What is a Section 8 Company?
Section 8 companies are Not-for-Profit organisations incorporated under the Companies Act, 2013. These companies do not operate with a prime business motive, and hence are different from the other class of companies.
Section 8 Company Registration in Bangalore, India
Section 8 Company is an organization which is registered as a Non-Profit Organization (NPO). NPO/Section 8 Company has its objective of promotion of arts, commerce, charity, education, protection of environment, science, social welfare, sports, research, religion etc. and intends to apply its profits, if any, or other income in promoting its objects. It functions exactly like a limited company including all the rights and obligations that are associated with such a company.
A Section 8 Company is similar to a Trust or Society; except, a section 8 Company is registered under the Central Government's Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations.
Compared to a trust or a society, a Section 8 Company has various advantages like improved members' reach, better legal standing, credibility, transparency of donations received etc. The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
The major difference of section 8 and other limited companies are as follows:-
- Formed with the object the of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other matters.
- The profit generated from the activities can be used only to meet administrative and other expenses incurred in the performance of activities mentioned in the Memorandum of Association i.e, dividend payment is prohibited.
Importance Of Registration
Advantages of Section 8 Company
Section 8 company advantages are not limited to giving internal satisfaction of helping people. From a financial standpoint, there are advantages that make going through the section 8 company registration process a strategic move:
- i) There are many tax benefits:
As a non-profit organization, a Section 8 company organization gets several tax benefits. In fact, there are some provisions in which they are exempted from paying income tax.
- ii) The share capital is minimal:
Unlike a limited company, a section 8 company doesn't have to minimum share capital. It means that even if you don't have any capital to put into your Section 8 Company, you can set it up
- iii) It doesn't have to add suffix:
Section 8 Company doesn't have to add "limited company" at the end of its name. It's not required for this type of company to use any title either.
- iv) Transferring the ownership is easy:
As the structure of this non-profit organization is same as the company, it's easy to transfer its ownership within its members.
- v) It is more trusted than other organizations:
Anyone can start a non-profit organization, but it's the section 8 company that is seen credible by the government, and the people. Therefore, it's almost certain that your NPO, once you register it as a Section 8 Company, would receive more donations
As you can see, the benefits of setting up a section 8 company are many. But especially, it can make your charity organization more credible.
Requirement and Compliances Under Section- 8 Company Registration in India
Minimum Requirement
A Section 8 Company is a company to be incorporated by the Ministry of Corporate Affairs. Minimum two directors and two members are required to incorporate it.
No minimum share capital is required for section 8 company registration.
Charitable object
Section 8 companies are required to be incorporated with non-profit objectives. Any profit earned through a section 8 company will not be distributed among its members.
It will either be reinvested in the business or utilized with an objective of furtherance of its main objects, i.e. charitable purpose.
Management Team
Unlike other Trusts which are managed by the Trustees as per a Trust Deed, section 8 Companies are governed by the Board of the Director as per the MoA and AoA of the Section 8 Company.
Regulated Under Companies Act, 2013
Section 8 company also needs to follow the rules and regulation that are prescribed under the Companies Act, 2013. Maintaining Book of accounts, filing of returns as and when required.
Income tax
A company has to follow the provisions of Income Tax Act.
GST Registration
Every person or company who is indulged into providing goods and services whose aggregate turnover crosses Rs.40 lakhs in a year requires GST Registration.
Incorporation Process
Prepare DSC and file Name Approval
The very first step for Section 8 company registration is to prepare DSC. Apply for Digital Signature Certificate (DSC) as soon as possible.
Section 8 companies should contain words like Foundation, Society, Association, Council, Club, charities, Academy, organisation, Federation, Institute, Chamber of Commerce, Development and many more.
Apply for Section 8 Company registration license from Regional Director, MCA (INC-12)
After Name approval, we will apply for Section 8 company registration license from Regional director.
The regional director will review the objectives, plans and will grant a permit for Section 8 Company registration. RD usually takes 15 days to issue a license to operate as a section 8 company.
Filing of Section 8 Incorporation Forms on MCA Portal
After getting approval from the regional director, we will proceed to file the section 8 company registration application with the requisite documents before ROC.
Once all clarifications are provided to ROC, the ROC shall issue a Certificate of Incorporation along with a Company Identification Number (CIN).
MoA and AoA file submission
Once you get the License, you need to draft the Memorandum of Association (MoA) and Article of Association (AoA) to file section 8 company registration applications.
The Object of the company will be detailed in the MoA and the rules, and the by-laws will be mentioned in the AoA.
PAN, TAN and Bank Account
You must have your PAN, TAN and bank account ready while going for Section- 8 Company registration in India.
Documents Required
Documents Required For Section 8 Company Registration
You need to have the following set of documents for Section 8 Company registration:
- PAN Card of the Directors and Shareholders
- Aadhaar Card
- Latest Bank Statement
- Telephone Bill or Electricity Bill
- Voter ID or Passport or Driving license
- Passport size photograph of all the directors and shareholders
- Copy of the Rental agreement, in case the property is on rent for the registered office
