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What is Section 8 Company ?

  • Not all the companies are incorporated with the commercial objective, i.e., with the objective to earn profit. Many companies are incorporated with non-profit and charitable objectives.
  • A Section 8 Company is the same as Section 25 Company under the old Companies Act, 1956. Under the new Companies Act, 2013, Section 25 (as per the old Act) has now become Section 8 Company.
  • Section 8 of the Companies Act, 2013 deals with formation of companies with charitable objects. The companies registered under this section may be public company, private company, or one person company. A company registered under this section enjoys all the privileges of a limited company subject to performance of all its obligations except those exempted by the Central Government by a notification.
  • The company is registered without paying any stamp duty on its Memorandum and Articles. But such company cannot alter the provisions of its Memorandum and Articles without approval of the Central Government.

Regulations applicable on section 8 company :-

Registration :- As per the provisions laid under the Companies Act, 2013
• License :- License to be applied to MCA.
• Directors :- A Minimum of 2 Directors for a Private Limited Company and 3 Directors for Public Limited Company must subscribe to the Memorandum of Association. The maximum limit is of 15 Directors. 

More than that can be appointed after passing a special Resolution in a general Meeting.

• Indian Resident :- At least 1 director must be a resident of India, i.e., have stayed in India for a total period of not less than 182 days in the previous calendar year [(Section 149(3)].
• MoA & AoA :- Unlike other Trusts which are governed by the Trustees as per a Trust Deed, the operations of Section 8 Companies are managed by the Board of the Director as per their MoA and AoA. Details regarding the proposed name, objects to be carried by the Company, address of its registered office, number of directors and promoters, authorized capital, and number of shares to be subscribed by each promoter must be mentioned along with outline of the plan laid-out to meet the objects.
• DIN for Directors :- All the Directors must have valid DIN (Director’s Identification Number) & DSC (Digital Signature Certificate), as required.

Other compliances/conditions required to be met from time to time by a section-8 company :-

• Compliance to provisions laid under the Companies Act, 2013 :- A Section 8 Company must follow the provisions for maintaining Books of Account, Audits, Return Filing, holding Board Meetings, etc.
• Property Management :-
The ownership of the property lies in the name of the Company and it can only be sold with the prior consent of the Board of Directors in the form of a resolution as per the rules mentioned under the Companies Act.
• Annual Compliance :- Annual filing of accounts, statements and the returns of the company with the ROC are necessary to meet the compliance required.
• Income tax :- The Company is require to follow the provisions of the Income Tax Act.
• GST Registration :- If Section 8 Company comes under the purview of the GST Act, it must get registered with GST.
• Dissolution :- Upon dissolution and after settling all debts and liabilities, the funds and property of the society are not to be distributed among the members of the company. Instead, the remaining funds and property would be given or transferred to some other Section 8 Company.

Essentials of Section 8 Company :-

1. It has an object to promote commerce, art, science, sports or education.

2. It intends to apply its profit income, or other earnings towards promotion of its objects.

3. It prohibits payment of dividend or income to its shareholders.

Benefits of Section 8 Company :-

There are many benefits of registering such companies:

  1. Distinct legal identity : A Section 8 Company also holds its own identity like other companies structures, and has its own legal standing separate from its member. A Section 8 Company also has a perpetual existence.
  2. Tax Benefits and eligibility for deductions : Such companies are provided numerous tax benefits under income tax. They can avail deductions under section 80G.
  3. No Stamp Duty : The company is registered without paying any stamp duty on its Memorandum and Articles.
  4. Less Capital requirement : Unlike other limited companies like private, public, or one person, the companies registered under section 8 do not require much share capital. They can be directly funded from subscriptions or donations made to them.
  5. Name : Other companies whether private or public are required to use ‘Limited’ as the last word in their names, but section 8 of the Act exempts them for the use of any suffix or title. Section 8 companies can be registered with names that have words like Association, Society, Council, Club, Charities, Foundation, Academy, Institute, Organisation, and Federation. This is of great importance to companies not engaged in business like educational or charitable institutions as it gives them a distinct non-commercial identity.
  6. Transfer of assets permitted : Unlike the limited liability companies which are not allowed to transfer the title or ownership, section 8 companies are allowed to transfer title or ownership of both movable and immovable interest with no hurdles or restrictions of any sort.
  7. Relaxed rules : It’s easy to fix the date, time, and place for annual general meeting for such companies and to conduct general meetings under a short period of notice of within 14 days instead of 21 days for limited companies.
  8. Better reliability : Section 8 Companies are more reliable than all other forms of charitable organizations. They are governed by the Companies Act and are regulated strictly.
  9. No CARO : Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
  10. Easy membership : A registered partnership firm can become a member in its individual capacity and obtain Directorship.
  11. Tax exemption to donors : Those donating to a Section 8 Company are eligible for tax exemptions u/s 12A and 80G of the Income Tax Act.

Penalty for non-compliance :-

If a company defaults in complying with the provisions of the Act or is found to be conduct its business fraudulently or in violation with the objects of the company, then the central government may revoke the license issued under the act.

Such a company, without prejudice to any other action under the provisions of this section, shall be punishable with fine which shall not be less than Rs. 10 lakh and may extend to Rs. 1 crore. The Directors and all other officers of the company, found in default, shall be punishable with imprisonment for a term which may extend to 3 years or with fine not be less than Rs. 25,000 and may extend to Rs. 25 lakh, or both. Provided that it is proved that the operations were conducted fraudulently. Then every officer in default shall be liable for action.

 

What are the documents required for Section 8 Company ?

What is the Procedure of Incorporation of Section 8 Company ?

List of various e-forms required for Incorporation as a Section 8 company :–

 

Number 

Purpose of Form

INC-1

To apply with the ROC for Name Approval.

INC-7

Application for Incorporating the Company

INC-8

Declaration to Apply for PAN & TAN

INC-9

Affidavit from each Director and subscriber of the MoA

INC-12

This is to apply for the issuance of License to operate as a Section 8 Company.

INC-13

Memorandum of Association (MoA)

INC-14

Declaration from a practicing Chartered Accountant or Company Secretary

INC-15

Declaration by each Subscriber of MOA (On duly notarized Non- judicial stamp paper of Rs. 100/-)

INC-16

License to operate as Company under Section 8 of the Companies Act, 2013

INC-22

Notice of Location of the registered office

DIR-2

Consent of Directors to act on behalf of the Company

DIR-3

Application to ROC to get DIN

 

Appointment of Directors of the Company

Application for grant of License :- A company seeking to be incorporated as a Section 8 Company must apply for a license from the Central Government in Form INC-12 as specified under Section 8 of the Companies Act. The license, essentially, permits them to delete the words ‘Private Limited’ or ‘Public Limited’ from their name. After obtaining this license, the company becomes eligible for various exemptions/deductions under Income Tax law and also gets concessions in the fee.

Incorporation :- The process of incorporating a Section 8 Company is almost similar to that of a limited company  under the Companies Act, 2013. A minimum of 2 or 3 directors depending upon whether it is private or public limited company (though the names ‘private limited’ and ‘public limited’ are omitted) shall subscribe to the MoA. One director of the company must be a resident in India.

The application for incorporation is made through e-form SPICe (Form INC-32) which is an integrated form for allotment of DIN, reservation of name and incorporation of a new company. The following documents are required to be filed along with the application :-

  • MoA in Form INC-13,
  • AoA, Declaration from CA/CS/CWA in Form INC-14,
  • Declaration by Directors or Applicant in Form INC-15,
  • Name Approval Letter,
  • 3-year estimate of future income & expenses.

After the concerned Registrar is satisfied with the information furnished in the application along with the documents filed, he shall issue a Certificate of Incorporation mentioning therein the unique CIN (Company Identification number) which acts as proof that the company has been created.

 

 

Do you still have few more Questions ?

Let us Answer!

 Any person or an association of persons intending to register a limited liability company for objects specified below can opt to apply for registration of Section 8 Company.

The following have to be proved to the satisfaction of the Central Government that:

  • its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
  • the company after incorporation intends to apply its profits, if any, or other income in promoting such objects only; and
  • the company intends to prohibit the payment of any dividend to its members.

 

 Registrars of Companies of respective jurisdictions are delegated with the powers of Central government to issue license to Section 8 Companies. [vide MCA notification dated 21st May, 2014 – Annexure D].

The term “person” is not defined under the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that “person” shall include any Company, or association or body of individuals, whether incorporated or not. Therefore such a person can be natural or a legal person.

It is also relevant to note that by virtue of provisions of section 8(3), even a partnership firm can be a member of Section 8 Company.

To incorporate a Section 8 Company, an application shall be made to the Registrar of Companies in Form no. INC.12, which shall be accompanied, inter alia, by the following documents:

  1. Draft Memorandum of Association (MOA) and Articles of association (AOA) of the Company in prescribed format (Form no. INC – 13) where the photographs of subscribers are affixed.
  2. A Declaration is to be attached in Form no. INC-14 (on the stamp paper, duly notarized) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with.
  3. An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
  4. A declaration (in Form no. INC-15) on stamp paper duly notarized by each of the persons making the application and
  5. Form no. INC-9 from each subscribers and first directors, on appropriate stamp paper of the State and duly notarized.

 No. Rule 20(1) of the Companies (Incorporation) Rules, 2014 provides that only a limited company registered under this Act or under any previous company law shall make an application to the Registrar for issue of license. Therefore, a company with unlimited liabilities cannot be registered as a Section 8 Company.

 Section 8 Company may be incorporated as a company limited by shares or by Guarantee (with or without share capital).

 Yes. As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc.

 

 Section 2(42) of the Companies Act, 2013 defines the term “Foreign Company” and means any company or body corporate incorporated outside India which :–

  • has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
  • conducts any business activity in India in any other manner.

Now since a Company or a body corporate incorporated outside India for doing not for profit activities, which has opened a branch/liason office in India, cannot fall in definition of a foreign company as business activity is missing. Therefore, such company cannot be termed as foreign company. However, subject to compliance of FEMA regulations, it can open branch/liason offices.

Such not for profit companies or bodies corporate incorporated outside India can promote and register a Section 8 Company in India as a distinct entity.

 No, Rule 3(6) of the Companies (Incorporation) Rules, 2014 prohibits one person company to invest in securities of any body corporate.

 Yes, under the Companies Act, 2013, a Partnership firm or an LLP can become the member of Section 8 Company. The provisions of respective Acts need to be complied with by the partnership firm or LLP as the case may be.

Scope of our Services :-

A Company Secretary has an important role to play in incorporation of a Section 8 Company. We are ready to serve you through the integrated efforts of our strong team of expert professionals for all your needs pertaining to Incorporation of a Section 8 Company in a systematic and phased manner as outlined below :-

  1. Help in applying to RUN (Reserve Unique Name) form to obtain and reserve an appropriate name for the company. This is the first step of incorporating a section 8 company
  2. We help in applying for DSC and DIN of the directors.
  3. Preparation of all crucial documents, such as, MoA, AoA, financial statements, and other declarations that are required to be filed.
  4. Applying for RD1 license. This is the most crucial step in the process of registration.
  5. Filing the SPICe form with both valid name and license.

On receiving a request our representative shall contact you at the time of your convenience to collect necessary information and documents required for Incorporation of a Section 8 Company. He shall act as a front-office Relationship Manager for all communication with you. At the back-office he shall coordinate with our in-house team of professionals comprising of legal experts, Chartered Accountants, Company Secretaries, Document Writers and other junior officers to get the work executed systematically, while remaining in touch with you throughout.

Why Filing Door Stands Out ?

 

   Strong team of qualified experts – Our strength in matters related to Incorporation of a Private Limited Company is attributed to our team of highly qualified and experienced working professionals from different disciplines, including legal experts, Chartered Accountants, Company Secretaries, Document Writers etc. who work in tandem with each other and are assisted by junior officers.

 

⇒  Smooth and seamless interaction – We endure to provide our best services in all matters relating to Incorporation of Private Limited Company, by ensuring smooth and seamless interaction with you preferably through digital communication mode to save your time and efforts.

 

⇒  The entire process is digitized – We have digitized the entire process of Incorporation of Private Limited Company using a dedicated software comprising a comprehensive checklist to ensure that all the obligations are fulfilled at each stage within the prescribed due time. Using this software, we are able to provide end to end services on all aspects relating to Incorporation of a Private Limited Company in a systematic manner. We also have specially designed data-entry forms which are essentially replicas of various e-forms prescribed for Incorporation of a Private Limited Company and shall be shared with you online for filling in the desired details under assistance from our team.

 

⇒  Regular Updating – The names and contact details of all our esteemed clients are preserved in a database which enables us to send them updates on new policies and regulations whenever they are announced, through SMS/WhatsApp/E-mail entirely free of cost.

 

 ⇒  Total Business Solution – We provide service assistance in each and every aspect of doing business whether in relation to its establishment or its working as well as undertake to provide total business solution on turnkey basis.     

 

    FilingDoor is India’s most trusted technology-driven legal advisory and tax filing platform that ensures a smooth transition of accounting operations for startups and established businesses. Found in the year 2017, FilingDoor is based in Delhi and has successfully assisted 5000+ clients till now. Some of our core services include government registrations & filings, accounting, documentation, and annual compliances. We aim to offer hassle-free legal consultancy and tax-related services to individuals and businesses.

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