What is Section 8 Company?
Section 8 Companies are Not-for-profit organizations that are registered for promoting sports, arts, culture, educations, religion, charity, etc. Any income or profit earned is applied to promoting these objectives.
The company can be registered as a trust, society, or NGO under section 8 of Companies Act 2013. Section 8 company is beneficial as compared to trust or societies. NGO is registered offline except section 8 company which is registered online through MCA filing e-form SPICe which is explained in detail henceforth.
Registration of Section 8
Registration of Section 8 Company can be useful in the following ways:
- They promote arts, culture, education or similar activities for promoting social welfare
- These companies use the profit incurred from such company in attaining these objectives of social welfare that enhance and boost the economy
- These companies are prohibited from the distribution of profit, i.e., dividends to its members.
- Section 8 Companies are also formed online through SPICe form with the only additional requirement that it needs to obtain a license from Central Government.
The Procedure of Registration of Section 8 Company
Steps to incorporate section 8 Company are:
1. Application for name availability in form RUN
Apply for the name reservation online through MCA web service RUN along with the prescribed fee of INR 1000. Section 8 companies have to make use of words such as federation, chambers, association, foundation, electoral trust, etc. The applicant can apply up to 2 names in the same form with the opportunity of one resubmission in case of the proposed name is not approved by ROC.
2. Prepare MOA & AOA
MOA is said to be the charter of the company necessary for defining the objectives and scope of the company authority and AOA regulated the internal management of the company.
Memorandum of Association of Section 8 Company shall be as per the format in form INC-13 while there is no format prescribed for the Articles of Association.
Memorandum and articles of association of the company shall be signed by each subscriber and shall mention the name, address, description, and occupation of subscribers and shall also be attested by one witness.
3. Filing of SPICe 32 Form
Earlier form INC-12 was filed before filing SPICe 32 to get the approval from Central Government and for the issuance of License which has been now omitted. Thus after name approval, file form SPICe 32 for getting a license with following attachments attached to the form:
• Memorandum of Association in Form INC-13;
• Articles of Association; (No Specified format)
• Consent by first Directors in form DIR-2;
• Affidavit by the first subscriber in form INC-9;
• PAN card of first directors and subscribers;
• Aadhar card of first directors and subscribers;
• Registered office address proof such as Rent Agreement, electricity bill, etc.;
• NOC of the owner in case the registered address is rented
• Application for grant of License to ROC
• Declaration in form INC-14 on notarized stamp paper duly certified by CA/CS certifying that MOA & AOA has been made in conformity of the provisions of an act.
• Declaration in form INC-15 notarized by each person who is applying for section 8 registration.
There is no need to file separate e form for MOA & AOA in form SPICe 33 and SPICe 34 for Section 8 Company, and they require filing MOA and AOA in PDF as a mandatory attachment to SPICe-32.
Benefits of Section 8 Company Registration:
Following are the advantages of section 8 company:
- Section 8 companies are also a separate legal entity, separate from that of its members
- Like a private company, this also has perpetual succession, i.e. its existence remains in the eye of laws even its members deceased, or become insolvent
- There is no minimum capital requirement for the incorporation of these companies.
- This company requires no "Private Limited" or "Limited" to be used at the end of the name of such companies however use of association, trust, society, foundation, etc. will be sufficient
- Company’ auditor report formalities are also not required by these companies
- Section 8 is exempted for the payment of stamp duty on MOA & AOA which is a hefty amount to be paid in other forms of companies
- Several tax exemptions & benefits are granted to section 8 companies.
- A registered partnership firm can become a member of section 8 in its capacity.