Section 8 Company

Who can Apply for Section 8 Company?

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 a 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.

Who is Eligible for Applying for a Section 8 Company

  • 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.

Essential Facts About Incorporating a Section 8 Company

Companies Act, 2013 is the essential act that declares the incorporation procedure of a Section 8 Company. The section mentions that the organization or a person has to apply Form No. INC.12 in case they want to get  Section 8 company incorporation. Several other documents are also necessary to be submitted along with it.

  • Form no. INC – 13: The company’s draft for the Memorandum of Association (MOA) and Articles of association (AOA) in Form No. INC – 13 as per the act, along with photographs of the applicant.
  • Form no. INC-14: The applicant has to attach a declaration form along with Form no. INC-14. It is to ensure the compliance of MOA & AOA with the provisions and norms of section 8. The applicant has to maintain the requirements as per the act on a stamp paper notarized by an Advocate, a Chartered Accountant, a Company Secretary, or a Cost Accountant.
  • Form no. INC-15: The Form needs a declaration from the applicant on a stamp paper and notarized by all the company members who are applying.
  • Form no. INC-9: Form no. INC-9 Form should be applied by the directors as well as each subscriber. It also needs State’s stamp paper and notarized. The applicant must declare the company’s approximate expenditure and annual income for the next three years. They also have to mention the sources of their income and the purpose of their expenditure.

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 Application

  • 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.

Conclusion 

At last, we can say that the stamp duty for a section 8 company is neutral Notarization of Memorandum and Articles of Association, not compulsory. Thus, applying for a section 8 company is comparatively easier than setting up a private or public company. However, you have to follow the guidelines to get approval for your section 8 company. Finally, for any help related to this, you can get in touch with the experts of Vakilsearch. We will help make the whole process of applying for Section 8 company easy and hassle-free.

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