Section 8 Company

A Section 8 company, also known as a non-profit company, is a type of organization that is established for the promotion of social welfare, charitable purposes, or any other non-profit objective such as education, science, art, or religion. The name “Section 8” refers to Section 8 of the Indian Companies Act, 2013, which governs the incorporation and operation of such companies in India. Section 8 companies are not formed for profit-making purposes, and any income generated from their activities must be used for the promotion of their objectives. They are allowed to accept donations and grants from the public, but they cannot distribute any profits or dividends to their members.
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Overview of Section 8 Company

Section 8 Company is a non-profit organization that is incorporated under Section 8 of the Companies Act, 2013 in India. It is formed for the promotion of commerce, art, science, education, research, social welfare, religion, charity, or any other object that benefits society. The main objective of a Section 8 Company is not to earn profits but to promote charitable or social causes.

Section 8 Companies are exempted from the minimum paid-up capital requirement and can be registered with a nominal amount of capital. They can raise funds through donations, subscriptions, grants, or contributions from members or the public. The profits earned by a Section 8 Company must be utilized towards the promotion of its objectives, and no dividend is paid to its members.

• Section 8 company is similar to Trusts & societies. But trusts & societies are registered under state regulations. Section 8 companies have various advantages over trusts & societies in terms of improved recognition & better legal standing, higher credibility in the market, etc.
• A section 8 company works as a limited company but it cannot use the word ‘limited’ in its name.
• In case they don’t fulfill them, the central government may also order them to wind up the company.
• In case the fraud objectives of the Company are proved, legal action will be taken against all officers of the Company.

Advantages of Section 8 Company

Privileges and Exemptions from Government Many privileges and exemptions are available to section 8 companies under Company Law.
Credibility Section 8 company enjoys more credibility as compared to any other non-profit organization be it a trust or a society due to more stringent regulations regarding functioning paints a more reliable picture.
No title to be Suffixed Unlike Private Limited or Public Limited Company, there is no requirement of suffixing any title like Pvt. Ltd., etc. next to its name.
Name options Section 8 Company can be registered with names containing words like Association, Foundation, Club, Charities, Foundations, Organisation, etc.
Transferability Another advantage of Section 8 Company is that the management can be transferred easily by just altering the composition of the Board of Directors.
No minimum capital Section 8 Companies are exempted from the requirement of Minimum Paid-up capital
No stamp Duty Section 8 Companies are not required to pay any Stamp duty for registration
Deduction under section 80G to donors Donors of the Company are entitled to tax deduction u/s. 80G of the Income Tax Act.
Ease of formation Section 8 company can be formed by two persons only, by complying with the prescribed formalities of the Companies Act. Many privileges and exemptions are provided under Company Law. A registered partnership firm can be a member of its capacity.
Limited Liability The greatest benefit of Section 8 Company is limited liability. If any liability arises then its member is not personally affected; members are only liable for unpaid shares held by them and not more than that.
Separate legal entity This is the most prominent quality of a Section 8 Company.The biggest advantage of a section 8 company is that its identity is distinct from that of its members. A company is a separate person having its rights & Obligations.
Greater flexibility A Section 8 company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law.
Tax benefits A Section 8 company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets.

Registration Process

Step 1:Obtaining DSC & DIN: The first and foremost step to incorporate the Company is to Apply for DSC and DIN of the director. DSC and DIN are required for filling the forms of company registration electronically to the Ministry of Corporate Affairs. DSC is obtained from Certifying Agencies. DIN is the Unique Number allotted to the Directors of the company which remains valid for the whole life of the director and is required to become director of any company. It will take 5-7 days.

Step 2:Company Name Availability:The next step is to apply the Name of the company in Form RUN (maximum 2 names). Most Crucial aspect of company registration is the name approval of the company.

Step 3:Drafting of MOA & AOA:After the name of the company is Approved, the Memorandum of Association and Articles of Association of the company is drafted electronically with MCA in Form INC-13.

Step 4: License under Section 8:Legal Suvidha Providers representative will then make an application in Form INC-12 along with the prescribed fee, to the Registrar for a license under section 8.

Step 5: Certificate of incorporation: After filling the Requisite forms for incorporation with the Registrar of Companies along with fees, ROC will issue the License (Certificate of Incorporation) under section 8 and the Company shall enjoy all the privileges and exemptions granted. MCA will usually approve the application for incorporation in 5-7 days, subject to their processing time.

Required Documents

1. ID proof for members

2. Address Proof

3. Passport size Photographs

4. Copy of Rent agreement(If rented property)

5. Electricity/ Water bill (Business Place)

6. Copy of Property papers (If owned property)

7. NOC of Landowner

8. Director’s Directorship details (in other Companies/LLPs, if any)

FAQ's Section 8 Company :-

Profit or Income of Non-Profit Company can only be used for promotion of the charity work in which it is involved. Even the declaration of dividend or distribution of profit to its promoters is not allowed.
No. Promoters of Non-profit company can be employed as paid employees of the company.
Yes, Section 8 company be converted into a private limited company after taking the approval from ROC.
The Director required to be above 18 years of age and must be a natural person. He may or may not be a citizen or residence of India. We can say that even foreign nationals can be Directors in Indian Section 8 Company.
In the case of Section 8 Company, minimum no. of the director is two.
No minimum paid-up capital is required to register the Section 8 company.
Apply for PAN and TAN • Apply for Sales Tax / Service Tax Registration based on the nature of Business. • Filing ADT-1 for Appointment of First Auditor of the Company within 1 Month of Incorporation of Company and in case the Board fails to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an Extra Ordinary General Meeting appoint such auditor and such auditor shall hold office till the conclusion of the first Annual General Meeting. • Filing Income Tax Return of Company on or Before 30th September every year • To maintain proper Books of Accounts • Get your account books Audited Every Year.
Yes, an NRI can register a Section-8 Company provided all the documents required are submitted and notarized by the professionals.
There are various privileges and exclusions under Company Law. • There is no need for a Minimum paid-up Capital. • Stamp duty registrations are also exempted. • Companies Auditor is not applicable. • Any registered partnership firm can be a member of its capacity. • Tax deductions to the donors of the Company.
It is important to have objects with a non-profit motive, and then it can be registered as Section-8 Company.
he registration under the Companies Act, 1956 is unchanging in nature and provides continuous existence. Under extreme conditions, such companies can be reimbursed. The government is the official liquidator of Corporations.
Yes, Corporate Social Responsibilities(CSR) is a part of all companies and similar to Section 8 Company it has non-profit related objectives.
The main objectives of Section 8 Company must ensure that it is related apply its profits(if any) in promoting and supporting the objectives. It should not provide any benefit/fund to its members. The objects to be promoted includes: • Commerce • Science • Sports • Research • Education • Social Welfare • Religion • Charity • Protection of Environment.

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