A Section 8 Company is a non-profit organization that aims to promote charitable activities, art, science, education, and sports. The profits of such companies are utilized for promoting these objectives and are not distributed among the Company’s members. It is essential to understand what is Section 8 company, document requirements, and the company incorporation process.
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According to the Companies Act 2013, a Section 8 company is defined as an organization whose objectives are to promote arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or other similar activities goals. These entities utilize their profits to achieve their mission and do not distribute dividends to their shareholders.
A Section 8 Company is a type of corporation established to promote non-profit activities, such as education, social welfare, environment preservation, arts, sports, charity, and more. This follows the provisions of the Companies Act 2013.
The essential purpose of registering a Section 8 Company is to encourage non-profitable goals, including but not limited to trade, arts, commerce, education, charity, environmental protection, sports research, and social welfare. To register a Section 8 Company, a minimum of two directors is required, and there is no requirement for a minimum paid-up capital to set up such a company.
Incorporating a Section 8 company in India offers numerous advantages, some highlighted below.
Section 8 companies registered under section 12AA of the Income Tax Act are eligible for a 100% tax exemption, as they utilize their profits for charitable purposes. This is a significant benefit as the profits generated by such entities are non-taxable.
Unlike public limited companies, Section 8 entities do not have a minimum capital requirement. They can adjust their capital structure according to their growth, giving them more flexibility.
Section 8 companies have a separate legal identity and perpetual existence, just like other registered companies. This increases their credibility and provides them with more autonomy and legal standing.
Section 8 companies are subject to strict legal compliance frameworks, enhancing their credibility regarding legal standing. Unlike NGOs and trusts, Section 8 entities follow stringent compliances post-registration, making them more trustworthy.
Section 8 companies are free to choose a name that suits their liking during the registration process. Unlike other registered structures, they are not required to affix the term “Section 8” after their name.
A Section 8 company in India offers numerous benefits, including tax exemption, no minimum capital requirement, no need to pay stamp duty, separate legal identity, increased credibility, and no title required. These advantages make Section 8 companies attractive for entrepreneurs looking to start a business with a charitable or social cause.
Specific eligibility criteria must be met to establish a Section 8 company in India.
These eligibility criteria ensure that the Section 8 Company operates to promote social welfare and contribute to the greater good of society.
Before applying for the incorporation process of a Section 8 company in India, specific legal requisites must be fulfilled. These requirements are as follows:
A minimum of two directors is required if the Section 8 entity intends to operate as a private limited company. However, a minimum of three directors is required if the entity aims to operate as a public limited company.
If the Section 8 Company Act aims to function as a private limited company, the number of members is capped at 200 by the Ministry of Corporate Affairs (MCA). However, there is no such limit for Section 8 entities with a business structure like a public limited company.
According to the Companies Act 2013, Section 8 entities are not required to maintain a minimum paid-up capital. Moreover, NGOs operating as Section 8 entities are not obligated to affix terms like private limited or limited in their name.
Only entities with non-profit objectives are eligible for Section 8 registration. The Memorandum of Association and Articles of Association must clearly state such goals for which the Company is established. Any profits the Section 8 entity generates must be utilized for charitable purposes or reinvested in the entity. The profit of Section 8 entities is not available to its members in any form. These legal requisites ensure that Section 8 companies operate with transparency and the intended purpose of promoting social welfare.
The following documents are required to complete the incorporation process for a Section 8 company in India:
By providing these documents, you can ensure smooth and efficient Section 8 company incorporation processes.
The process of incorporating Section 8 companies in India involves the following steps:
The first step is to obtain a Digital Signature Certificate (DSC) for the proposed directors of the Section 8 Company. This certificate is required for the online filing of documents with the Ministry of Corporate Affairs (MCA). Form DIR-3 is used for obtaining the DIN and should be filed along with the DSC of the proposed directors.
Forms to be used: DIR-3, DSC
After obtaining the DSC, the next step is to apply for a Director Identification Number (DIN) for the proposed directors. The DIN number is a unique identification number issued by the MCA to individuals who wish to be directors of a company in India.
Forms to be used: DIR-3
The next step is to reserve the name of the proposed Company with the MCA. The Section 8 company name should be unique and not be similar to any existing company name. Form INC-1 is used for reserving the company name.
Forms to be used: INC-1
After the company name is approved, the next step is to apply for Section 8 Company incorporation. The application for incorporation is filed in Form INC-32 along with the Company’s Memorandum of Association (MOA) and Articles of Association (AOA).
Forms to be used: INC-32, MOA, and AOA
Once the application for incorporation is approved, the next step is to obtain a license for the Section 8 Company. Form INC-12 is used for obtaining the license. It should be filed along with the necessary documents.
Forms to be used: INC-12
After obtaining the license, the MCA issues a Certificate of Incorporation in Form INC-16. This certificate confirms the incorporation of the Section 8 Company.
Forms to be used: INC-16
In summary, the forms used for Section 8 Company registration are DIR-3, DSC, INC-1, INC-32, MOA, AOA, INC-12, and INC-16.
A Section 8 Company cannot collect capital through deposits but can accept donations from the public. Several methods are available to raise funds, such as foreign donations, equity funding, and domestic donations.
SRN Filings is a trusted partner for entrepreneurs and organizations looking to obtain Section 8 company registration in India. With our expertise and seamless online platform, SRN Filings simplifies the complex process of registering a Section 8 company, ensuring that all legal formalities are met. Our dedicated team of professionals guides clients through the entire registration procedure, from documentation to approval, and helps you establish non-profit organizations that can work towards social welfare and charitable activities.
Contact us now to begin your Section 8 company registration journey.
