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Section 8 Company Registration

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Section 8 Company Registration in India

Under the Companies Act 2013, a section 8 company is a non-profit entity established to promote sectors such as trade, arts, science, sports, education, research, social welfare, environmental protection, and other charitable causes. Unlike traditional profit-oriented companies, section 8 companies are formed to serve society and are legally prohibited from distributing profits among their members. If any profit is generated, it has to be reinvested in the company to fulfill its objectives.

Features of Section 8 Companies

Formed with a Non-Profit Objective: The primary aim of the companies incorporated under Section 8 of the Companies Act, 2013, is to promote charitable activities without the intention of earning profits.
No "Limited" or "Private Limited" Suffix: Unlike private or public companies, Section 8 companies do not use "Ltd." or "Pvt. Ltd." in their name.
Limited Liability: The members of the section 8 companies have liabilities limited to their shares in the company, which means that their personal assets are protected from the debts and liability of the company.
No Minimum Capital Requirement: No minimum capital is required to incorporate a Section 8 Company in India.
Separate Legal Entity: The company has its own legal identity in the eyes of the law and stakeholders, which allows it to own property in its name and incur debts independently of its members.

Benefits of Forming a Section 8 Company

Incorporating companies under Section 8 of the Companies Act, 2013 has several benefits, including:

Perpetual Succession: Companies incorporated under Section 8 continue to exist even if the members and the leadership of the company change.
Limited Liability: Directors and members of a Section 8 company enjoy limited liability, which means that their personal assets are protected from the company’s debts and liabilities.
Tax Benefits: Section 8 companies can avail of exemptions on income generated from their charitable activities under Section 12A of the Income Tax Act of 1961. Furthermore, once the company is recognized under Section 80G of the Income Tax Act of 1961, any donations received can offer donors significant tax relief.
No Stamp Duty on Incorporation Documents: It is a general rule that during the formation of a company, stamp duty is levied on the documents. However, Section 8 companies are granted an exemption from paying stamp duty on these documents in many jurisdictions.
Efficient Management: The corporate structure of a section 8 company allows for a professional board of directors, which in the long run leads to efficient decision-making and management.
Enhanced Credibility: Companies incorporated under Section 8 of the Companies Act, 2013, must comply with various rigorous compliances to maintain their legal standing. These include mandatory annual audits, regular board meetings, and periodic filings with the Registrar of Companies (ROC). Such strict operational rules make stakeholders and donors see the organization as more reliable and transparent compared to unregistered entities like certain trusts or societies.

Eligibility Criteria for Section 8 Company Registration

No minimum share capital: Under Section 8 of the Companies Act, 2013, there is no minimum share capital requirement for incorporating a company.
Charitable purpose: The company must be established with an object to promote non-profit activities like commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, or similar objectives
No profit sharing: Members of Companies under Section 8 of the Companies Act, 2013, are not allowed to share profit among themselves. If there is any surplus income, it shall be reinvested to fulfil the company's objectives.
A minimum of two directors is required: A Section 8 company needs at least two directors. The directors and the shareholders can be the same individuals.
Indian resident: At least one of the company's directors must be a resident of India.
Clear organizational plan: To establish a company under Section 8 of the Companies Act, 2013, the founders need a well-defined vision and a detailed plan that clearly outlines how the organization will achieve its non-profit objectives.
Name requirements: The chosen name for the Section 8 company should reflect its non-profit nature, such as “Foundation,” “Association,” or “Society.”

Documents Required for Section 8 Company Registration

1. For Directors:

Aadhar Card, PAN Card, or passport (for foreign nationals)
Recent Passport-size Photographs
Digital Signature Certificate (DSC)
Director Identification Number (DIN)

2. For the Shareholders:

Aadhar Card, PAN Card, or passport (for foreign nationals)
Recent Passport-size Photographs
A declaration using the INC-15 form

3. For the Company:

Address of the registered office
Memorandum of Association (MoA)
Articles of Association (AoA)
Form INC-12 (Application for Section 8 License)
Name Reservation Certificate
A declaration by a practising chartered accountant or company secretary confirms that the MoA and AoA of the company comply with the Companies Act of 2013.

Forms Required for Registration/Incorporation of a Section 8 Company

SPICe+ (INC-32): It is a mandatory form for incorporating a Section 8 Company, which includes name approval, DIN allotment, and company registration.
INC-12: The application form to obtain a license from the government to operate as a Section 8 Company.
INC-13: The prescribed Memorandum of Association (MoA) format.
INC-14 & INC-15: These are declarations by professionals and subscribers confirming that the company's objectives comply with Section 8 regulations.
DIR-2: It is a form where each proposed director is to provide their formal consent to act as a director of the company.
AGILE-PRO (INC-35): This form is used to apply for GST registration, EPFO, and ESIC and to open a company bank account during incorporation.

Section 8 Company Registration Process in India

Follow the following steps to register a Section 8 company in India:

STEP 1: Obtain Digital Signature Certificates (DSC)

All proposed company directors must acquire DSCs to sign electronic documents. DSCs can be obtained from authorized Certifying Authorities (CAs) like eMudhra, Sify, or NSDL. The Controller approves the issuance of DSCs by these agencies of Certifying Authorities (CCA).

STEP 2: Apply for Director Identification Number (DIN)

All proposed company directors must acquire a Director Identification Number (DIN) to file the incorporation documents. You can apply for DIN online via the Ministry of Corporate Affairs (MCA) portal by submitting Form DIR-3.

STEP 3: Name Reservation

Once DSC and DIN are obtained, the next step is to choose a name for your company that reflects its charity purpose. You can add words like ‘Foundation’ or ‘Association’ at the end. File and submit the Form INC-1 at the MCA portal to reserve a name for the company. The name shall be reserved for 20 days.

STEP 4: SPICe Form (INC-32) Filing

Submitting a SPICe form, a proforma for online Section 8 business incorporation, is the next step after obtaining a DSC and Section 8 company licence. You need the following information to complete the form:

Details of the Company
Details of Members and Subscribers of MOA and AOA.
Application for Director Identification Number (DIN)
Application for PAN and TAN
Declaration by Directors and subscribers
Declaration and Certification by professional

STEP 5: Draft MoA and AoA

Once your company name is reserved, draft the Memorandum of Association (MoA) to outline your organization’s charitable objectives and the Articles of Association (AoA) that define your governance structure.

STEP 6: File Incorporation Forms

Submit Form INC-12 to apply for a license under Section 8
Upon approval, file Form SPICe+ (INC-32) along with the MoA and AoA to incorporate the company.

STEP 7: Obtain Certificate of Incorporation

After verification, the Registrar of Companies (RoC) issues the Certificate of Incorporation, officially recognizing the entity as a Section 8 Company.

STEP 8: Apply for PAN and TAN

Once your company is incorporated, apply for the company's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).

STEP 9: Open a Bank Account

Use the Certificate of Incorporation, PAN, and other documents to open a bank account in the company's name.

Restrictions & Limitations of Section 8 Companies

Cannot distribute profits: All income must be used for charitable purposes
Government monitoring: Section 8 companies face strict scrutiny and regulatory audits.
Conversion restrictions: Section 8 Companies cannot easily convert into private or public companies without approval from the NCLT (National Company Law Tribunal).
Dissolution rules: If dissolved, assets must be transferred to another Section 8 company or a government entity.

Penalty Under Section 8

The corporation may be accused of fraudulent behaviour and subject to fines in line with Section 8 of the Companies Act of 2013's subsection (11) if the terms and regulations of the section are violated:

A fine of Rs. 10 lakhs that can exceed a maximum of Rs 1 Crore
Every Director of the organisation will be punished. They would be imprisoned for three years and fined a minimum of Rs. 25000, though this can exceed Rs. 25 lakhs.
Or the responsible person will experience both.

Donations on Registration of Section 8 Company

Accepting Donations for Section 8 Company: Once the Section 8 Company is successfully registered, it can begin accepting donations. However, it has to comply with the regulatory guidelines to receive funds.
Legal Requirements for Accepting Donations: A Section 8 Company must have 12A registration from the Income Tax Department to qualify for tax exemptions.
80G Certification:To enable donors to avail of tax deductions on their contributions, the company must obtain 80G certification. The company needs to register under FCRA to accept donations from foreign sources.
FCRA Registration for Foreign Donations: If the organization wishes to accept foreign donations, it is necessary to register under the Foreign Contribution Regulation Act (FCRA).

Revocation of License by Central Government

The Central Government holds the authority to revoke the license of a Section 8 company under the Companies Act, 2013, on the following grounds:

If the company contravenes any requirements specified in Section 8 of the Companies Act, 2013.
If the company violates any of the conditions to which the license was granted.
If the company's affairs are conducted fraudulently, in violation of its objectives, or in a manner prejudicial to the public interest.

Compliance Requirements for Section 8 Company

The following are the annual compliance tasks necessary for Section 8 companies:

Appointment of Auditor (Form ADT-1): Appoint a statutory auditor within 30 days of incorporation.
Maintain Books of Accounts: Keep accurate financial records of all transactions.
Maintain Statutory Registers: Maintain registers of members, directors, loans, and other statutory records.
Conducting Board Meetings: Hold a minimum of two board meetings annually.
Annual General Meeting (AGM): Conduct an AGM within six months from the end of the financial year.
Preparation of Financial Statements: Prepare audited financial statements, including Balance Sheet and Profit & Loss Account and file it with the MCA.
Filing of Financial Statements (Form AOC-4): File audited financial statements with the Registrar of Companies within 30 days of the AGM.
Filing of Annual Return (Form MGT-7): Submit the company's annual return within 60 days of the AGM.
Income Tax Return Filing: File the company's income tax return by September 30^th each year.
File Director's KYC (Form DIR-3 KYC) timely

Why Choose Kanakkupillai?

Kanakkupillai is a leading business consulting firm in India that offers a wide range of online business registration and compliance services. We are committed to helping businesses stay compliant with regulatory requirements. Here’s why Kanakkupillai is the preferred choice for thousands of entrepreneurs and businesses:

Experienced Professionals: Our dedicated team of over 500+ skilled professionals specialize in company registration, tax filing, and business compliance services.
End-to-End Compliance Solutions: We provide expertise in Section 8 company registration to ensure that your businesses meet all legal and regulatory requirements hassle-free.
Seamless Compliance Management: We understand that the legal standing of business is essential. Therefore, we provide efficient and simplified business compliance solutions that minimize complexities and legal risks.
Timely & Accurate Filings: We ensure on-time filing of incorporation forms, annual returns, income tax reports, and ROC filings to avoid delays and penalties.
Affordable Pricing: Transparent and budget-friendly, with no hidden fees
24/7 Customer Support: Our expert support team is available to assist with company registration, post-registration compliances, GST filing, and trademark registration.

Frequently Asked Questions

How can I raise funds for my Section 8 Company? +

Donations, grants, and other non-equity capital sources are some ways you might raise money. There is a legal prohibition on this kind of firm raising money through stock shares.

Does the Section 8 company have shares? +

A charitable corporation may be established under the Companies Act of 2013 as a Section 8 business. A limited guarantee (with or without share capital) or limited share capital may be used in this type of business.

Are there any minimum capital requirements for a Section 8 Company? +

No, in order to form a Section 8 Company, there is no minimum capital requirement. Any quantity of capital will be enough to register it as long as it is enough to achieve its goals.

Which is better, trust or section 8 company? +

It depends on your need. Both offer different benefits. Section 8 companies can be preferred for their structure, transparency and trustworthiness. While trusts are easier to set up and have lower compliance requirements.

To form a section 8 company, how many directors are required? +

Under Section 8 of the Companies Act, a minimum of two directors is required.