SECTION 8 COMPANY INCORPORATION

A Section 8 Company, as per the Companies Act, 2013 in India, is a type of company established for promoting charitable or non-profit objectives. The primary purpose of a Section 8 Company is to apply its profits or income towards promoting activities such as education, art, science, charity, religion, or any other socially beneficial purpose. The income generated by a this Company is utilized for promoting its objectives rather than distributing it among its members.

The primary objective of this Company should be the promotion of charitable or non-profit activities. It can include areas such as education, healthcare, poverty alleviation, environmental protection, social welfare, and more.

Benefits of section 8 company

Charitable and Non-profit Activities: Section 8 Companies are specifically designed for promoting charitable or non-profit activities. They provide a legal structure for organizations engaged in activities related to education, healthcare, social welfare, environment, and other socially beneficial causes.
Limited Liability: Members and directors of a Section 8 Company have limited liability. Their personal assets are generally protected in case of any debts, liabilities, or legal disputes of the company. This provides a level of financial security for the individuals associated with the organization.
Tax Exemptions: Section 8 Companies are eligible for various tax benefits and exemptions. They can enjoy income tax exemptions under Section 12A and Section 80G of the Income Tax Act, 1961. Donations made to Section 8 Companies are also eligible for tax deductions under Section 80G of the Income Tax Act, which encourages philanthropic contributions.
No Minimum Share Capital Requirement: Unlike other types of companies, Section 8 Companies do not have any minimum share capital requirement. This allows organizations to focus on their charitable objectives without the burden of meeting capital requirements.
Recognition and Credibility: Registration as a Section 8 Company provides legal recognition and credibility to an organization. It enhances trust and confidence among stakeholders, including donors, beneficiaries, government bodies, and the general public.
Easy Transferability of Ownership: Members can transfer their shares or ownership rights to other individuals or organizations, facilitating smooth transitions or changes in the organization’s structure.
Global Recognition: Section 8 Companies are recognized and respected globally as entities dedicated to social welfare and non-profit activities. This can facilitate collaborations, partnerships, and fundraising efforts with national and international organizations.

Exemption

Section 8 Companies in India, as per the Companies Act, 2013, enjoy certain exemptions and privileges to support their charitable or non-profit activities. Here are some key exemptions available to Section 8 Companies:

Tax Exemptions: Section 8 Companies are eligible for tax exemptions under the Income Tax Act, 1961. The following tax benefits are available to them:
- Income Tax Exemption: Section 8 Companies can avail income tax exemption on their surplus income, provided the income is applied towards the promotion of charitable or non-profit objectives. Such income is not subject to income tax.
- Donations Exemption: Donations made to Section 8 Companies are eligible for tax deductions under Section 80G of the Income Tax Act. This encourages individuals and entities to contribute funds to support the organization’s charitable activities.
Stamp Duty Exemption: Section 8 Companies may be eligible for stamp duty exemptions on various transactions and documents, such as those related to property acquisition, lease, or transfer.
Government Grants and Funding: Section 8 Companies are eligible to receive government grants, funding, and support for their charitable activities.
Compliance Relaxations: Section 8 Companies enjoy certain relaxations in compliance requirements, as compared to regular for-profit companies.
Foreign Contributions: Section 8 Companies can receive foreign contributions and donations under the Foreign Contribution (Regulation) Act, 2010 (FCRA). This allows them to engage in international collaborations and receive funding from foreign sources for their charitable objectives.

Eligibility

To be eligible to form a Section 8 Company under the Companies Act, 2013 in India, the organization must fulfill certain criteria. Here are the key eligibility criteria for a Section 8 Company:

Charitable or Non-profit Objectives: The primary objective of the company should be the promotion of charitable or non-profit activities.
Utilization of Profits: The company should have an intention to apply its profits, income, or any other earnings solely towards promoting its objectives.
No Dividend Distribution: Unlike other types of companies, a Section 8 Company should not have the intention of distributing dividends to its members. Any surplus generated must be utilized for furthering its charitable objectives.
Licensing Requirement: The company needs to obtain a license from the Registrar of Companies (ROC) to operate as a Section 8 Company. The license ensures that the organization meets the necessary criteria and objectives for a non-profit entity.
Name Restriction: The name of the Section 8 Company should end with words like “Foundation,” “Association,” “Society,” “Council,” “Charity,” “Institute,” “Organization,” or other similar terms. The name should not imply any intention to engage in activities that are prohibited or against public interest.
Minimum Directors and Members: A Section 8 Company should have a minimum of two directors for a private limited company and a minimum of seven directors for a public limited company. For a private limited Section 8 Company, a minimum of two members is required, and for a public limited Section 8 Company, a minimum of seven members is required.
Compliance Requirements: The Section 8 Company must comply with various statutory obligations, such as filing annual financial statements, annual returns, and maintaining proper accounting records. Regular board meetings should be conducted, and the company should adhere to all applicable laws and regulations.

Process

The process of registering a Section 8 Company under the Companies Act, 2013 involves several steps. Here is a general outline of the registration process:

Name Reservation: Choose a unique name for the Section 8 Company and apply for name reservation with the Registrar of Companies (ROC) through the RUN (Reserve Unique Name) service or SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form. Ensure that the name complies with the naming guidelines specified by the ROC.
Prepare and File Incorporation Documents: Prepare the necessary incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AOA) of the Section 8 Company. These documents outline the objectives, rules, and regulations of the company.
Digital Signature Certificates (DSC): Obtain Digital Signature Certificates (DSC) for all the proposed directors and subscribers of the Section 8 Company. The DSC is required for digitally signing the incorporation documents.
Obtain Director Identification Number (DIN): If the proposed directors do not have a Director Identification Number (DIN), apply for DIN online through the Ministry of Corporate Affairs (MCA) portal by filing Form DIR-3.
File Incorporation Documents: File the incorporation documents with the ROC. The SPICe+ form can be used for filing the incorporation documents along with the MOA, AOA, and other required information. Attach the necessary supporting documents, including identity proofs and address proofs of the directors and subscribers.
Pay Fees: Pay the prescribed fees for the registration process, including the registration fee and stamp duty.
Verification and Approval: The ROC will examine the documents and, if everything is in order, issue a Certificate of Incorporation. The Certificate of Incorporation serves as proof of the company’s registration.
Apply for PAN and TAN: After receiving the Certificate of Incorporation, apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the Section 8 Company.
Apply for Section 8 License: Once the company is incorporated, apply for a Section 8 License from the ROC. The application should include details about the company’s objectives, activities, and proposed utilization of income.
Compliance Requirements: After registration, comply with various statutory obligations, such as filing annual financial statements, annual returns, and maintaining proper accounting records. Conduct regular board meetings and ensure compliance with applicable laws and regulations

Documents:

To incorporate a Section 8 Company in India under the Companies Act, 2013, the following documents are typically required:

Memorandum of Association (MOA): MOA should clearly specify the charitable or non-profit objectives that the Section 8 Company aims to pursue.
Articles of Association (AOA): The AOA contains the rules, regulations, and internal governance structure of the company. It includes provisions related to the appointment and removal of directors, conduct of meetings, voting rights, and other operational aspects.
Form INC-12: This form is required for obtaining a license for a Section 8 Company. It includes details such as the name of the proposed company, its objectives, details of directors, and other relevant information.
Declaration and Affidavit: The proposed directors of the Section 8 Company need to submit a declaration and affidavit stating their eligibility, non-disqualification, and compliance with all the requirements of the Companies Act, 2013.
Address Proof: Documents proving the registered office address of the Section 8 Company are required. This can include a utility bill, rent agreement, or property ownership documents.
Identity Proof: Identity proof documents of all the proposed directors, such as PAN cards, passports, or voter ID cards, are necessary.
Address Proof of Directors: Address proof documents of all the proposed directors, such as Aadhaar cards, passports, or driving licenses, are required.
Passport-sized Photographs: Recent passport-sized photographs of all the proposed directors need to be provided.
Digital Signature Certificates (DSC): Digital Signature Certificates are required for digitally signing the incorporation documents. Each proposed director needs to obtain a valid DSC.
Consent to Act as Director: The proposed directors should provide their consent to act as directors of the Section 8 Company.
Declaration of Non-Association: The proposed directors should declare that they are not associated with any other Section 8 Company or have not been directors of any such company in the past five years.

Conclusion

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