Section 8 Company Registration

Section 8 Company Registration

The Companies Act, 2013, defines the streamlined process for registering a Section 8 Company in India. This type of company forms with the objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and environmental protection, without the intention of earning profits The profits, if any, are applied towards the promotion of these objectives and are not distributed as dividends to its members. This guide provides a detailed overview of the registration process, eligibility criteria, required documents, and benefits of incorporating a Section 8 Company.

Understanding Section 8 Company

A Section 8 Company is similar to a Trust or Society but is registered under the Companies Act, 2013. The primary purpose is to promote non-profit objectives. These companies enjoy several benefits such as tax exemptions and more stringent compliance requirements, which help in maintaining transparency.

Eligibility Criteria

To register a Section 8 Company, the following criteria must be met:

• At least two shareholders.
• At least two directors (the directors can be shareholders).
• At least one of the directors must be a resident of India.
• There is no requirement for minimum paid-up capital.
• The company must have a clear vision of promoting non-profit objectives.

Steps to Register a Section 8 Company

1. Name Reservation:

   • The first step is to reserve the name of the company using the RUN (Reserve Unique Name) service on the MCA portal.
   • The name should end with words like ‘Foundation’, ‘Forum’, ‘Association’, ‘Federation’, ‘Chambers’, ‘Confederation’, ‘Council’, ‘Electoral Trust’, and the like.

2. Obtain Digital Signature Certificate (DSC):

   • Obtain DSC for the proposed directors, which is necessary for signing the e-forms.

3. Director Identification Number (DIN):

   • Apply for DIN using Form DIR-3, if the directors do not already have one.

4. Drafting of Memorandum of Association (MoA) and Articles of Association (AoA):

   • Draft the MoA and AoA outlining the company’s objectives and rules. These documents must be submitted electronically through Form INC-13.

5. Application for License:

   • File Form INC-12 to apply for a license under Section 8. This includes submitting the MoA, AoA, estimated annual income and expenditure for the next three years, and details about the company’s promoters and proposed activities.

6. Incorporation:

   • Once the license is granted, file SPICe+ Form (INC-32) along with the required documents, including INC-13 (MoA), INC-31 (AoA), AGILE-PRO-S (INC-35), and Form INC-9.

Required Documents

• For Name Approval:

  • Digital Signature Certificate.
  • Name reservation application in the RUN form.

• For License Application:

  • Form INC-12.
  • Memorandum of Association (MoA) and Articles of Association (AoA).
  • Declaration by Advocates, Chartered Accountants, Cost Accountants, or Company Secretaries in practice.
  • Estimated income and expenditure for the next three years.
  • Details of the promoters and directors.

• For Incorporation:

  • Form INC-32 (SPICe+).
  • Form INC-33 (e-MoA) and INC-34 (e-AoA).
  • Form INC-35 (AGILE-PRO-S) for GST, ESIC, EPFO, and Professional Tax registration.
  • PAN and TAN applications.
  • Form INC-9 for declaration by the subscribers and first directors.

Benefits of Section 8 Company

• Tax Benefits:
  • Section 8 Companies are eligible for various tax exemptions and benefits under the Income Tax Act.
• Credibility:
  • The incorporation process under the Companies Act ensures higher credibility among donors and other stakeholders.
• No Minimum Capital Requirement:
  • Unlike other companies, Section 8 Companies do not require a minimum paid-up capital.
• Exemption from Certain Provisions:
  • They are exempt from certain provisions of the Companies Act, such as needing to include the word “Limited” or “Private Limited” in their name.

Compliance Requirements

• Annual Returns:
  • Section 8 Companies must file their annual returns with the Registrar of Companies (RoC).
• Financial Statements:
  • They must prepare and file financial statements, including balance sheets and profit & loss accounts.
• Board Meetings:
  • Conduct at least two board meetings every year with a gap of not less than 90 days between the two meetings.
• Audit:
  • Financial records must be audited annually by a Chartered Accountant.
• Reports:
  • File various reports such as director’s report and auditor’s report annually.

FAQs

What is the minimum capital requirement for a Section 8 Company?

• There is no minimum capital requirement for Section 8 Companies.

Can a Section 8 Company distribute its profits to its members?

• No, profits must be applied solely towards the promotion of the company’s objectives.

What are the annual compliance requirements for a Section 8 Company?

• Filing annual returns, financial statements, conducting board meetings, and auditing financial records.

How long does it take to register a Section 8 Company?

• The process typically takes around 30-45 days, depending on the completeness and accuracy of the submitted documents.

Are Section 8 Companies eligible for tax exemptions?

• Yes, they are eligible for various tax exemptions under the Income Tax Act.

Can foreigners be appointed as directors in a Section 8 Company?

• Yes, foreigners can be appointed as directors provided they obtain a DIN and comply with the Indian laws.