Section 8 Company Registration

 ​Introduction

In India, there are following 3 legal forms exist for an NGO or Non-Profit Organizations:

1. Trusts

2. Societies

3. Section 8 Companies

Indian Trusts have no central law; Indian Societies have different legal and institutional frameworks from state to state while Section 8 companies have one uniform law across the country – Companies Act, 2013. It is this robust Act that regulates the formation, management and accountability of a Section 8 Company, thus making it more closely regulated and monitored than trusts and societies, and recognized all over the world.

A Non-profit Company or Section 8 Company is a Company which:

Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
Intends to apply its profits, if any, or other income in promoting its objects; and
Intends to prohibit the payment of any dividend to its members.

 

Procedure Procedure for Incorporation of Section 8 Company under Companies Act, 2013

1. Application for name availability in form RUN

Application for name availability must be made in “Reserve Unique Name” facility. The name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, and the like etc.

You can propose maximum 2 names at a time and 1 resubmission is allowed in RUN facility. It is advisable to attach the object clause of the proposed company.

 
2. Preparation of Memorandum of Association and Articles of Association

Memorandum of association is the charter of the company and defines the scope of its activities. An article of association of the company is a document which regulates the internal management of the company.

Memorandum of Association of Section 8 Company must be in form INC-13 while there is no format prescribed for Articles of Association for Section 8 Company. One can adopt table F provisions.

Memorandum and articles of association of the company shall be signed by each subscriber to the memorandum who shall mention his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation.

 

3. Application in Form INC-12

After approval of name by CRC, one can make an application in Form INC-12 to the Registrar for a license under sub-section (1) of section 8. 

Attachment of INC-12

1. Memorandum of Association in Form INC-13;

2. Articles of Association; (No Specified format)

3. Declaration in Form INC-14 by CS/CA/CWA in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

4. Declaration by each of the persons making the application in Form INC-15;

 
5. An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;

6. Name Approval Letter received from CRC;

These are compulsory attachment of form INC-12. It is advisable to attach note on work proposed to be undertaken by the Company after incorporation and Grounds of application for issue of license under section 8.

Once the form INC-12 will be approved, License under section 8 will be issued in Form INC-16 which required to be attached in form SPICe.

4. Filing of SPICe 32 Form

After receiving Central Government approval i.e approval of form INC-12, one may go ahead with filing of form SPICe 32.

Attachment of SPICe 32:

1. Memorandum of Association in Form INC-13;

2. Articles of Association; (No Specified format)

3. Consent and Declaration by first Directors in form DIR-2;

4. Affidavit by first subscriber in form INC-9;

5. PAN card of first directors and subscribers;

6. Aaadhar card of first directors and subscribers;

7. Proof of Registered office like Sale Deed/Lease Deed/Rent Agreement etc;

8. Latest Utility Bill of Registered office like Electricity Bill;

9. NOC of owner/director if registered office is taken on rent/lease;

10. License issued in form INC-16;

SPICe 33 and 34 i.e e-MOA and e-AOA can’t be used for Section 8 Company. Section 8 companies are mandatorily required to file MOA and AOA as pdf attachments to SPICe-32.

Benefits of Section 8 Company Registration:

Exemption from Stamp Duty.
Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and general public.
Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name.
A Section 8 Company has more credibility as compared to any other Non-profit organization structure like Trust or Society.

Following are the Advantages of Section 8 Company Registration :

1)    Tax Exemption
Numerous Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies, they can claim the Tax exemption against the donation they made to a Section 8 company.

 

2)    No minimum capital requirement
There is no prescribed limit over section 8 companies for the minimum capital requirement unlike other entities such as public limited, but the capital structure can be altered at any stage as the required for the growth of the company.

 

3) No stamp duty payable
A section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.

 

4)    Separate Legal entity
A Section 8 Company also holds its own identity like other companies structures, and has its own separate legal standing from its member. A Section 8 Company also has a perpetual existence.

 

5)    Credible
A Section 8 Company has more credibility as compared to any other Non-profit organization structure be it a Trust or Society. As it is a licensed by the central government. It has more stringent regulations such as no change in MOA and AOA can be done at any stage or situation in a Section 8 Company. A section 8 company due its strict compliances as regard to functioning has a more reliable image in comparison to other legal structures.

 

6)    No title required
Unlike the names requirements of the private limited or a public limited company, a section 8 company does not require to use a suffix next to its name.