Section 8 Company Registration

A Section 8 Company is a non-profit organisation that aims to promote charitable activities, art, science, education, and sports. The profits of such companies are utilised for promoting these objectives and are not distributed among the Company’s members. At Tej and Associates, we provide end-to-end services for registering Section 8 companies in India. Our team of experts offers hassle-free and professional services to help you establish a Section 8 company quickly and efficiently. Contact us today to avail of our professional services for registering your Section 8 Company in India. Tej and Associates delivers a broad array of services beyond Section 8 Company,  , assisting Indian owners (OPC, Partnership, Proprietary concern, LLP, Pvt Ltd,Trusts/Societies), foreign owners (Subsidiary Company, Branch/Liaison Office), and special entities (AOP) in ensuring compliance and efficiency.

Definition of Section 8 Company – Companies Act, 2013

According to the Companies Act 2013, a Section 8 company is defined as an organisation whose objectives are to promote arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or other similar activities goals. These entities utilise their profits to achieve their mission and do not distribute dividends to their shareholders.

Overview of Section 8 Company Registration

A Section 8 Company is a type of corporation established to promote non-profit activities, such as education, social welfare, environment preservation, arts, sports, charity, and more. This follows the provisions of the Companies Act 2013. The essential purpose of registering a Section 8 Company is to encourage non-profitable goals, including but not limited to trade, arts, commerce, education, charity, environmental protection, sports research, and social welfare. To register a Section 8 Company, a minimum of two directors are required, and there is no requirement for a minimum paid-up capital to set up such a company.

Key Points about Section 8 Company

•  In India, Non-Governmental Organisations (NGOs) can be registered under the Registrar of Societies or as a non-profit entity under Section 8 Company of the Companies Act, 2013.
• Profit generated by Section 8 Companies cannot be used for purposes other than charitable objectives and cannot be distributed among shareholders.
• Section 8 Companies are similar to the erstwhile Section 25 Company under the Company Act 1956. As per the prevailing Company Act, these are now recognized as Section 8 Companies.
• Section 8 Companies are required to comply with the provisions of the Companies Act 2013. They are mandated to maintain books of accounts, file returns with the Registrar of Companies (ROCs), and comply with GST and IT Act.
• Any changes to the charter documents like the Articles of Association (AoA) and Memorandum of Association (MoA) require the government’s consent.

Benefits of Opening a Section 8 Company in India

Incorporating a Section 8 company in India offers numerous advantages, some highlighted below.

Tax Exemption

Section 8 companies registered under section 12AA of the Income Tax Act are eligible for a 100% tax exemption, as they utilise their profits for charitable purposes. This is a significant benefit as the profits generated by such entities are non-taxable.

No Minimum Capital Requirement

Unlike public limited companies, Section 8 entities do not have a minimum capital requirement. They can adjust their capital structure according to their growth, giving them more flexibility.

Separate Legal Entity

Section 8 companies have a separate legal identity and perpetual existence, just like other registered companies. This increases their credibility and provides them with more autonomy and legal standing.

Increased Credibility

Section 8 companies are subject to strict legal compliance frameworks, enhancing their credibility regarding legal standing. Unlike NGOs and trusts, Section 8 entities follow stringent compliances post-registration, making them more trustworthy.

No Title Required

Section 8 companies are free to choose a name that suits their liking during the registration process. Unlike other registered structures, they are not required to affix the term “Section 8” after their name. A Section 8 company in India offers numerous benefits, including tax exemption, no minimum capital requirement, no need to pay stamp duty, separate legal identity, increased credibility, and no title required. These advantages make Section 8 companies attractive for entrepreneurs looking to start a business with a charitable or social cause.

Eligibility Criteria for Incorporation of the Section 8 Company

Specific eligibility criteria must be met to establish a Section 8 company in India.

• An Indian national or Hindu Undivided Family (HUF) can incorporate a Section 8 Company.
• The entity must have at least one director.
• The primary object of the Section 8 Company should be related to promoting art and science, sports, charitable activities, education, or providing financial assistance to individuals from lower-income groups.

These eligibility criteria ensure that the Section 8 Company operates to promote social welfare and contribute to the greater good of society.

How to Do Registration for Section 8 Company?

A company is referred a to as Section 8 Company when registered as a Non-Profit Organisation (NPO) i.e. when it the has motive of promoting arts, commerce, education, charity, protection of the environment, sports, science, research, social welfare, religion and intends to use its profits (if any) or other income for promoting these objectives. The income of NPO can not be used for paying out dividends to the company’s members and has to be for the promotion of charitable objectives. Such companies obtain an incorporation certificate from the central government and are liable to adhere to the rules specified by the government. According to the rules, failure to comply with the responsibilities stated by the Central Government may lead to the winding up of the company on the orders of the government. Besides, strict legal action will be taken against all the members of the company if the objectives laid down by the company prove to be bogus. Its manner of carrying out the operation is similar to any other limited company and even the rights & duties of a limited company and NPO are alike. However, the titles of “Section 8” and “Limited” can not be interchanged

Eligibility to Apply for Section 8 Company

An individual or an association of individuals are eligible to be registered as a Section 8 Company if it holds the below-mentioned intentions or objectives. The objectives have to be confirmed to the satisfaction of the Central Government.

• When the company intends to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment or other objectives;
• When the company holds an intention to invest all the profits (if any) or any other income generated after incorporation in the promotion of such objects only;
• When the company does not intend to pay any dividend to its members.

Mandatory legal requirements for Section 8 Company

Before applying for the incorporation process of a Section 8 company in India, specific legal requisites must be fulfilled. These requirements are as follows:

Number of Directors

A minimum of two directors is required if the Section 8 entity intends to operate as a private limited company. However, a minimum of three directors are required if the entity aims to operate as a public limited company.

Number of Members

If the Section 8 Company aims to function as a private limited company, the number of members is capped at 200 by the Ministry of Corporate Affairs (MCA). However, there is no such limit for Section 8 entities with a business structure like a public limited company.

Capital Requirement and Name

According to the Companies Act 2013, Section 8 entities are not required to maintain a minimum paid-up capital. Moreover, NGOs operating as Section 8 entities are not obligated to affix terms like private limited or limited in their name.

Company Objects

Only entities with non-profit objectives are eligible for Section 8 registration. The Memorandum of Association and Articles of Association must clearly state such goals for which the Company is established. Any profits the Section 8 entity generates must be utilised for charitable purposes or reinvested in the entity. The profit of Section 8 entities is not available to its members in any form. These legal requisites ensure that Section 8 companies operate with transparency and the intended purpose of promoting social welfare.

Documents Required for Section 8 Company Incorporation

The following documents are required to complete the incorporation process for a Section 8 company in India:

• ·Articles of Association (AOA) and Memorandum of Association (MOA)
• Declaration by the first director(s) and subscriber(s) (an affidavit is not required)
• Proof of office address, such as a copy of utility bills like electricity, water, or gas bill
• Copy of the certificate of incorporation (COI) of an overseas corporate body (if any)
• A resolution passed by the promoter company
• Consent of Nominee (INC-3)
• Residential and identity proof of nominees and subscribers
•  Applicant’s identity and residential proof
• Digital Signature Certificate (DSC)
• Declaration of unregistered companies.

By providing these documents, you can ensure smooth and efficient Section 8 company incorporation processes.

Section 8 Company Incorporation Process

The process of incorporating Section 8 companies in India involves the following steps:

Step 1: Obtain Digital Signature Certificate (DSC)

The first step is to obtain a Digital Signature Certificate (DSC) for the proposed directors of the Section 8 Company. This certificate is required for the online filing of documents with the Ministry of Corporate Affairs (MCA). Form DIR-3 is used for obtaining the DIN and should be filed along with the DSC of the proposed directors. Forms to be used: DIR-3, DSC

Step 2: Obtain Director Identification Number (DIN)

After obtaining the DSC, the next step is to apply for a Director Identification Number (DIN) for the proposed directors. The DIN number is a unique identification number issued by the MCA to individuals who wish to be directors of a company in India. Forms to be used: DIR-3

Step 3: Reserve the Company Name

The next step is to reserve the name of the proposed Company with the MCA. The Section 8 company name should be unique and not be similar to any existing company name. Form INC-1 is used for reserving the company name. Forms to be used: INC-1

Step 4: File the Application for Incorporation

After the company name is approved, the next step is to apply for Section 8 Company incorporation. The application for incorporation is filed in Form INC-32 along with the Company’s Memorandum of Association (MOA) and Articles of Association (AOA). Forms to be used: INC-32, MOA, and AOA

Step 5: Obtain a Licence for Section 8 Company

Once the application for incorporation is approved, the next step is to obtain a licence for the Section 8 Company. Form INC-12 is used for obtaining the licence. It should be filed along with the necessary documents. Forms to be used: INC-12

Step 6: Obtain a Certificate of Incorporation

After obtaining the licence, the MCA issues a Certificate of Incorporation in Form INC-16. This certificate confirms the incorporation of the Section 8 Company. Forms to be used: INC-16 In summary, the forms used for Section 8 Company registration are DIR-3, DSC, INC-1, INC-32, MOA, AOA, INC-12, and INC-16.

Donations/Funding of Section 8 Company

A Section 8 Company cannot collect capital through deposits but can accept donations from the public. Several methods are available to raise funds, such as foreign donations, equity funding, and domestic donations. Foreign contributions are permissible only if FCRA registration is obtained, which can be applied for three years after registration. If immediate foreign contributions are required, prior permission from the commissioner can be requested. Equity funding can be achieved by releasing new equity shares at a premium price. Domestic subsidies have no restrictions, but it is vital to establish a comprehensive system to prevent money laundering.

Streamline Section 8 Company Registration with Tej and Associates

Tej and Associates is a trusted partner for entrepreneurs and organisations looking to obtain Section 8 company registration in India. With our expertise and seamless online platform, Tej and Associates simplifies the complex process of registering a Section 8 company, ensuring that all legal formalities are met. Our dedicated team of professionals guides clients through the entire registration procedure, from documentation to approval, and helps you establish non-profit organisations that can work towards social welfare and charitable activities.  

Incorporation of a Section 8 Company

Companies Act, 2013 deals with the procedure of Incorporation of a Section 8 Company and as per this section, an application in Form No. INC.12 has to be submitted along with the below-mentioned documents to the Registrar of Companies. Form no. INC – 13 – Company’s Draft Memorandum of Association (MOA) and Articles of Association (AOA) in Form No. INC – 13 (as specified in Act) along with the affixation of subscribers’ photographs. Form no. INC-14 – A Declaration is to be affixed in Form no. INC-14 that the draft MOA & AOA are compliant with the provisions & norms of Section 8 and the requirements as per Section 8 have been duly taken care of. Note: The declaration has to be made on stamp paper & should be notarized by an Advocate, a Company Secretary, a Chartered Accountant or a Cost Accountant, practising the profession. Form no. INC-15 – A declaration in Form No. INC-15 on stamp paper & notarized by each member of the company who is applying. Form no. INC-9 – Form no. INC-9 form first directors as well as each subscriber, on the relevant State’s stamp paper and appropriately notarized. An estimation of the company’s future annual income and expenditure for the next three years, mentioning the sources of the income and the purpose of the expenditure.

New & Simplified Process of Incorporation of Section 8 Companies

Companies (Incorporation) Sixth Amendment Rules, 2019 dated 7th June 2019 to ease the Incorporation process has knocked off the need for filing Form no. INC 12, which was initially needed. This amendment has made the Process of Incorporation of Section 8 Companies as easy & simple as that of other companies. Section 8 Companies can be incorporated by reserving names in part A of Spice+ followed by part B of the Spice+ form or by directly filing Spice+. Licence No. shall be given to the section 8 company during the incorporation.

When the Company Already Have the Licence Number

Stakeholders having Licence Numbers already before the filing of the SPICe form may file the form at their ease. However, one thing should be noted: form processing takes time to let the workflow changes be effective.

Documents Requirement for the Registration of Section 8 Company

•         Digital Signature Certificate
•         Memorandum of Association
•         Articles of Association
•         Passport Size Photographs
•         Members’ ID proof such as Aadhar Card, Passport, Voter ID
•         Details of Director (When the Members Are Other Companies/LLPs)
•         Address Evidence
•         Director Identification Number

Most Important Advantages for the Incorporation of Section 8 Company

Through building the section-8 company the intention or goal of the company would be to perform any activity and obtain integrity and commitment because the same is being approved through the Union government. Towards operations because of its strict rules, the same poses a trustful image in front of internal and external users of the details with respect to the communities. The reliability of section 8 companies has much more with respect to the communities and the additional kinds of charitable firms. Grants and subsidies via the government and the additional institutions were acknowledged to the section-8 company according to the communities of trust.

Section 8 Company Total Exemptions and Reliefs

Companies Act 2013: The directorship under section 8 companies shall not come under the computation of the ceiling towards the highest number of the directorships which has been mentioned beneath Section 165 of the Act. Through furnishing the notice of not less than 14 exact days rather than 21 exact days a general meeting has been conducted. Section 8 firms would conduct at least one meeting every 6 calendar months rather than holding 4 meetings for a year. Recording of Minutes of General Meetings and Board Meetings along with additional resolutions shall not be subjected to apply upon the section 8 company. However, the minutes of meetings might be recorded within 30 days of the outcome of the meeting towards the cases in which the firm articles furnish the confirmation through the method of circulation of minutes. A company is a member of Section 8 company. Section 149(1) of the Act will not apply towards Section 8 companies as per Section 8 companies shall not need to hire an Independent director. From the reasons above the Audit committee under section 8 company will not be needed to have independent directors similar to its board members. Section 8 firms shall not be needed to hire a qualified CS professional as their company secretary. From the applicability of secretarial standards, the same gets privileged. Section 8 firms shall not be needed to appoint a Nomination and Remuneration Committee or a Stakeholders Relationship Committee.

Number of Directors in a Section 8 Company

Section 149(1) of the Companies Act 2013 – prescribed a minimum of 3 & 2 directors for public limited & private limited companies respectively and a maximum of 15 directors. But there is no minimum or maximum prescription for Section 8 companies. The second proviso to section 149(1) – prescribes a woman director in a specified class of companies. Section 149(3) of the Companies Act 2013 – prescribes resident directors in every company. Section 165 of the Companies Act, 2013 – says Directorship in Section 8 Companies will not be summed up when the total number of directorships will be calculated i.e. it will not be counted while adhering to the maximum limit of twenty Directorship as prescribed in the Act. Section 149(1) of the Companies Act, 2013 – vide exemption notification dated June 05, 2016, stated that Section 8 Companies are not under obligation to appoint an independent director and are free from all the consequential provisions concerned with Independent directors. Under Section 149(3) – Section 8 companies must have a minimum of one Resident Director i.e. a director who has resided in India at least for a total period of 182 days (one hundred and eighty-two days) or more within the previous calendar year.

Total Number of Board Meetings and its Quorum

As per the exemption notification read with sections 173(1) and 174(1), Section 8 companies must have at least one meeting within a period of 6 calendar months and the quorum for its board meetings is 8 directors or 1/4th of its total strength, whichever is less, respectively. However, the quorum should have a minimum of at least two members.

Some Misleading Facts About Incorporation of Section 8 Company

• Directors in form no INC 15 affidavit is required.
• The matter concerned with form no INC 15 be self-declaration should be accepted and properly executed.
•  Section 8 company applicability of INC 33 and 34.
• A duly signed copy of the MOA and AOA by the witnesses and members (professionals) along with the expenditure statement and estimated income of 3 years must be attached.
• Notarized Memorandum and Articles of Association.
• Notarization of Memorandum and Articles of Association is not compulsory.
• Government fees are on the higher side.
• The stamp duty of Section 8 Company if compared to the stamp duty of MOA and AOA is neutral.

Annual, Quarterly and Monthly Compliance for Section 8 Company

Here is a list of Monthly, quarterly and annual compliance for section 8 company under MCA (Ministry of Corporate Affairs)

 

Annual Compliance Under Section 8 Company

Appointment of an auditor: Under section 139 of the Companies Act 2013, it is essential for the firms to hire an auditor within 30 days from the start date. The book of accounts and manual returns of the company will get audited through the statutory auditor who will be hired for a duration of 5 years. Maintenance of Statutory Registers: It is obligated for the company to maintain a statutory register consisting of members, loans received, charges made, its directors, and others. as listed under section 8 of the Companies Act 2013. Calling board meet: Section 8 companies will have at least one meeting every 6 calendar months. Statutory Audit: Every entity that would enrol under the Companies Act would need to audit their books of accounts every year from a CA (refer to point 1). GM notice: A section 8 company could hold a general meeting i.e. whether yearly or extraordinary within 14 days notice. Calling AGM: The annual general body meeting would be held once a year within 6 months of the finish of the fiscal year. But, in the case of the first annual general meeting, the company could hold an AGM in less than 9 months from the finish of the first fiscal year. You must learn that the time duration between 2 annual general meetings need not surpass 15 months. Board Reports: The Board of Directors of the company will furnish their board’s report in a specific way, it comprises all the financial statements and additional annexure. The board report will need to be furnished in Form AOC-4. Making of Financials Statement of the Company: The organisation would obtain the balance sheet, profit, loss A/C, cash flow statement as well as additional financial statements audited via statutory auditor i.e. is to be furnished with ROC. Tax returns: Income tax returns will need to be furnished during the finish of every assessment year prior to the date of 31st Oct. Tax audit: Tax audit report in Form 10B would get filed through a charitable or religious trust or institution that would be enrolled u/s 12A or who has submitted an application for registration by filing Form 10A. Form 10B is an audit report which is provided by a CA upon nomination by the taxpayer. Filing Financial Statements: The financial statement would be furnished in the suitable form ( E-FORM AOC-4), within 30 days from the date of the annual general meeting (Discussed in point 7 above). Annual Return Filing: The annual return filing consists of all the details such as management details, and shareholders’ information would be filed in Form MGT-7 with the Registrar of Companies (ROC), within 60 days of the annual general meeting. DIN KYC: Every person who would be provided with a DIN dated 31st March of the fiscal year should submit his KYC on or prior to September 30 of the next fiscal year. GST Annual Return: Beneath GST, the enrolled assessee needed to file GSTR-9 i.e. the annual return. 31st December of the year will be the last date following the related fiscal year.

Form No	Compliance	Due date	Last date
AOC-4	Director report	Within 30 days of AGM	29th October
MGT-7	Annual returns	Within 60 days of AGM	28th November
Form ITR-6	Income tax returns	31st October	31st October
GSTR-9	GST Annual Return	31st December	31st December
Form- 10B	Tax Audit	31st September	31st September

Monthly or Quarterly Due Date

GSTR-1 (return to be filed towards reporting details of all outward supplies of goods and services incurred) Monthly, by the 11th of every month- The business poses a yearly aggregate turnover exceeding Rs 5 cr or would not opt in the QRMP scheme. Quarterly, by the 13th of the month following every quarter of the QRMP scheme, the business has opted. GSTR- 3B (for filing summarised information regarding all outward supplies incurred, input tax credit claimed, tax liability ascertained, and taxes filed). Monthly, 20th of every month- For the assessee, an aggregate turnover in the former fiscal year exceeds Rs 5 cr or is eligible while still opting out of the QRMP scheme. Quarterly, 24th of the month following the quarter- To the assessee with aggregate turnover equivalent to or less than Rs 5 crore, eligible and remain opted into the QRMP scheme.

Quarter ending	Month of deduction	The last date towards the payment of tax deducted	Last date towards filing the TDS return
30th June	April May June	7th May 7th June 7th July	31st July
30th September	July August September	7th August 7th September 7th October	31st October
31st December	October November December	7th November 7th December 7th January	31st January
31st March	January February March	7th February 7th March 30th April	31st May

 

Additional Compliance

Besides the list of compliance specified above, a section 8 company might need to function additional compliance chores relying on the situation. In the case when the company chooses donations or funding via donors, the incomes would be qualified for the tax exemptions. To claim the same exemptions the company needed to follow the conditions mentioned under Section 11 and enrol beneath Sections 80G and 12A. Director’s approval form (Form DIR 2) to occupy the office within 30 days from the appointment of the director. Returns form (Form MR-1) within 60 days from the appointment of a managing director, manager, or another key managerial posting. When the company has 20 or more employees, employees would be mandated to be members of the Employees’ Provident Fund Organization (EPFO) i.e. company is required to take registration under EPF Act, 1952. (Mandatory = Employees who draw less than Rs. 15000/- per month. Optional = Employees if draws more than Rs. 15000 per month with permission of Assistant PF Commissioner). Provident fund returns should be furnished through all the entities securing PF registration every month. On the 25th of every month, PF returns would be due. Moreover, a final PF return would be due dated 25th April for the year finished on 31st March. For the case when the company secures 10 or more employees and the monthly wage shall not be more than Rs 21,000, the company would be obligated to opt for enrollment under Employees State Insurance (ESI) Act, 1948. ESI returns should require to get filed by the employer on monthly grounds, and the last date would indeed be fixed: The 15th of the subsequent month would be the last date for ESI return filing.