When a business is registered as a Non-Profit Organization (NPO), or when it has the intention of using its profits (if any) or other income for the promotion of the arts, commerce, education, charity, environmental protection, sports, science, research, social welfare, or religion, it is referred to as a Section 8 Company.
The income of NPO must be used to further philanthropic goals rather than for the payment of dividends to the organization’s shareholders. These businesses are required to abide by the government’s standards and receive an incorporation certificate from the national government.
In accordance with the regulations, the corporation may be shut down on the Central Government’s orders if the obligations stipulated therein are not met. In addition, if the company’s goals turn out to be false, strict legal action will be taken against all of the members.
Eligibility for registration of Section-8 Company
If an individual or group of individuals has any of the following aims or goals, they are entitled to register as a Section 8 Company. The Central Government must be satisfied that the objectives have been accomplished.
- When a firm wants to advance commerce, science, education, art, sports, research, religion, charity, social welfare, environmental protection, or similar goals;
- When the business intends to use all profits (if any) or any income it receives after incorporation exclusively for the furtherance of such purposes;
- When the corporation has no intention of paying its shareholders any dividends.
Documents needed for Section 8 company registration include
- The directors’ DSC and DIN.
- Company goals and the projected work.
- Assets and liabilities, five-year projections, and other financial figures are included.
- Personal papers of directors.
- Documents indicating the registered office address include utility bills that are no more than two months old and a rental agreement or sale deed in the company’s name.
Benefits of Section-8 Company registration
- Its activities are organized, and it is more flexible.
- Eliminates laborious registration procedures and does not require physical presence.
- No minimum paid-up capital is needed.
- Tax benefits under sections 12AA and 80G of the Income Tax Act are easily obtained.
- Any partnership firm may join as an individual member and become a director.
How to incorporate a Section 8 company
The procedure for incorporating a section 8 company is outlined in the Companies Act, 2013, and according to this provision, an application in Form No. INC.12 must be filed to the Registrar of Companies together with the supporting documentation listed below.
Form no. INC – 13 – Company’s Draft Memorandum of Association (MOA) and Articles of Association (AOA) in Form No. INC – 13 (as stipulated in Act) with Affixion of Photographs of Subscribers.
Form No. INC-14 – A declaration that the draught MOA and AOA are in compliance with the rules and regulations of Section 8 and that the necessary steps have been made to meet Section 8 criteria must be attached to Form No. INC-14.
Note: The declaration must be written on stamp paper and notarized by a notary public who is a practicing advocate, company secretary, chartered accountant, or cost accountant.
Form No. INC-15 – A statement in Form No. INC-15 on stamp paper that has been notarized by each member of the applying company.
Form No. INC-9– A statement in Form INC-9 on the relevant state’s stamp paper and appropriately notarized by form first directors as well as each subscriber.
An estimate of the company’s projected yearly income and expenses for the following three years, along with information on the sources of income and the intended use of funds.
Legal Requirements for Forming an Indian Section 8 Company
The prerequisites listed below must be satisfied before applying for the Section 8 incorporation process;
There must be at least two directors if the section 8 firm wants to operate as a private limited company. A minimum of 3 directors are needed if a section 8 entity hopes to operate as a public limited company.
If a Section 8 firm wants to operate as a private limited company, the MCA has set a restriction on the number of members that can be a part of it at 200. On the other hand, section 8 entities with a business structure like a public limited company are not subject to this restriction.
Name and Capital Requirement
According to the Company Act of 2013, Section 8 enterprises are not required to maintain a minimum paid-up capital. NGOs operating as Section 8 entities are not liable to affix the terms like Private limited or limited in their name.
Only organizations with non-profit goals are qualified to get Section 8 registration. The MOA & AOA must have the goals for which it was created. Any profit made by the section 8 firm is either reinvested in the business or utilized to further its core goals, such as philanthropic endeavors. These organizations’ members have no access to any kind of profit.
The Section 8 Company Incorporation Procedures Are As Follows:
In India, Section 8 Companies Must Complete The Following Extensive Procedures;
Step 1: Obtain DSC from MCA-approved organizations
A digital instrument called a DSC, or digital signature certificate is used to sign a variety of e-forms and scanned copies of documents. It is mostly utilized by the company’s authorized signatories, including the director, partners, managing directors, etc. In this situation, the section 8 company proposed directors must obtain the DSC before signing important documents.
Step 2: Visit the MCA portal to submit the Spice+ Form.
The following action is to go to the MCA portal and register an account there. The next step is for the applicant to choose the Spice+ form from the Service menu item in the homepage’s top menu. This would take the applicant to a short electronic form that contained components A and B, which are both crucial.
PART B provides the following services, and PART A assists the applicant in registering the proposed company name:
- incorporation of a company
- DIN allocation
- PAN allocation
- TAN Allocation
- Granting of GSTINs
- EPF allocation
- ESI allocation
- registration of the company’s professional tax and opening of a bank account (only for Maharashtra)
Step 3: Submit the Form and the Required Documents Online
Upload the required documents as stated above, then proceed to the payment part to provide the required fees. After finishing, click the submit button to complete the application submission process.
As you can see, the section 8 registration process for companies comprises a number of challenging processes and calls for proper information. Feel free to contact PhoenixTax- Tax Consultant in Tambaram, Chennai if you wish to avoid all those hassles.