{"id":52325,"date":"2023-02-13T14:07:32","date_gmt":"2023-02-13T08:37:32","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=52325"},"modified":"2024-09-27T12:07:34","modified_gmt":"2024-09-27T06:37:34","slug":"formation-of-section-8-company-requirements-exemptions-who-can-form","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/formation-of-section-8-company-requirements-exemptions-who-can-form\/","title":{"rendered":"Formation of Section 8 Company \u2013 Requirements, Exemptions, Who can Form?"},"content":{"rendered":"\n<p>A\nSection 8 Company is formed after filling form no. INC 12, which has to be\nsubmitted with the registrar of the companies. It has few other compliances and\nprocedures to be followed after filling of incorporation of form with the\nregistrar. Section 8 co. was previously covered under section 25 of <strong>the companies act,\n1956<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/Companies_Act_1956_13jun2011.pdf\"><strong>[1]<\/strong><\/a><\/sup>, which implies that companies with an objective of social\nbenefit was prevalent even before. FICCI and CII are an example of section 8\ncompany, they aim to develop trade and commerce. In this write-up, we will\ndiscuss the formation of Section 8 Company in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/formation-of-section-8-company-requirements-exemptions-who-can-form\/#Requirements_for_the_Formation_of_Section_8_Company\" >Requirements for the Formation\nof Section 8 Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/formation-of-section-8-company-requirements-exemptions-who-can-form\/#Who_Can_Form_a_Section_8_Company\" >Who Can Form a Section 8\nCompany?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/formation-of-section-8-company-requirements-exemptions-who-can-form\/#Exemptions_of_Section_8_Company\" >Exemptions of Section 8 Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/formation-of-section-8-company-requirements-exemptions-who-can-form\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_for_the_Formation_of_Section_8_Company\"><\/span>Requirements for the Formation\nof Section 8 Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A\n<strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/section-8-company-registration\">section 8 company<\/a><\/strong> is incorporated only after the approval of the government\nand in order to attain the approval the applicant shall fulfil some\nrequirements for the formation of Section 8 Company such as below:<\/p>\n\n\n\n<ul>\n<li><strong>Objective<\/strong>:\nthe objective of the company should be to promote arts, commerce, research,\neducation, conduct charity, protect the environment, develop science, sports,\nsocial welfare etc. The company should work to use its profit or any other\nincome towards the fulfilment of the objective, and it should not work for\nmerely earning profits out of its activity.<\/li>\n\n\n\n<li><strong>Minimum capital:<\/strong>\nThere is no minimum capital requirement fixed by the law, as the company is\nincorporated for charitable purposes, there is no bar on minimum capital\nrequirement.<\/li>\n\n\n\n<li><strong>Shareholder: <\/strong>In\na section 8 company the maximum no. of shareholders can be 200. However, in\norder to incorporate the company, there must be at least 2 shareholders.<\/li>\n\n\n\n<li><strong>Director<\/strong>:\nAs per section 149(3),being the company incorporated in India it is really\nnecessary that at least one of the directors should be a resident of India, and\nby resident of India it means that the person should have resided in India for\n182 days in the preceding year.<\/li>\n\n\n\n<li><strong>Composition of board and board\nmeetings<\/strong>: the board shall be composed of at least 2 directors\nand as per section 173(1) and 174(1), a board meeting shall be conducted at\nleast once in six months and the composition of the board shall be 8 directors\nor 1\/4<sup>th<\/sup> of the total directors in the non-profit company.<\/li>\n\n\n\n<li><strong>Compliances fulfilment<\/strong>:\nFormation of section 8 company requires approval from the government at first,\nand only after that MOA, AOA, declaration, stamp paper duty etc will be\nfulfilled. <\/li>\n\n\n\n<li><strong>Name of the company<\/strong>:\nFor the Formation of Section 8 Company in India, the name of the company shall\nbe decided on the basis of the trademark rules, i.e., it should not be similar\nto any other company\u2019s name and that it should represent its nature and\nobjective but should not be identical to the nature of the products and\nservices.<\/li>\n\n\n\n<li><strong>Violation of objective: <\/strong>the\nobjectives of the section 8 company is to promote the purpose for which they\nare incorporated and all the profits should be used to promote the objective\nand not distribute the profits amongst the shareholders, if any violation is\nfound to be done, then the company\u2019s license shall stand cancelled. <\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Can_Form_a_Section_8_Company\"><\/span>Who Can Form a Section 8\nCompany?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A\nsection 8 company can be incorporated by any individual or association of\nindividuals who aim to fulfil all the requirements for the formation of section\n8 company as mentioned under the law. The person or the group of persons shall\nhave approval from the central government for the formation of section 8\ncompany. Below are some further eligibilities on who can form a section 8\ncompany:<\/p>\n\n\n\n<ol>\n<li>Any 2 persons or individuals, or\nassociation of persons who wants to work for charitable purpose and adhere to\nthe guidelines of the government that the purpose of the formation of the\ncompany should be to promote arts, commerce, research, education, conduct\ncharity, protect environment, develop science, sports, social welfare etc.<\/li>\n\n\n\n<li>They should not divide the profits amongst\nthemselves and use them for charity purposes.<\/li>\n\n\n\n<li>They should abide by the government orders,\nand they are referred as Ltd. company, which means the liability of the members\nare limited although they do not need to put the words ltd. in the name.<\/li>\n\n\n\n<li>Section 149(3) of the companies act makes\nit mandatory that every organization must have women director. However, A\nsection 8 company is free to appoint independent directors as per notification\nissued on 5<sup>th<\/sup> June 2016.<\/li>\n\n\n\n<li>They shall not make any changes in the AOA\nor MOA of the company without the authority of the government, everything that\nwould alter the structure or the objectives, vision, etc. of the company will\nhave to go through the central government and if any changes are made without\nthe approval of the government then the license of being a non-profit company\nshall be cancelled, and the company members will have to release all the\nbenefits and privileges that they were using being a non-profit company.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exemptions_of_Section_8_Company\"><\/span>Exemptions of Section 8 Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section\n8 company are offered many benefits from the government so that charity does\nnot stop due to losses and high expenses. Few of the exemptions and benefits\nare as listed below:<\/p>\n\n\n\n<ol>\n<li><strong>Tax benefits<\/strong>:\nA charity or religious trust or organisation that is enrolled under Section 12A\nor who has submitted an application for registration by submitting Form 10A\nwould file a tax audit report in Form 10B. A CA must provide a Form 10B, which\nis an audit report, after being requested by the taxpayer.<\/li>\n\n\n\n<li><strong>Financial Statements Filing:<\/strong>\nWithin 30 days of the annual general meeting, the financial statement would be\nprovided in the appropriate format (E-FORM AOC-4)&nbsp;<\/li>\n\n\n\n<li><strong>Annual Return Filing:<\/strong>\nWithin 60 days of the annual general meeting, Form MGT-7, along with all the\nnecessary information, including shareholder and management information, is\nsubmitted to the Registrar of Companies (ROC).<\/li>\n\n\n\n<li><strong>AGM:<\/strong>\nThe annual general body meeting is called within six months of the end of the\nfiscal year. However, the firm might have the first AGM fewer than nine months\nafter the end of the first fiscal year in the case of the first annual general\nmeeting. You must understand that there shouldn&#8217;t be more than 15 months\nbetween 2 annual general meetings.<\/li>\n\n\n\n<li>When a business selects funding from donors, the revenues are eligible for taxation relief. The corporation has to comply with the requirements outlined in Section 11 and enlist under <strong><a href=\"https:\/\/corpbiz.io\/80g-and-12a-registration\" title=\"12a and 80g registration online\">Sections 80G and 12A<\/a><\/strong> in order to claim the same exemptions.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 8 companies are incorporated for the objective of promoting social welfare and for the motive of earning income solely for the members households and so they are provided with benefits and exemptions. In order to keep a check on the misuse of the exemptions every alteration is to be approved by the central government and the audits reports are to be submitted with the ROC. Although there is no restriction as to who can incorporate a section 8 company it is still necessary that one of the members be resident in India.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/what-are-section-8-companies\/\">What Are Section 8 Companies? Know Its Provisions And Incorporation Procedures<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Section 8 Company is formed after filling form no. INC 12, which has to be submitted with the registrar of the companies. It has few other compliances and procedures to be followed after filling of incorporation of form with the registrar. Section 8 co. was previously covered under section 25 of the companies act, [&hellip;]<\/p>\n","protected":false},"author":51,"featured_media":52326,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[325],"tags":[3073],"acf":{"service_id":"11"},"authorName":"Aditee Arya","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2023\/01\/MicrosoftTeams-image-51-1.jpg","authorDescription":"Aditee is a legal researcher and writer. She has completed her graduation in BBALLB from IP University, New Delhi. She has a keen interest in insolvency and bankruptcy law and the companies Act. She likes to watch a lot of movies and series in her free time and hang around with her friends and travel across.","postViews":4078,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52325"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/51"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=52325"}],"version-history":[{"count":5,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52325\/revisions"}],"predecessor-version":[{"id":66486,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52325\/revisions\/66486"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/52326"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=52325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=52325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=52325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}