Section 8 Company Registration

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Introduction

A Section 8 Company, also known as a Non-Profit Organization (NPO), is established with the primary purpose of advancing various fields, including commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, and more. It is mandatory that any profits or income generated by the company are directed towards furthering its stated objectives. This type of company is prohibited from distributing profits to its members as dividends; instead, these profits must be reinvested in advancing the company’s original goals. Notably, a Section 8 Company can attain registration with limited liability status without the need to include the terms “Private Limited” or “Limited” in its name, and it is allowed to use descriptors like Foundation, Association, Organization, Forum, Federation, and similar terms within its name.

Advantages

  1. Limited Liability
    Members of a Section 8 Company benefit from limited liability. Their liability is restricted to the extent of their investment in the company, ensuring the safeguarding of their personal assets and property.
  2. Exemptions
    Non-Profit Organizations enjoy several noteworthy exemptions, including no requirement to pay stamp duty during the registration process and no minimum capital requirement. Additionally, donors can claim tax exemptions under section 80G of the Income Tax Act for their contributions.
  3. Separate Legal Entity
    A Section 8 Company possesses a distinct legal identity. It can hold property and assume debts in its own name. Importantly, the company’s debts do not impose any liability on its members or directors since, in the eyes of the law, the company and its members are distinct entities.

Procedure for Registering a Section 8 Company under the Companies Act, 2013

The primary aim of registering a company as a Section 8 Company is to advance non-profit goals such as commerce, arts, charity, education, religion, environmental protection, social welfare, sports research, and more.

To establish a Section 8 Company, a minimum of two directors is required, and there is no obligation for a minimum paid-up capital.

In India, a non-profit organization can opt for registration under the Registrar of Societies or as a Non-profit Company under Section 8 of the Companies Act, 2013.

Any profits generated by this company, if any, must be utilized to further the company’s objectives and are not distributed as dividends to its shareholders.

It’s worth noting that a Section 8 Company is the equivalent of the erstwhile Section 25 Company under the previous Companies Act of 1956. With the implementation of the Companies Act of 2013, Section 25 has been renumbered as Section 8.

Who is Eligible to Establish a Section 8 Company?

An individual or a collective group of individuals can seek Section 8 Company Registration, provided they have the following intentions, which must be verified and approved by the Central Government:

  1. If the company aims to advance fields like science, commerce, education, art, sports, research, charity, social welfare, environmental protection, or similar objectives.
  2. If the company is committed to channeling all its profits or income generated after incorporation exclusively towards the promotion of these specified objectives.
  3. When the company has no intention of disbursing dividends to its members.

What’s Covered

  1. Director Identification Number (DIN) for 2 Directors
  2. Digital Signatures (DSC) for 2 Directors
  3. Preparation of Memorandum and Articles of Association
  4. Incorporation fees*
  5. Approval of Company Name
  6. Issuance of Incorporation Certificate
  7. Company PAN and TAN registration
  8. Registration for EPFO, ESIC, and Profession Tax
  9. Assistance with Opening a Bank Account Kit

Required Documents

  • PAN Card: PAN card copies of Shareholders and Directors. For Foreign Nationals, a Passport is mandatory.
  • ID Proof: Aadhaar card/Passport/Voter ID/Driving Licence (Any 1) of Shareholders and Directors.
  • Address Proof: Bank Statement/Mobile/Telephone Bill/Electricity Bill (Any 1) of Shareholders and Directors.
  • Photograph: Passport-sized photos of Shareholders and Directors.
  • Office Address Proof: Proof of the office address – Electricity Bill/Mobile Bill (Any 1).
  • No Objection Certificate (NOC) from Owner: A No Objection Certificate from the owner of the office.
  • Rent Agreement: If the property is rented, provide the Rent Agreement for the office.

What Are the Aims or Purposes for Establishing a Section 8 Company?

A Section 8 Company, also known as a Non-Profit Organization (NPO), can be established with the primary objective of advancing fields such as commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, or any similar objectives.

Is it Permissible for a Section 8 Company to Disburse Profits?

A Section 8 Company is prohibited from distributing its profits among its members or disbursing them as dividends. Instead, these profits must be utilized to further the objectives for which the company was established.

What is the Minimum Number of Directors and Members Needed in a Non-Profit Company?

A minimum of 2 Directors and 2 Members is mandatory for the formation of a Non-Profit Company.


What Sets Directors Apart from Members?

Directors are responsible for overseeing and managing the company’s operational aspects, while Members are individuals who invest in the company’s shares.


Is it possible for Directors and Members to be Identical?

Yes, it is permissible for the same individuals to serve as both Directors and Members.

What Does a Company Name Search Entail?

The chosen name for the company must not replicate any existing company or LLP name or infringe upon any existing trademark. You can propose a maximum of two names in the application, with one name ultimately receiving approval from the Registrar of Companies. To expedite the company application process, we will conduct a thorough name search based on the name you provide to confirm its availability.

Distinguishing Between Authorized and Paid-Up Share Capital

Authorized share capital represents the maximum limit to which a company can issue shares. Conversely, paid-up share capital signifies the actual amount invested in the company by its members when they purchase equity shares. The paid-up share capital must be deposited into the company’s bank account.

What is the Minimum Authorized Share Capital?

The Company is required to have a minimum authorized share capital of Rs. 100,000.

What is the Minimum Capital Requirement?

There is no stipulated minimum paid-up share capital. Members have the flexibility to contribute an amount deemed sufficient to commence business operations. However, the paid-up share capital must be deposited in the company’s bank account upon incorporation.

What is a Digital Signature Certificate (DSC)?

The Company application process is conducted entirely online. Therefore, the signatures of Directors and Shareholders are electronically affixed to the e-form and submitted accordingly.

Is Physical Presence Necessary for Section 8 Company Registration?

No, neither members nor Directors need to be physically present. The entire Section 8 Company registration process is conducted online. Scanned copies of the required documents can be submitted via email, and all forms are digitally signed and filed online.

Seeking Registration under Sections 12A and 80G of the Income Tax Act?

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