What is Section 8 Company?
Section 8 of the Companies Act 2013 provides for the formation of the companies with charitable objects etc. Section 8 Company, (earlier Section 25 Company of the Companies Act, 1956), is a legal entity for Non-Government or Non-Profit Organizations. It is a type of company which is established with the objective to promote commerce, arts, science, sports, education, research, social welfare, protection of the environment or any other such object.
What are eligibility for Section 8 Company registration?
- Minimum Two People: Two person is required to become the shareholder / director of the company. However, the number of shareholders can’t exceed 200
- No Minimum Capital: No minimum capital is prescribed, it must be based on the business requirements. The registration fee is based on the amount of capital.
- One Resident Director: Among director, one person must be resident Indian.
- Unique Name: The name of the section 8 company should be unique and should not be similar to the any existing company name or trademark.
- Social or Welfare Object: The object of the section 8 Company shall be to promote Commerce, Art, Science, Sports, Education, Research, Social Welfare, Religion, Charity & Protection of Environment. It Intends to apply all its profit in promoting the objectives.
- No Profit Distribution: Profits of section 8 company to be applied only for the promotion of object of the company for which it is formed and there is a prohibition on payment of dividend to its members.
What are document required for Section 8 Company registration?
Identity proof of Directors and Shareholders
- PAN Card for Indian Nationals (Mandatory)
- Passport for Foreign Nationals (Mandatory)
- Proof of nationality for Foreign Nationals
- Proof of Identity (Voter ID/Passport/Driving License) (any one)
- Resolution of the board of company / LLP for authorization of director/partner
- 2 Passport size photos.
Address proof of Directors and Shareholders
- Bank statement/Electricity/Telephone/Mobile bill) (not older than two months) (any one)
Proof of Registered office
- Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts (any one)
- Copy of the utility bills (Telephone/Gas/Electricity bill) (not older than two months) (any one)
- NOC from Landlord
- DSC form (physically signed)
Note: All the Documents in case of Foreign Director should be additionally complied as follows:
- Notarized (if residing in commonwealth countries)
- Notarized & Apostiled (if residing in country which is signatory to Hague convention)
- Notarized & Consularised (If not covered in above categories)
What are procedure for Section 8 Company registration?
- Name approval of the company: The first step in incorporation is to reserve/approve the name of company. The proposed name selected should do not contain any word which is prohibited under Companies Act, 2013. An approved name is valid for a period of 20 days from the date of approval, for a new company. It is permitted to apply for two proposed names and one Resubmission (RSUB) while Reserving Unique Names for companies through the RUN web service.
- Digital Signature Certificate (DSC) of Director: The application for section 8 company is filed online and it is mandatorily required to be signed by the director and shareholder of the company. So DSC is required to be taken by those directors and shareholder of the company, , who is required to sign the e-form for registration of the company. Photo, ID and Address proof is required to along with DSC application form for issuance of DSC.
- Director Identification Number: It is a unique identification number to the director issued by Registrar of the companies (ROC) for becoming a director in India. An application is filed along with ID and address proof duly attested by CS/CMA/CA.
- Approval of other authorities: The Registrar of Companies may require the applicant to furnish the approval or concurrence of any department,regulatory body, appropriate authority, or Ministry of the Central or State Government(s) in relation to the work to be done.
- Obtaining Section 8 Company Licence : After the company’s name is approved, one needs to apply for a Section 8 Company licence from the MCA. The Registrar of Companies may,at its discretion, grant the licence with or without certain conditions. The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such licencing conditions as may be specified by the Registrar in this behalf.
- Document submission: Application for registration/license of section 8 company is made to Registrar of Companies (ROC) along Memorandum and Article of Associations, declaration, affidavits etc.. Minimum two persons are required for Incorporation of section 8 company.
- Registration Certificate: ROC then scrutinizes the incorporation form and documents, if ROC finds the documents are in order, issues Certificate of Incorporation of section 8 company. Certificate of Incorporation are conclusive evidence of registration of company. After receiving the certificate of Incorporation the section 8 company is set to start its function.
- PAN & TAN: Permanent Account Number (PAN) & Tax Deduction Account Number (TAN) are allotted by the Income tax Department to the company. These identification numbers are essential for smooth operation of the company. These are applied along with company incorporation documents. These are mentioned on Certificate of Incorporation.
- Opening of Bank Account: On submission of Certificate of Incorporation & other essential documents, bank open a current account in name of company, required for smooth running of the company.
What are advantages of Section 8 Company registration?
- Tax Exemption: Numerous Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies, they can claim the Tax exemption against the donation they made to a Section 8 company.
- No minimum capital requirement: There is no prescribed limit over section 8 companies for the minimum capital requirement unlike other entities such as public limited, but the capital structure can be altered at any stage as the required for the growth of the company.
- No stamp duty payable: A section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.
- Separate Legal Entity: Company legal entity are separate than its shareholders/promoters.
- Perpetual Existence: Company existence will go for ever and its existence will not be effected by the death of shareholders, directors or transfer of shares to others.
- Credibility: A Section 8 Company has more credibility as compared to any other Non-profit organization structure be it a Trust or Society. As it is a licensed by the central government. It has more stringent regulations such as no change in MOA and AOA can be done at any stage or situation in a Section 8 Company. A section 8 company due its strict compliances as regard to functioning has a more reliable image in comparison to other legal structures.
- No title required: Unlike the names requirements of the private limited or a public limited company, a section 8 company does not require to use a suffix next to its name.