INTRODUCTION:
Section 8 of the Companies Act, 2013 deals with the provisions of incorporating a company with non-profit objectives. Profit-making is not the objective of this kind of company and profits, if any, are contributed towards promoting and encouraging the objectives of the company. The shareholders do not get any share in profits as dividends.
The main purpose of registering a company as a company under this section is to promote non-profit objectives such as charity, education, trade, commerce, arts, religion, environment protection, social welfare, sports, research, etc.
For incorporating a Section 8 Company, a minimum of 2 directors are required. Further, there is no requirement of having a minimum paid-up capital in the case of Section 8 Company.Please note that Section 8 of the Companies Act, 2013 corresponds to Section 25 of the Companies Act, 1956.
ELIGIBILITY TO INCORPORATE A SECTION 8 COMPANY:
Some certain conditions/pre-requisites are needed to be present when an individual or a group of persons move ahead to incorporate a Section 8 Company. Such objectives/conditions have to be then confirmed by the Central Government. The conditions are as under-
- Objectives to form the company must be the promotion of science, commerce, education, art, sports, research, charity, social welfare, protection of the environment, or such other charitable objective;
- The profits or income earned by the company are earned to invest all of them in the promotion of the above-mentioned objects only;
- When the company has no intention to pay any dividends to its members.
DOCUMENTS NEEDED FOR REGISTERING A SECTION 8 COMPANY
Like any other private or public limited company, the following documents are required for registering a Section 8 Company:
- PAN of Promoters
- ID and Address Proof
- Passport size Photographs
- Digital Signature Certificate (DSC)
- Memorandum of Association
- Articles of Association
- Other relevant details of Promoters
OBTAINING DIGITAL SIGNATURES FOR DIRECTORS IN SECTION 8 COMPANY
Under the Trust Regulations in India, a trust is regulated and governed by the trustees mentioned in the Trust Deed. Section 8 Company shall be governed by the Board of Directors, as in the case of a Private Limited Company.
Right at the beginning of the incorporation, the DSC is obtained for the proposed directors.
To obtain the DSC, the following documents must be submitted:-
- PAN or Aadhar card;
- Drivers License/ Passport/ Election ID/ Any Government Issued ID.
Once these documents are submitted, the applicant is expected to complete an OTP and eKYC based procedure to get DSC in their name.
NAME APPROVAL OF SECTION 8 COMPANY
- While you initiate the process of submitting the DSC application, you can apply for name approval for the Section 8 Company via Spice Part A Service in the MCA Portal.
- The name of a Section 8 Company must preferably end with the words like Association, Electoral Trust, Foundation, Federation, Chambers, Council, etc.
- Ideally, the Name approval process gets completed within 24-72 hours.
PREPARATION OF MEMORANDUM & ARTICLES OF ASSOCIATION
- The MOA of Section 8 Company is drafted in Form INC-13 and since there is no prescribed format prescribed for AOA for Section 8 Company, the same should be prepared as per Table F provisions.
- MOA & AOA of the company will be signed by each subscriber along with his complete details like- name, address, description, and occupation.
- Such information shall be entered in the presence of at least one witness who shall attest the signature and would also sign there and further add his name, address, description, etc.
Note:
SPICe 33 and 34 i.e e-MOA and e-AOA cannot be used for Section 8 Company. Hence, Section 8 companies are mandatorily required to file MOA and AOA as pdf attachments to SPICe-32.
FILING OF SPICE 32 FORM
After getting the proposed name approval, you may proceed to file Form SPICe 32.
Attachments of SPICe 32:
The following are the documents that are required to be attached with the SPICe form for incorporation of Section 8 Company.
- Memorandum of Association in the format given in Form INC-13;
- Articles of Association; (No Specified format given in the Act)
- Declaration in Form INC-14 by a practicing professional, that the draft MOA & AOA have been made according to the provisions of Section 8 and rules made thereunder;
- Declaration by each of the persons applying in Form INC-15;
- An estimate of the annual income and expenditure of the company for the upcoming three financial years;
- Name Approval Letter as issued by the CRC/MCA;
- Form DIR-2- Consent and Declaration by first Directors;
- Form INC-9- Declaration by first subscribers;
- Copy of PAN card of first directors and subscribers;
- Copy of ID and Address Proof of first directors and subscribers;
- Proof of having a Registered office like Sale Deed/Lease Deed/Rent Agreement etc;
- Latest Utility Bill of Registered office, e.g. Electricity Bill;
- No-Objection Certificate (NOC) from the owner of the place if the registered office is taken on lease.
- Projected Statement of account for 3 years of the proposed Section 8 Company
- Grounds on which application for Section 8 License is made out
- Any other docuements which MCA may ask for.
ADVANTAGES OF SECTION 8 COMPANY REGISTRATION
- Exemption from heavy Stamp Duty.
- Tax deductions under Section 80G of the Income Tax Act.
- The Section 8 Companies are also capable of being formed without share capital. In such a case, the necessary funds for operating the business are brought in the form of donations, subscriptions from members, and also from the general public.
- These companies are not required to add the suffix Limited or Private Limited at the end of their name which establishes the non-profit making objective of the Company.
- A Section 8 Company has much higher credibility as compared to any other charitable/Non-Profit organization structure like Trust or Society.
HOW CAN COMPLIANCE CALENDAR HELP?
Incorporation of a section 8 company is no more a tedious task when you have the right advice right from the beginning of the plan. We, at Compliance Calendar LLP can guide you and connect you with the professionals who have experience in company registrations and further compliances.
Contact us for understanding all the nuances relating to the formation of a Section 8 Company. If you have already registered a section 8 company, do not forget to consult us for post incorporation compliance requirements.
Get in touch at 9988424211 or/and at [email protected] to get your concerns resolved!
