A Section 8 Company, defined under the Companies Act 2013, stands as a beacon for organizations aiming to promote charitable activities, arts, science, education, and sports. These non-profit entities utilize their profits for the betterment of society without distributing dividends to their members. IndiaFilings, a trusted service provider, offers end-to-end solutions for hassle-free Section 8 Company registration in India, ensuring a swift and efficient process.
Definition of Section 8 Company – Companies Act, 2013:
As per the Companies Act 2013, a Section 8 Company is an organization dedicated to advancing objectives such as arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or similar activities. Profits earned are channeled towards fulfilling these missions rather than being distributed among shareholders.
Overview of Section 8 Company Registration:
A Section 8 Company is a special form of corporation established to promote non-profit activities. It covers a wide array of societal objectives, following the provisions of the Companies Act 2013. The registration process aims to encourage goals such as trade, arts, commerce, education, charity, environmental protection, sports research, and social welfare. Key to this registration is the requirement of a minimum of two directors, with no stipulated minimum paid-up capital.
Key Points about Section 8 Company:
In India, Non-Governmental Organisations (NGOs) can opt for registration under the Registrar of Societies or as a non-profit entity under Section 8 Company of the Companies Act, 2013. The profits generated by Section 8 Companies are strictly earmarked for charitable objectives and cannot be distributed among shareholders. These companies, akin to the erstwhile Section 25 Company under the Company Act 1956, are now recognized as Section 8 Companies under the prevailing Company Act.
Benefits of Opening a Section 8 Company in India:
Section 8 company registration in India brings numerous advantages, making it an attractive option for entrepreneurs with a charitable or social cause:
- Tax Exemption: Section 8 companies, registered under section 12AA of the Income Tax Act, enjoy a 100% tax exemption as they utilize their profits for charitable purposes.
- No Minimum Capital Requirement: Unlike public limited companies, Section 8 entities have the flexibility to adjust their capital structure according to their growth, without a minimum capital requirement.
- Separate Legal Entity: Section 8 companies possess a separate legal identity and perpetual existence, enhancing credibility, autonomy, and legal standing.
- Increased Credibility: Stringent legal compliance frameworks post-registration enhance the credibility of Section 8 companies, making them more trustworthy than other structures like NGOs and trusts.
- No Title Required: Section 8 companies can choose a name during the registration process without the obligatory addition of the term “Section 8” after their name.
Eligibility Criteria for Incorporation of Section 8 Company:
To establish a Section 8 company in India, specific eligibility criteria must be met:
- A Section 8 Company can be set up by an Indian citizen or a Hindu Undivided Family (HUF).
- The entity must have at least one director.
- The organization needs to have at least one head.
- Section 8 Companies should mainly work to promote art and science, sports, charitable activities, education, or helping people with less money.
These criteria ensure that Section 8 Companies operate with the aim of promoting social welfare and contributing to the greater good of society.
Mandatory Legal Requirements for Section 8 Company:
Before applying for Section 8 Company incorporation, certain legal requisites must be fulfilled:
- Number of Directors: A minimum of two directors for a private limited company, and three directors for a public limited company.
- Number of Members: Capped at 200 for private limited companies; no limit for public limited companies.
- Capital Requirement and Name: No minimum paid-up capital is required, and no need for terms like private limited or limited in the name.
- Company Objects: Non-profit objectives must be clearly stated in the Memorandum of Association and Articles of Association, ensuring profits are used for charitable purposes.
Documents Required for Section 8 Company Incorporation
To complete the incorporation process, specific documents are required:
- Articles of Association (AOA) and Memorandum of Association (MOA)
- Declaration by the first director(s) and subscriber(s)
- Proof of office address
- Copy of the certificate of incorporation of an overseas corporate body (if any)
- The 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
Providing these documents ensures a smooth and efficient Section 8 company incorporation process.
Section 8 Company Incorporation Process:
The incorporation process involves several steps:
- Obtain Digital Signature Certificate (DSC): Necessary for online filing of documents with the Ministry of Corporate Affairs (MCA).
- Obtain Director Identification Number (DIN): Apply for a unique identification number for proposed directors.
- Reserve the Company Name: File for name reservation with the MCA.
- File the Application for Incorporation: Apply Form INC-32 along with MOA and AOA.
- Obtain a License for Section 8 Company: Apply for a license using Form INC-12.
- Obtain a Certificate of Incorporation: After obtaining the license, receive the Certificate of Incorporation in Form INC-16.
Donations/Funding of Section 8 Company:
Section 8 Companies can accept donations from the public and utilize various fundraising methods, including foreign contributions, equity funding, and domestic donations. Foreign contributions require FCRA registration, and equity funding involves releasing new equity shares at a premium price. Domestic subsidies have no restrictions, but a robust system to prevent money laundering is crucial.
Conclusion:
In conclusion, establishing a Section 8 Company in India is a strategic move for entrepreneurs looking to combine business with a social or charitable cause. The benefits, including tax exemption, flexibility in capital structure, separate legal identity, increased credibility, and freedom in choosing a name, make Section 8 companies an attractive option. By adhering to eligibility criteria, legal requirements, and documentation, organizations can seamlessly navigate the incorporation process and contribute to societal welfare in a meaningful way. IndiaFilings’ end-to-end services further simplify the registration process, ensuring efficiency and compliance. Contacting IndiaFilings today opens the door to a journey of impactful social entrepreneurship.