What is Section 8 Company Registration?
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 Company
Section 8 Company egistration 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 objectives of social welfare that 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.
Benefits of Section 8 Company Registration
Following are the advantages of section 8 company registration:
- 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 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 from 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.
Eligibility Criteria for Section 8 Company Registration
- HUF or an individual or limited company is qualified to start a Section-8 company registration in India.
- Directors or shareholders of the company should fulfil all necessary requirements and compliances of the Section 8 Company registration.
- It is mandatory for at least one of the directors to be the resident of India.
- The goal of forming a Section 8 Company should be the promotion of sports, social welfare, education, art and financial assistance to lower income groups.
- The company should have a clear plan for the next three years.
The Procedure of Registration of Section 8 Company
Steps to registration of 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. Filing of Section 8 Incorporation Forms on MCA Portal
Once you have received approval from the regional director, the next step is to proceed for the section 8 company registration application. The application is submitted before the ROC along with the requisite documents.
Once you have provided all the details to ROC, ROC then issue a Certification of Incorporation along with a Company Identification Number (CIN).
3. Prepare MOA & AOA
MOA is said to be the charter of the company necessary for defining the objectives and scope of the company while AOA regulates 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.
4. PAN, TAN and Bank Account
It is essential to have PAN, TAN, and Bank account before filing for Section- 8 Company Registration in India.
5. 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 is submitted 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.
Compliances under Section-8 Company Registration
1. Minimal Requirement
Minimum of two directors can formulate Section 8 Company and only two members are needed to incorporate it. Ministry of Corporate Affairs has the authority to integrate a Section 8 Company. It can be formed with or without minimum share capital.
2. Charitable Object
Section 8 companies are formed with non-profit objectives. The aim of such companies is to provide benefit to the society, the profit earned is not distributed amongst its members.
Section 8 company will either use it for charitable purpose or reinvest it in the business.
3. Management Team
MoA and AoA section 8 companies contain the list of board of directors which govern the section 8 companies.
4. Regulated Under Companies Act, 2013
It is essential for section 8 companies to follow the norms which are prescribed under the Companies Act, 2013. Thus, they must maintain book of accounts, filling of returns when required.
5. Income Tax
A company must follow all the provisions of Income Tax Act.
Compliances for Section 8 Companies Defined Under Companies Act 2013
- Conducting minimum two board meetings in a year
- Keeping book of accounts
- Maintaining financial statements
- Compulsory Audit
- Income tax return filing
- Using form AOC 4 for filing financial statements
- Filing of annual return every year with other e-filing forms like MGT 7
- Registration like 12AA, 80G are performed under additional compliances
Frequently Asked Questions
Following are the criteria that must be fulfilled for registering section 8:
- It must be incorporated with the main objectives of promoting culture, charity, education, arts, religion, and such similar social welfare activity
- Section 8 companies cannot operate without a license which has to be applied to MCA
- One director must be an Indian resident
- Initial capital must be invested in the company within two months of its incorporation
Yes, section 8 company can raise capital through FDI subject to the FEMA regulation.
No, as per companies (incorporation) rules 2014 only limited company registered under this act can apply for a license under section 8 company. There no unlimited liability company is allowed to get registered as a section 8 company.
Section 8 companies are allowed to get registered as a private or public company. Provided it shall comply with the minimum shareholder requirement depending upon the type of company it selects. However, OPC cannot be registered as a section 8 company.