Section-8 Registration

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Section 8 Company Registration

A Section 8 Company is a non-profit organization that aims to promote charitable activities, art, science, education, and sports. The profits of such companies are utilized for promoting these objectives and are not distributed among the Company's members. It is essential to understand what is Section 8 company, document requirements, and company incorporation process.

According to the Companies Act 2013, a Section 8 company is defined as an organization whose objectives are to promote arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or other similar activities goals. These entities utilize their profits to achieve their mission and do not distribute dividends to their shareholders.

Advantages of Section 8 Company Registration in India

Following are the advantages of Section 8 Company Registration in India:

1. Separate Legal Entity:

These types of companies in India are considered as a separate legal entity, which means that they can own property, sue or be sued in their name, and enter into contracts.

2. More Trustworthy & Credibility:

Due to its non-profit nature, Section 8 Companies are often viewed as more credible & trustworthy than other types of Companies.

3. Nil Stamp Duty:

These Companies are exempted from paying stamp duty on their Registration Documents.

4. Minimum Share Capital:

These companies don’t have any minimum capital requirement.

5. No Minimum Capital is Required:

In India, Section 8 Companies do not have a minimum capital requirement and they can adjust their capital structure as per their growth and give them more flexibility.

6. Exemption to Donors:

Tax exemption is only allowed to the donations received by the Section 8 Company under Section 12A & 80G of the Income Tax Act.

Eligibility Criteria for Section 8 Company Registration in India

Following is the eligibility criteria for Section 8 Company Registration in India:

  • At least 1 Director is required and he or she should be a resident of {cityName} At least 1 Director is required and he or she should be a resident of India
  • HUF, an individual is eligible to commence a Section 8 Company in {cityName} HUF, an individual is eligible to commence a Section 8 Company in India
  • The objective of the Company should be one or more of the following – the advancement of science & art, social welfare, promotion of sports/arts, and financial support to lower-income groups The objective of the Company should be one or more of the following – the advancement of science & art, social welfare, promotion of sports/arts, and financial support to lower-income groups
  • 2 or more individuals who will act as Directors/Shareholders should fulfill all the compliance & requirements of the Section 8 Company Registration under the Companies Act 2 or more individuals who will act as Directors/Shareholders should fulfill all the compliance & requirements of the Section 8 Company Registration under the Companies Act
  • Directors, founders, and Members Directors of the Company cannot draw any remuneration in any form of cash or kind Directors, founders, and Members Directors of the Company cannot draw any remuneration in any form of cash or kind
  • No profit should be shared or distributed among the Directors & members of the Company indirectly/directly No profit should be shared or distributed among the Directors & members of the Company indirectly/directly

Requirements for Section 8 Company Registration

Following are some vital requirements for Section 8 Company Registration:

1. Directors:

For Section 8 Company Registration in India, a minimum of 2 Directors are required.

2. Capital Requirement:

There is no minimum paid-up capital for the Registration of Section 8 Company. NGOs in India established as a Section 8 company need not use the words Private Limited or Limited in their name.

3. Management

Section 8 Company is managed by the BoD (Board of Directors) as per AoA & MoA of the Company, unlike other Trusts that are handled by the Trustees as per the Trust Deed.

4. Regulation under various Acts:

Section 8 Company needs to follow the Rules & Regulations prescribed under the Companies Act, 2013. It needs to file returns & maintain Books of Account with ROCs. Section 8 Company can’t make any alterations to the provisions of Memorandum of Association (MoA) & Articles of Association (AoA) without prior consent of the Central Government and it should follow the provisions of the GST Law & Income Tax Act.

5. Charitable Objects:

In India, Section 8 Companies are registered with non-profit objectives. The AoA & MoA must mention the purpose for which it is set up. Any profits earned by the Section 8 Company is utilised for the furtherance of its main objectives i.e., charitable purposes in the Company. The profits will not be distributed among its members.

6. DSC and DIN:

DSC or Digital Signatures of all the proposed Company’s Directors are necessary for the Registration because the forms for the Registration process are filed online & should be digitally signed. Apart from DSC, you need to apply for DIN for the Directors and the application for allotment of DIN must be filed in Form DIR-3 or along with the SPICe+ Form for the Registration.

Documents Required for Section 8 Company Registration

Following are some crucial documents required for Registration of Section 8 Company:

Identity/Address proof of Directors or Shareholders:

  • Passport size photographs of Directors/Shareholders Passport size photographs of Directors/Shareholders
  • Copy of DL or Voter ID Copy of DL or Voter ID
  • Copy of latest bank statement & utility bills Copy of latest bank statement & utility bills
  • Copy of Aadhar Card Copy of Aadhar Card
  • Copy of Passport (In case of NRI or Foreign National) Copy of Passport (In case of NRI or Foreign National)

Address proof of Registered Office:

  • Copy of latest electricity bill or water bill or gas bill (not older than 2 months) Copy of latest electricity bill or water bill or gas bill (not older than 2 months)
  • In case of rented office, Rent Agreement is required In case of rented office, Rent Agreement is required
  • NOC from the property owner NOC from the property owner

Other Documents:

  • MoA & AoA MoA & AoA
  • Consent of Nominee (INC-3) Consent of Nominee (INC-3)
  • DSC (Digital Signature Certificate) DSC (Digital Signature Certificate)
  • Declaration by the 1st Director Subscriber Declaration by the 1st Director Subscriber (an affidavit is not required)
  • Copy of Incorporation Certificate of an overseas corporate body Copy of Incorporation Certificate of an overseas corporate body (if any)
  • A Resolution passed by the promoter company A Resolution passed by the promoter company
  • Declaration of unregistered companies Declaration of unregistered companies
  • Residential & identity proof of subscribers & nominees Residential & identity proof of subscribers & nominees

Procedure for Section 8 Company Registration

Following is the step-by-step procedure for Section 8 Company Registration:

Step 1: Obtain DSC & DIN:

First, the applicant needs to obtain a Digital Signature Certificate of the proposed Directors. Once they receive DSC, file Form DIR-3 with ROC for obtaining DIN. The identity & address proof should be attached for getting DSC. Once DIR-3 is approved, the Registrar of Companies will allot a DIN to the proposed Directors.

Step 2: Filing of INC-12 Application Form:

After getting DSC and DIN, the next step is to file Form INC-12 with the Registrar of Companies to apply for a Licence under Section 8 Company along with the attachment of the required documents. Once the form is approved, a Licence under Section 8 Company will be issued in Form INC-16.

Step 3: Filing of SPICe+ Form:

After getting License under Section 8, you need to file SPICe+ Form with the Registrar of Companies (ROC) for the Registration along with the vital documents.

Note: Once the Registrar of Companies is satisfied with the forms submitted, he or she issues a CoI (Certificate of Incorporation) along with a Unique CIN

What are the Annual Compliances for Section 8 Companies in India?

Following are the annual compliances for Section 8 Company:

  1. Mandatory Audit Report
  2. Maintenance of Books of Accounts
  3. ITR filing
  4. Conduct a minimum of 2 board meetings in a year
  5. Preparation of Financial Statements
  6. Filing of financial statements in Form AOC-4
  7. An Annual Return is to be filed every year with other e-filing forms like MGT-7
  8. Additional compliance to fulfil the Registration like 12AA, 80G, etc

Penalties for Non-Compliance

As per the Companies Act, if the Company fails to comply with the legal provisions, then the Central Government will cancel the License for Section 8 Company. If the Company’s objectives are conducted fraudulently or in violation of the objectives for which it is established, the licence can be cancelled. In case a Company fails to comply with the provisions of the Companies Act, then the Company will be punishable with a fine not less than Rs. 10 lakhs & may extend to Rs. 1 crore. The Officers & Directors of the Company in default of the provisions will be punishable with a fine not less than Rs. 25,000 which may extend to Rs. 25 lakhs or both.