Section 8 Company is named Section 8 of the Companies Act, 2013, which pertains to a established ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. Therefore, Section 8 Company or Section 25 Company is a company registered under the Companies Act, 2013 for charitable or not-for-profit purposes.
A Section 8 Company is similar to a Trust or Society; expect, a section 8 Company is registered under the Central Government’s Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations. A section 8 company has various advantages when compared to Trust or Society like improved recognition and better legal standing. Section 8 company also has higher credibility amongst donors, Government departments and other stakeholders.
What are the Minimum Requirement of Registration of a Section 8 Company?
- Digital Signature Certificate (if you already have it)
- Director Identification Number (if you already have it)
- Memorandum of Association
- Articles of Association
- ID proof for members: (Aadhar Card, Passport, Voter ID)
- Passport size Photographs
- Director’s details (if Members are other Companies/LLPs)
- Address Proof
ELIGIBILITY FOR SECTION 8 COMPANY REGISTRATION
- Object must be Charitable or to promote arts, science, commerce etc
- Intends to apply all its profit in promoting the objectives
- Assures the prohibiting of the payment of dividends to any of its members
CONCERNS RELATED TO SECTION 8 COMPANY
- Profit or income of the Section 8 Company cannot be used for any object other than those mentioned in its MOA.
- Distribution of profits or declaration of dividend to its members is prohibited.
- No member can be appointed as an office of the company with any remuneration.
- Its income is taxed at the same rates as other companies.
- A Section 8 Company cannot alter the provisions of its MOA and AOA except with the previous approval of the Central Government.
ADVANTAGES OF SECTION 8 COMPANY REGISTRATION
- No Minimum Share Capital Requirement
- Easy Transfer of Ownership
- Tax Benefits
- No need to use “Section 8” or “Limited” title
- No Stamp Duty
- Clear Objectives for easy donations and loans
- Easy to Manage
- Exemptions and Privileges under Companies Act, 2013
- Relaxation in Compliances
PROCEDURE FOR SECTION 8 COMPANY REGISTRATION
- Application of DSC & DPIN: First of all, the partners have to apply for Digital signature and DPIN. Digital signature is an online signature used of filing and DPIN refer to Directors PIN number issued by MCA. If the directors already have DSC and DPIN, then this step can be skipped.
- Name approval: You to provide 3 different name options to MCA of which one will be selected. Names provided should ideally be unique and suggestive of company business
- 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 License: After the company’s name is approved, one needs to apply for a Section 8 Company license from the MCA. The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers. The Registrar might also consult any other regulatory bodies and necessary authorities.
Thereafter, the Registrar of Companies may, at its discretion, grant the license 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 licensing conditions as may be specified by the Registrar in this behalf.
- MOA & AOA submission: Once the license is obtained, one needs to draft Memorandum of association and Articles of Associate. But the object of the company must always be a charitable object. Both MOA and AOA are filed with the MCA with the subscription statement.
- Get Section 8 Company incorporation certificate: It typically takes 15- 25 days to form a Section 8 company and get the incorporation certificate. The Certificate of Incorporation is proof that a company exists. It also includes your CIN (Company Incorporation Number).The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers. The Registrar might also consult any other regulatory bodies and necessary authorities. Thereafter, the Registrar of Companies at its discretion may grant the license. And such license may contain conditions as deemed necessary by the Registrar.
- Apply for PAN, TAN and Bank account: Then you need to apply for PAN and TAN. PAN and TAN are received in 7 working days. Post this, you can submit the Incorporation certificate, MOA, AOA and PAN with bank to open your bank account.