A Section 8 Company is a type of non-profit company that is registered under the Companies Act, 2013. Section 8 Companies are formed to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research, etc.
To incorporate a Section 8 Company, a minimum of two directors are required. There is no requirement of minimum paid-up capital in the case of Section 8 Company.
The profits of a Section 8 Company, if any, are applied towards promoting the objectives of the company and not distributed as dividends to its shareholders.
The Central Government can revoke the license of a Section 8 Company if the conditions of Section 8 are contravened or the affairs of the company are conducted fraudulently or prejudiced to public interest. If the license of a Section 8 Company is revoked, the company will have to use the words “Ltd.” or “Pvt Ltd.” in its name.
Below are the list of advantages and benefits of forming a Section 8 Company:
- Limited liability: The shareholders of a Section 8 Company are only liable for the amount they have invested in the company. This means that their personal assets are not at risk if the company goes bankrupt.
- Legal entity: A Section 8 Company is a separate legal entity from its members. This means that the company can own property and enter into contracts in its own name.
- No minimum capital requirement: There is no minimum capital requirement for a Section 8 Company. This means that you can start a Section 8 Company with no money at all.
- No suffix: Section 8 Companies are not required to use suffixes like “Private Limited” or “Limited” in their name. This gives them more flexibility in choosing a name.
- Tax benefits: Section 8 Companies can enjoy a number of tax benefits, including exemption from income tax.
- Reduced stamp duty charges: Section 8 Companies are subject to reduced stamp duty charges. This can save you money when you register your company.
The checklist/requirements for registering a Section 8 Company in India:
Basic Requirements
- At least one Indian director is required. There is no limit on the maximum number of directors.
- A woman director is required in specified classes of companies.
- The company must have a registered office address.
Documents Required
- For each director and shareholder of a Section 8 Company:
- PAN card
- Passport
- Address proof (any one of the following, not more than 2 months old):
- Bank statement
- Phone bill
- Mobile bill
- Electricity bill
(Note: For NRI and foreigners, documents issued by foreign authorities or signed outside India must be notarized and apostilled.)
- For registered address:
- NOC from owner
- Rent agreement
- Utility bill
How to register a Section 8 Company in India:
- Apply for a Digital Signature Certificate (DSC) and Director Identification Number (DIN): A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA). A DIN is a unique identification number that is assigned to each director of a company. It is required for filing documents with the MCA.
- Apply for name reservation: The name of your Section 8 Company must be unique and cannot be similar to the name of any other existing company. You can apply for name reservation online through the MCA website.
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA): The MOA and AOA are the governing documents of your Section 8 Company. They set out the company’s objectives, structure, and management. You can either draft the MOA and AOA yourself or hire a lawyer to do it for you.
- File the MOA and AOA with the MCA: Once you have the DSC, name reservation, and MOA and AOA, you can file them with the MCA. You will need to pay a filing fee.
- Apply for PAN and TAN: Once the MOA and AOA are filed with the MCA, you can apply for PAN and TAN for your company. You can apply for PAN and TAN online through the Income Tax Department website.
- Receive the Certificate of Incorporation: Once PAN and TAN are allotted, you will receive a Certificate of Incorporation from the MCA. This document is proof that your Section 8 Company is a legal entity.
Here are some additional things to keep in mind when registering a Section 8 Company:
- The minimum authorized capital of a Section 8 Company is ₹1 lakh.
- The Section 8 Company must have a registered office in India.
- The Section 8 Company must have a nominee. The nominee is a person who will act as the member of the Section 8 Company in the event of the death or incapacity of the sole member.
The key deliverables for registering a Section 8 Company:
- Digital Signature Certificate (DSC): A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA). Each director and shareholder of a Section 8 Company must have a DSC.
- Permanent Account Number (PAN): A PAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all financial transactions in India. A Section 8 Company must have a PAN.
- Tax Deduction and Collection Account Number (TAN): A TAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all businesses that are required to deduct tax at source. A Section 8 Company must have a TAN.
- Certificate of Incorporation (COI): A COI is a document that is issued by the Registrar of Companies (ROC). It is proof that the company has been incorporated and is a legal entity. A Section 8 Company must have a COI.
- Memorandum of Association (MOA): The MOA is a document that sets out the company’s objectives, structure, and management. It is a legal document that is binding on the company. A Section 8 Company must have an MOA.
- Articles of Association (AOA): The AOA is a document that sets out the company’s internal rules and regulations. It is a legal document that is binding on the company. A Section 8 Company must have an AOA.
What do you want to know?
Section 8 company is governed by the companies act, 2013 whereas trust is governed by The Indian Trust Act 1882. Some of the states also has different trust acts and the society is governed by The Societies Registration Act 1860.
Any individuals or group of individuals can apply for section 8 company registrations, only minors (below 18 years old) can not incorporate a section 8 company.
The 80G Certificate exempts the individuals from paying taxes who have made donations to a charitable organization such as section 8 company. There is maximum allowable deduction criteria to this.
Registration under this section will be processed by the commissioner of Income-tax after receiving an application from the applicant.
We at BN Advisories can get you the company incorporated in 15-20 working days of time. Subject to receiving documents on time from the client end.