Section 8 Company Registration - An Overview
As per the Companies Act, 2013, Section 8 Company refers to a corporation that aims to incentivize arts, sciences, sports, education, environment preservation, social welfare, charity, or other similar objectives.
The ultimate objection of registering Section 8 Company is to incentivize non-profit goals such as trade, arts, commerce, education, charity, environment protection, sports research, social welfare, etc. To register a Section 8 entity, at least two directors are required. Also, there is no compulsion of securing minimum paid-up capital to set up such a company.
Key points regarding the Section 8 Company
Potential benefits of opening Section 8 company in India
Following are some key benefits that one can experience after incorporating Section 8 Company in India;
The 100% tax exemption is available to Section 8 companies registered u/s 12AA of the IT Act. The profits generated by such entities are non-taxable in nature because they use the same for charitable purposes.
No minimum capital requirement
There is no underlying limitation over section 8 entities pertaining to minimum capital requirement, unlike other companies such as the public limited company. But these entities have the right to change their capital structure in accordance with the growth of the company.
No need for paying stamp duty
A section 8 Company is not liable to pay stamp duty for registration, unlike other companies such as public limited companies or private limited companies.
Separate Legal entity
A section 8 company holds its own legal identity just like other registered companies & rejoices autonomous legal standing from its member. These entities fit the concept of perpetual existence.
A Section 8 Entity is more credible in terms of compliances and legal standing. Such entities usually function under a tight legal framework developed by the concerned authorities. Unlike NGOs and trust, these entities follow stringent compliances post-registration.
No title required
Section 8 companies have the leverage to choose the name that suits their liking during the registration process. Unlike other registered structures, they are not bound to affix the term like "Section 8" after their name.
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Incorporation Eligibility of the Section 8 Company
Legal Requisites for Incorporating Section 8 Company in India
The below-mentioned are the mandatory perquisites that one needs to fulfil before applying for Section 8 incorporation process;
Numbers of Directors
If the section 8 company intends to function as a private limited company, then a minimum of two directors is required. Likewise, if such a section 8 entity aims to operate as a public limited company, then a minimum of 3 directors is required.
Number of Members
The number of members that can be a part of a Section 8 company has been capped at 200 by MCA if the entity aims to function as a private limited company. On the other hand, there is no such limit on section 8 entities having a business structure like Public Limited Company.
Capital Requirement and Name
Section 8 entities are not required to manage a minimum paid-up capital as per the Company Act, 2013.
NGOs operating as Section 8 entities are not liable to affix the terms like Private limited or limited in their name.
Entities with non-profit objectives are only eligible to secure Section 8 registration. The MOA & AOA must entail such objectives for which it is established. Any profit generated by the section 8 entity is used to serve its underlying objectives, i.e. charitable purposes or reinvested in the company. The profit of such entities is not available to its members in any form.
Documents required for Section 8 Company Incorporation Process
The incorporation process of Section 8 Company
Following is the detailed process of incorporation for Section 8 companies in India;
Step 1: Secure DSC from the MCA authorized agencies
DSC, i.e. Digital Signature Certificate, serves as a digital tool for signing various e-forms and scanned copies of documents. It is primarily used by the authorized signatory of the company, such as the Director, partners, managing directors, etc. In this case, the proposed directors of the section 8 companies are required to secure the DSC for signing key documentations.
Step 2: Visit the MCA portal to file Spice+ Form
The next step is to visit the MCA portal and create an account on the same. After that, the applicant is required to select the Spice+ form option from the Service section located on the top menu of the home page. This would lead the applicant to a brief e-form which entails the two vital parts, A and part B.
Part A helps the applicant to register the proposed company name, and PART B offers the given services:
Step 3: Upload mandatory documents and submit the Form
Upload the mandatory documents as mentioned above and make your way to the payment section to submit the standard fees. Once done, tap on the submit button to wrap up the application submission formalities.
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