The blog discusses the primary functions of a Section 8 company and the application procedure for getting approval for a Section 8 company from the government of India.
Who can form a for Section 8 Company?
According to the Companies Act 2013, A Section 8 Company must be registered as a Non-Profit Organization (NPO). A Section 8 company deals with promoting arts, commerce, education, charity, protection of the environment, sports, science, research, social welfare, and religion. The primary purpose of Formation of Section 8 Company is to use its profits or other income to promote its primary objectives.
If any person or organization wants to register itself as a Section 8 company, it must maintain some objectives or intentions per the central government’s guidelines.
Eligibility for Formation of Section 8 Company
To establish a Section 8 company in India, an individual or a Hindu Undivided Family (HUF) is eligible. However, the incorporation of the company requires at least two persons to act as directors or shareholders, who must fulfill all the compliance and regulatory requirements as prescribed under the Act.
- If a company wants to promote science, arts, commerce, sports, education, research, charity, religion, social welfare, protection of the environment, or other objectives of the same enre, it can apply for a Section 8 company.
- If the company intends to use its profits (if any) or any other income in promoting social welfare or its primary objective of promoting such objectives, they are eligible for applying for a Section 8 company.
- If the company declares not to pay any dividend to its members for any profit, it can also apply to register itself as a Section 8 company.
Key Features of Section 8 Company
- Charitable Objective: A Section 8 Company is established for the promotion of charitable activities and social welfare, without the intention of generating profits.
- Limited Liability: Members’ liability is limited to the extent of their contributions to the company’s objectives.
- Name Restrictions: The name of the Section 8 Company should reflect its purpose and must not resemble existing registered entities.
Forms Required for Section 8 Company Registration – Formation of Section 8 Company
The process of registering a Section 8 Company necessitates the submission of specific forms, including:
| Name of the form | Purpose of the Form |
| SPICE+ | Application for Incorporation of Company |
| INC 12 | Application for License |
| INC 13 | Memorandum of Association |
| INC 14 | Declaration from a practising Chartered Accountant |
| INC 15 | Declaration from each person making the application |
| INC 16 | License to incorporate as Section 8 company |
| INC 22 | Situation of Registered Office |
| DIR 2 | Consent of Directors |
| DIR 3 | Application to ROC to get DIN |
| DIR 12 | Appointment of Directors |
Latest Rules for Incorporation of the Section 8 Companies
The sixth Companies Amendment Rules, 2019, on June 07, has decreased the need for filling Form no 12. In the earlier time, the Form was mandatory to be filled by the applicants. The new amendment has simplified the incorporation process, and companies can easily apply to register themselves under section 8 companies.
The reserving names for the section 8 companies are part A of Spice+, part B of Spice+ and direct Spice+. The Central Government will provide the licenses to the companies during the incorporation period.
If the stakeholder already has a License Number, before applying for a SPICe form, they can file the Form if the authority asks for it. However, the entire process may need more than three months for the verification process.
Required Documents for Formation of Section 8 Company
- Signature Certificate in digital Form i.e DSC Signature
- Memorandum of Association
- Articles of Association
- Recent Passport Size Photographs of the applicants
- Details of Director if the members are from different companies or organization
- Valid Id Proof of the members including Aadhar Card, Passport, Voter Id
- Details of Address
- Identification Number of the director
Benefits of Incorporation for a Section 8 Company
- The Union government allows MCA section 8 company to perform any activity to promote and obtain integrity through their work process.
- The company is based on strict rules to work as a non-profit organization and has a clear image in front of its external and internal users.
- A section 8 company is more reliable in its operations for serving the communities and works like a charitable firm.
- The communities of trust are responsible for acknowledging the Grants and subsidies via the government and the other institutions.
The Exemptions and Reliefs for a Section 8 Company
- The directorship act of 165 is not applicable for section 8 companies as these companies can appoint more than three directors.
- The companies can provide a 14-day prior notice for any general meeting, unlike the other companies who have to give 21 days prior notice for any general meeting.
- The Section 8 company can conduct at least one meeting every six calendar months rather than holding four meetings yearly.
- Section 8 companies have not to provide the Recording of Minutes of General Meetings and Board Meetings. However, in some cases, the company has to provide 30 days of the outcome of the meetings.
- The company, enlisted as a section 8 company, is exempted from appointing an independent director. The audit committee and the board members are responsible for the company’s operations.
- The company secretary of a Section 8 company ma is any person as it is not mandatory to appoint a CS professional as the component secretary in such a company.
- Section 8 firms are exempt from appointing a Nomination and Remuneration Committee and Stakeholders Relationship Committee.
Appointment of Directors in a Section 8 Company
- Section 149(1) of the Companies Act 2013 declares that a public limited and private limited company can appoint 3 and 2 directors, respectively. A company can appoint a maximum number of 15 directors. However, Action 8 companies can appoint directors as per their requirements as they are exempted from this rule.
- The second proviso to section 149(1) declares that a woman director is to be preferred in any specified class of company.
- According to Section 165 of the Companies Act, 2013, There is no need to sum up the number of directorships in Section 8 Companies.
- Section 149(1) of the Companies Act, 2013 vide exemption notification on June 05, 2016, declared that Section 8 Companies don’t need to appoint an independent director for guidance.
- Under Section 149(3), one Resident Director is mandatory for a Section 8 company. The company’s resident director must have stayed in India for at least 182 days before applying for a section 8 company registration.
Annual, Quarterly, and Monthly Compliance for Section 8 Company – New & Simplified Process of Incorporation of Section 8 Companies
When the Company Already Has the License Number:
If the company has already obtained the license number, the incorporation process involves filing the SPICe + form (Simplified Proforma for Incorporating Company Electronically). To know more get in touch with our experts right away!
Annual Compliance Under Section 8 Company:
The Section 8 Company is required to file its financial statements and annual returns with the Registrar of Companies (RoC) within the prescribed time.
Monthly or Quarterly Due Date:
In addition to annual compliance, Section 8 Companies must adhere to regular GST and income tax compliance, if applicable.
Additional Compliance for Formation of Section 8 Company
Depending on the operations and activities of the company, additional compliance may be necessary.
Vakilsearch’s Expertise in Section 8 Company Formation Assistance
Navigating the intricacies of Section 8 Company Formation can be overwhelming, but with Vakilsearch’s guidance, it becomes a streamlined process.
With a profound commitment to providing client-centric solutions, Vakilsearch assists you in every step of forming a Section 8 Company.
FAQs:
1. Is It Necessary to Obtain Permission from the Central Government?
Yes, obtaining a license from the central government is mandatory for the incorporation of a Section 8 Company. This is facilitated through the INC-12 form.
2. Can NRIs/Foreign Nationals Serve as Directors of Section 8 Companies?
Yes, NRIs and foreign nationals can serve as directors of Section 8 Companies, subject to compliance with the Companies Act, 2013.
3. Is a Digital Signature Required to Complete Registration Procedures?
Yes, a digital signature is mandatory for filing the necessary forms electronically during the registration process.
Conclusion
The Section 8 Company is a distinctive vehicle that empowers individuals to contribute to society while adhering to corporate principles. As you aspire to bring positive change, consider Vakilsearch as your partner for securing smooth, compliant, and purpose-driven Section 8 registration.
Contact us today and embark on a path towards making a difference.
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