8 companies are free to choose a name without the mandatory “Section 8” tag. Instead, the name should end with terms prescribed for this purpose, such as foundation, forum, association, federation, chambers, confederation, council, electoral trust, etc.
Section 8 Company Incorporation Process
The process of setting up a Section 8 Company involves several steps:
- Obtain Digital Signature Certificate (DSC): This is needed for online filing of documents. Form DIR-3 is used for obtaining the Director Identification Number (DIN).
- Obtain Director Identification Number (DIN): A unique identification number is required for individuals wanting to be directors.
- Reserve the Company Name: Choose a unique name for your company using Form INC-1.
- File the Application for Incorporation: File Form INC-32 with the Company’s Memorandum of Association (MOA) and Articles of Association (AOA).
- Obtain a License for Section 8 Company: Form INC-12 is used for this purpose.
- Obtain a Certificate of Incorporation: Once the license is approved, Form INC-16 is issued to confirm incorporation.
Purpose of the Section 8 Company Forms
– Form INC-12: This is filed for the license to operate as a Section 8 company. It requires a draft copy of the MOA and AOA.
– Form INC-22: Filed for providing the registered office address within 30 days of incorporation.
– Form DIR-12: Filed for the appointment of directors within 30 days from their appointment.
Vakilsearch is here to guide you through the process of incorporating a Section 8 Company. We’re here to ensure that your good intentions don’t go to waste. Let us be your partner in this journey of social transformation.
How Vakilsearch Can Help in Registering Your Section 8 Company?
As you can see, the procedure of registering a form for a Section 8 company is time-bound. You have to complete the process within 20 working days. This is exactly what Vakilsearch does. Vakilsearch’s experts can help you to register section 8 companies online. This can avoid meticulous registration processes and physical presence.
Reach out to experts at Vakilsearch for registering a Section 8 company. Our experts will help you choose the right entity section and complete the online paperwork. We will help you to register the NGO and handle all the formalities easily.
Also, Read;
- What Documents Do I Need to Apply for Section 8?
- Does a Section 8 company have to register for GST?
- How to Close a Section 8 Company?
FAQs
How much does it cost to register a Section 8 company in India?
The cost of registering a Section 8 company in India varies depending on the service provider and the package chosen. The fees can range from INR 14,999 to INR 50,000.
How can I set up a Section 8 company in India?
To set up a Section 8 company in India, you need to prepare a DSC, apply for a Digital Signature Certificate, file for name approval, draft the Memorandum of Association and Articles of Association, and file for incorporation
How do I become a Section 8 company member?
To become a member of a Section 8 company, you need to apply for membership and be approved by the company's board of directors. The process may vary depending on the company's bylaws
Does Section 8 company need GST registration?
Yes, a Section 8 company is required to register for GST if its annual turnover exceeds the GST threshold limit.
Can Section 8 company show profit?
Section 8 companies cannot distribute profits among their members. Any income or profits earned by the company must be used to promote its objectives.
Can Section 8 company pay salary?
Yes, Section 8 companies can pay salaries to their employees and directors. However, the salaries must be reasonable and in line with industry standards
