Section 8 Company Registration Consultant & Advisor

Section 8 Company of the Companies Act, 2013: A Study

A Section 8 Company is a specific kind of company registered under the Companies Act, 2013, primarily with the intention of undertaking objects like art, trade, science, research, education, sports, charity, social welfare, religion, environmental protection etc.

The profit, if any, shall be applied in pursuance of the objects; it cannot distribute its profits nor declare any dividend to its shareholders. In other words, Section 8 Companies are inherently constituted as non-profit companies, but in law and practice, they are incorporated as a company. Below is given a glance at the registration process, benefits, and legal requirements for an India Section 8 Company.

Important Features of a Section 8 Company

Non-profit Motive: The company must work for a specific social objective and cannot distribute dividends to the shareholders.
Minimum Paid-up Share Capital: No minimum paid-up capital is to be maintained while incorporating.
Separate Legal Entity: The status of a separate legal entity exists and can own properties, enter into contracts, sue or be sued in the name.
Option of Name: The company could opt for any name without the necessity to include terms like "Private Limited" or "Limited."
Tax Incentives: Under Income Tax Act, 1961, Section 8 companies avail many kinds of exemptions and can acquire 80G and 12A registration.
Stamp Duty Nil: Stamp Duty payable on the state is nil on the registration of MOA and AOA documents for the Section 8 Company.

Benefits of Section 8 Company Registration

Tax Exemption

Section 8 Company also has exemptions under the Income Tax Act, 1961. The surplus income arriving at the company is exempted from income tax if it is so applied as to form a part of the reserve funds of the company, which is to be wholly applied for promoting the objects of the company. This is one of the other major advantages associated with such companies. More importantly, donations to Section 8 companies also claim a deduction under Section 80G of the Income Tax Act based on the welfare activities as well.

No Need for Minimum Capital

Section 8 Companies do not require a minimum paid-up capital where as in the case of public limited companies. In this respect, it further brings advantage to all individuals or organizations interested in starting a non-profit initiative without investing a lot of money.

Higher Credibility

As a Section 8 Company strictly follows all the provisions incorporated under the Companies Act, 2013, it is thus viewed as a more reliable and believable form of non-profit organization than other forms, such as trusts or societies.

Separate Legal Entity

A Section 8 Company is an independent legal entity, which means it enjoys its own independent existence and is divorced from its promoters, members, or directors. It thus gives legal protection and strengthens the feasibility of access to funds, properties, and contract performance.

No Stamp Duty

Section 8 Company’s registration does not incur stamp duty; hence, while getting the MOA and AOA prepared for your company, it saves costs for the whole process.

Liberalities in naming the Company

Unlike other forms of companies, you may not be required to use "Private Limited" or "Limited" while using the name of the company in a section 8 company, and thus it has more flexibility for choosing a name according to its mission.

Eligibility Criteria for Incorporation of a Section 8 Company

A section 8 company can be incorporated if the following eligibility criteria are fulfilled:

Directors: At least two directors have to be there. In case of a Public Limited Section 8 company, the minimum number of directors has to be three.
Indian Nationals or HUFs: Only Indian nationals or Hindu Undivided Families (HUFs) can be promoters.
Members and Shareholders: The minimum number of members for a Private Section 8 Company is two but not so in the case of Public Section 8 Companies wherein no limitation has been laid with regard to the number of members.
Non-profit Objectives: The company should be formed for promoting social welfare or charitable activities with objectives suchas education, health-care, environmental protection, , and other similar purposes.

Documents Needed for Registration

Articles of Association and Memorandum of Association
Office Address Proof (electricity, water or gas bills etc.)
DSC of directors
DIN for Proposed Directors
Declaration of Nominee in Form INC-3
Residence and Identity Proof of directors and shareholders
Nationality Proof of Indian origin for promoters.
Certificate of incorporation of any overseas corporate body, if the company is incorporated abroad.

Section 8 Company Incorporation Procedure

The procedure for incorporation of a Section 8 Company involves the following main steps:

Obtain Digital Signature Certificate (DSC): First, obtain a DSC for the proposed directors, which is mandatory for online filing.
Obtain Director Identification Number (DIN): A unique DIN is mandatory for all directors of the company.
Reserve Company Name: The name of a company needs to be unique and should not resemble any name existing in any other company. Form INC-1 is used for reserving the name.
Incorporation Filing Application: Form INC-32, along with MOA and AOA, is filed at the Ministry of Corporate Affairs (MCA) for the application to be incorporated.
License for Section 8 Company: After preliminary examination, MCA grants license for incorporation through Form INC 12.
Certificate of Incorporation: After the Central Authority gives its approval, MCA issues Certificate of Incorporation through Form INC 16, which is an incorporation certificate stating that the company has been formed.

Fundraising for Section 8 Companies

Section 8 Companies cannot raise funds from Capital Market or deposits. Nevertheless, they can receive funds through:
Grants: The Section 8 companies can collect grants from the public in India and abroad provided they have registered under the FCRA.
Foreign Contributions: Contributions from abroad are also permitted under the FCRA. The company shall seek prior permission from the Ministry of Home Affairs if it proposes to accept foreign contributions.
Equity funding: The Section 8 Company can issue equity and, in doing so, is required to adhere to the provisions of applicable financial regulations.

How SKMC can help you?

Having a Section 8 Company has many beneficial considerations if one wants to run an organization that will be classified as not-for-profit, but still has a solid legal backing. As a firm adherent to the provisions of the Companies Act 2013, greater transparency, credibility, and access to government grants and tax exemptions are gained by Section 8 Companies. Professional services are likely to ensure a hassle-free experience for entrepreneurs and organizations who wish to form a Section 8 Company in India, thus streamlining the entire process.

SKMC GLOBAL is the one-stop document support and compliance guaranteeing clients an absolutely hassle-free experience in their registration process to serve society through a legally recognized non-profit entity:

Expert Discussion: Our team of experts understands the objective of business and advises on the way forward.
Document Drafting: Our team drafts the required documents along with the Memorandum and Articles of Association (MOA and AOA) meticulously so as to align the goals of the business with the documentation.
Filing of Application Submission:SKMC Global prepares and submit necessary documents with Registrar of Companies (RoC).
Obtaining the approval: Once the application is filed, SKMC Global team handles the task of ROC approval making the process hassle-free and seamless for the client.
Post incorporation Compliance: SKMC team ensures that the newly incorporated company adheres to the compliances required post-incorporation which allows the client to concentrate on the objectives of NGO.