Introduction
Section 8 companies are a popular choice in India for individuals or groups aiming to promote charitable, educational, religious, or other social causes. These companies operate without the intent of earning profits, directing any income towards the furtherance of their objectives. Governed by the Companies Act, 2013, Section 8 companies offer various benefits, including limited liability and tax exemptions. This article provides a guide to a Section 8 company registration in India, including its benefits, eligibility criteria, required documents, and step-by-step registration process.
1.What is a Section 8 Company?
Section 8 company is a type of non-profit organization that operates with the primary goal of promoting arts, commerce, charity, education, environment protection, social welfare, sports, or similar objectives. Unlike traditional companies, Section 8 companies do not distribute dividends to their members; instead, they reinvest any profits to further their mission. This structure is ideal for those looking to establish a formal organization for social or charitable purposes while enjoying the legal and financial benefits of a corporate entity.
2.Key Benefits of Registering a Section 8 Company
-Legal Identity: Section 8 companies have a separate legal identity, allowing them to own property, enter contracts, and sue or be sued in their own name.
-Limited Liability: Members of a Section 8 company enjoy limited liability, protecting their personal assets from the company’s liabilities.
-Tax Benefits: These companies are eligible for various tax exemptions under the Income Tax Act, provided they comply with the relevant provisions and obtain the necessary registrations.
-Credibility: Section 8 companies are recognized by the government and are subject to regulatory oversight, enhancing their credibility among donors, stakeholders, and the public.
-No Minimum Capital Requirement: Unlike other companies, there is no minimum capital requirement for starting a Section 8 company, making it accessible for various social initiatives.
3.Eligibility Criteria for Section 8 Company Registration
To register a Section 8 company in India, certain criteria must be met:
-Objective: The company must have a clear objective that aligns with promoting charitable, social, or similar purposes.
-Profit Motive: The company should not have a profit motive; all income must be utilized to support the company’s objectives.
-Number of Members: At least two directors are required for a Section 8 company, and there is no cap on the maximum number of members.
-Resident Directors: At least one director must be a resident of India.
4.Required Documents for Registration
Before starting the registration process, ensure you have the following documents ready:
-Director Identification Number (DIN) and Digital Signature Certificate (DSC): For all directors of the company.
-Identity Proof: PAN card, Aadhar card, or passport of all directors and shareholders.
-Address Proof: Recent utility bills or bank statements of all directors and shareholders.
-Registered Office Proof: Proof of the company registration office, such as an electricity bill or rental agreement, along with a No Objection Certificate (NOC) from the property owner.
-Memorandum of Association (MOA) and Articles of Association (AOA): Drafted documents outlining the company’s objectives and operational framework.
-Declaration: A declaration by the directors and promoters regarding compliance with the Companies Act, 2013.
5.Step-by-Step Registration Process
Step 1: Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)
The first step in registering a Section 8 company is obtaining a DSC for all proposed directors, which will be used to sign electronic documents during the registration process. Alongside this, apply for a DIN for each director through the Ministry of Corporate Affairs (MCA) portal.
Step 2: Name Reservation
Submit a name reservation application through the ‘RUN’ (Reserve Unique Name) facility on the MCA portal. The name should reflect the company’s objectives and must not be like any existing registered company.
Step 3: Apply for Incorporation
File Form INC-12 along with the required documents, including the MOA, AOA, and declarations, with the Registrar of Companies (ROC). The ROC will review the application and, upon satisfaction, issue a license under Section 8.
Step 4: License Issuance
Once the application is approved, the ROC issues a license under Section 8 of the Companies Act, 2013, allowing the company to operate as a non-profit entity. This license is an essential part of the incorporation process.
Step 5: Certificate of Incorporation
After obtaining the license, the final step is filing the incorporation forms (INC-32) along with the necessary attachments. Upon successful verification, the ROC issues the Certificate of Incorporation, officially recognizing the entity as a Section 8 company.
6.Compliance and Ongoing Requirements
Section 8 companies must adhere to certain ongoing compliance requirements:
-Annual Filings: Submit annual financial statements, reports, and income tax returns to the ROC.
-Meetings: Conduct regular board and general meetings as per the regulations.
-Maintaining Records: Keep accurate and up-to-date records of all financial transactions, minutes of meetings, and other statutory registers.
Conclusion
Section 8 companies provide a robust framework for individuals and groups dedicated to social and charitable causes. By registering as a Section 8 company, you can benefit from limited liability, enhanced credibility, and various tax exemptions while contributing to society. The registration process, though structured, is straightforward if approached methodically with all necessary documentation. As India continues to encourage social entrepreneurship, the future for Section 8 companies looks promising, offering a valuable path for those committed to making a difference.