Section 8 Company Registration Process

A Section 8 Company is a non-profit entity under the Companies Act, 2013, established to promote social objectives like education, charity, arts, science, or environmental protection. It operates like an NGO or trust but with a more structured and regulated framework.

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    Step 1: Obtain a Digital Signature Certificate (DSC)

    • The first step to register a Section 8 company is to obtain a Digital Signature Certificate (DSC) for the proposed directors.
    • The DSC is required for signing electronic documents during the registration process.
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    Step 2: Obtain Director Identification Number (DIN)

    • Each proposed director must have a Director Identification Number (DIN).
    • DIN can be obtained by filing Form DIR-3 through the Ministry of Corporate Affairs (MCA) website. This can be done by submitting proof of identity and address for the proposed director.
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    Step 3: Choose a Suitable Name for the Company

    • The name should reflect the non-profit objective of the company.
    • The name should not be identical or similar to an existing company name or trademark.
    • Check Name Availability: You can check the name availability using the MCA Name Availability search tool. If the name is not available, you will need to propose an alternative name.
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    Step 4: Draft the Memorandum of Association (MOA) and Articles of Association (AOA)

    • MOA: The Memorandum of Association (MOA) outlines the objectives of the company. For a Section 8 company, this should specifically highlight its non-profit aims.
    • AOA: The Articles of Association (AOA) define the rules and regulations governing the internal management of the company. It should detail how profits will be used for charitable purposes, and it should include provisions for winding up the company if necessary.
    • Both documents must be signed by the directors and must comply with the provisions of the Companies Act, 2013.
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    Step 5: Apply for Section 8 Company License

    • Form INC-12: To register a Section 8 company, you need to submit an application to the Registrar of Companies (RoC) in the prescribed format through Form INC-12. This form is specifically for companies applying under Section 8.
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    Step 6: RoC Approval and License Issuance

    • The Registrar of Companies (RoC) will review the documents and the application.
    • If the application is approved, the RoC will issue a license under Section 8 of the Companies Act, 2013, authorizing the company to be registered as a non-profit organization.
    • Once the license is issued, the company can proceed to incorporate the company.
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    Step 7: Incorporation of the Company

    • Form INC-7: After obtaining the Section 8 license, you need to file Form INC-7 with the RoC for the incorporation of the company.
    • The RoC will verify the details and, if everything is in order, will issue a Certificate of Incorporation. This completes the registration process, and the company is officially recognized as a Section 8 company.
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    Step 8: PAN and TAN Registration

    • After incorporation, you need to apply for a Permanent Account Number (PAN) for the company from the Income Tax Department.
    • You will also need to apply for Tax Deduction and Collection Account Number (TAN) if the company is liable to deduct tax at source (TDS) under the Income Tax Act.
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    Step 9: Open a Bank Account

    • Once the company is incorporated, you can open a bank account in the name of the company.
    • You will need the Certificate of Incorporation, PAN, and proof of identity of the directors to open the account.
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    Step 10: Comply with Post-Incorporation Compliance

    • After incorporation, the company must comply with annual filing requirements, such as submitting annual returns, financial statements, and auditor reports to the RoC.
    • Additionally, as a Section 8 company, you must ensure that the profits are reinvested in the business and are not distributed to members.

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      The key feature of a Section 8 company is that it does not distribute profits to its members or shareholders. Instead, any profits earned are reinvested into the organization to promote its objectives. Eligibility Criteria for Section 8 Company Registration

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      Non-Profit Objective: The company must aim to promote social causes like charity, education, research, arts, sports, or environmental welfare for the public good.

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      Income and Profit: The company must not distribute profits to members; all income should be reinvested to achieve its stated objectives.

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      Minimum Number of Members: A Section 8 company requires at least 2 members for a private company and **7 members** for a public company.

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      Minimum Number of Directors: A Section 8 company must have at least 2 directors for a private company and **3 directors** for a public company.

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      Name of the Company: The name of a Section 8 company must clearly reflect its non-profit nature and should not be misleading.

      Benefits of Section 8 Company A Section 8 company is a non-profit organization established under the Companies Act, 2013, with the primary objective of promoting social causes and welfare activities like education, charity, science, arts, environmental protection, sports, and more. The government provides various incentives and advantages to such companies due to their positive social impact. Here’s a detailed list of the benefits of registering as a Section 8 company:

      1. Legal Entity Status

      01 Separate Legal Entity: A Section 8 company is a separate legal entity that can own property, enter into contracts, and conduct business in its name. This gives the company legal recognition, and its liability is limited to the company’s assets.

      02 Limited Liability for Members: Members and directors have limited liability, meaning they are not personally responsible for the company’s debts, beyond their shareholding or contribution.

      2. Tax Benefits and Exemptions

      01 Income Tax Exemption: Section 8 companies can avail of tax exemptions under Section 12A and 80G of the Income Tax Act, provided the company meets the required criteria. This exemption helps reduce the tax burden, especially for non-profit organizations.

      02 Tax Deductions for Donors: Donations made to a Section 8 company are eligible for tax deductions under Section 80G. Donors can claim deductions from their taxable income, incentivizing them to contribute to the cause.

      03 GST Exemptions: Section 8 companies are eligible for Goods and Services Tax (GST) exemptions for certain services and activities, making it easier for them to operate without the additional financial burden of indirect taxes.

      3. Credibility and Trust

      01 Public Trust: Being a registered non-profit company, a Section 8 company gains credibility and trust from the public, donors, and stakeholders. This trust can help attract funding, partnerships, and collaboration with other organizations.

      02 Government Backing: Registration under Section 8 ensures that the company is recognized by the government as a legitimate non-profit entity. This adds weight to its activities and mission.

      03 Professional and Transparent Structure: Section 8 companies have a formal and transparent structure, which can enhance their credibility compared to informal or unregistered NGOs or charitable trusts.

      4. Ability to Raise Funds

      01 Access to Grants and Donations: Section 8 companies can receive grants, donations, and funding from the government, international organizations, and other bodies. These funds can be used to further the company’s social objectives.

      02 Corporate Social Responsibility (CSR): Section 8 companies are eligible to receive funding under the CSR (Corporate Social Responsibility) initiatives of various corporations. Many companies contribute to Section 8 organizations to fulfill their CSR obligations.

      03 Foreign Contributions: Section 8 companies can also apply for foreign donations under the Foreign Contribution Regulation Act (FCRA), provided they meet the eligibility criteria.

      5. Permanent Registration

      01 Lifetime Registration: Once registered, a Section 8 company can continue its operations indefinitely, as long as it fulfills its objectives and complies with regulations. It is not subject to the dissolution requirements of a charitable trust or society.

      02 No Requirement for a Share Capital: A Section 8 company does not require a share capital, making it easier to operate without the need for investment from shareholders or members.

      6. Ease of Management

      01 Structured Governance: Section 8 companies must adhere to formal governance structures, including holding annual general meetings (AGMs), appointing directors, and complying with regulations set forth by the Ministry of Corporate Affairs (MCA). This brings in better accountability and ensures that the company remains focused on its social goals.

      02 Centralized Control: The decision-making process in a Section 8 company is generally managed by the board of directors, ensuring clarity in operations, policies, and direction.

      7. Exemption from Companies Act Restrictions

      01 No Requirement to Declare Dividends: A Section 8 company is not required to pay dividends to its members. Any profits earned by the company must be used for the promotion of its objectives rather than for personal gain.

      02 Special Exemptions: A Section 8 company enjoys certain exemptions from the provisions of the Companies Act, making it easier to run with reduced regulatory pressure, as long as the company follows the charitable objectives.

      8. Facilitation of Public Awareness

      01 Public Fundraising: Section 8 companies can raise funds from the public through organized campaigns, crowdfunding, or charity events, as long as they use the funds for their stated objectives.

      02 Public Awareness and Outreach: Because Section 8 companies are registered entities, they have greater access to media attention and public recognition, which can help in spreading awareness about their cause and attracting more supporters.

      9. Transferability of Assets

      01 Transfer of Assets to Similar Entities: In case a Section 8 company is dissolved, its assets can be transferred to another non-profit organization with similar objectives. This ensures that the company’s assets are used for charitable purposes even after its closure.

      10. Professional Recognition

      01 Registered Company: Being registered as a company offers professional recognition that can help with networking, government funding, and partnerships. This is not always available for other forms of non-profit organizations like trusts or societies.

      Conclusion

      Registering a Section 8 company is ideal for starting a non-profit focused on social or charitable causes. It involves steps like obtaining a digital signature, preparing documents, and applying with the Registrar of Companies (RoC). Once registered, the company gains legal status and is eligible for donations and tax benefits. Need assistance? We're here to help!

      FAQs

      What is a Section 8 Company?
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      A Section 8 Company is a non-profit organization established for promoting charitable or not-for-profit objectives.
      What are the key objectives of a Section 8 Company?
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      The primary objectives include promoting arts, science, commerce, education, social welfare, religion, charity, or any other useful public purpose.
      Can a Section 8 Company distribute its profits to members?
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      No, a Section 8 Company cannot distribute its profits to members. All income must be utilized for its objectives.
      Is it necessary to add “Limited” or “Private Limited” to the company’s name?
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      Yes, the company’s name must include “Limited” or “Private Limited” as per the type of Section 8 Company
      How many directors are required for registration?
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      A minimum of two directors is required for a Section 8 Company.
      Is there a minimum capital requirement for Section 8 Company registration?
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      No, there is no minimum capital requirement.
      How long does it take to register a Section 8 Company?
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      Registration typically takes 20-60 days, depending on the processing time of government authorities.
      What documents are needed for registration?
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      Documents include identity proof, address proof, PAN card, and No Objection Certificate from the landlord for the registered office.
      Can foreign nationals be directors in a Section 8 Company?
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      Yes, foreign nationals can be directors, but at least one director must be an Indian resident.
      Is there an age limit for directors in a Section 8 Company?
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      There is no age limit for directors in Section 8 Companies.
      What are the compliance requirements after registration?
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      Section 8 Companies must file annual returns, financial statements, and comply with tax regulations.
      Can a Section 8 Company be converted into a for-profit company?
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      No, a Section 8 Company cannot be converted into a for-profit company.
      Can a Section 8 Company own property and assets?
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      Yes, it can own property and assets in its name.
      Is it mandatory to conduct an annual general meeting (AGM)?
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      Yes, an AGM must be held within six months from the end of the financial year.
      Can a Section 8 Company be dissolved voluntarily?
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      Yes, it can be dissolved voluntarily by following the legal procedures.
      What is the penalty for non-compliance with Section 8 Company regulations?
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      Non-compliance can lead to penalties, fines, or even cancellation of registration, so it’s crucial to adhere to the rules.

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