Section 8 company Registration

What is a Section 8 Company?

A company registered under companies act 2013 or previous applicable act and has in objects to,

• Promote Sports commerce, art, science,  education, research, social welfare, religion, charity, protection of environment or any such other object;

And intends to apply its profits, if any, or other income in promoting its objective, intends to prohibit the payment of any dividend to its members is called section 8 companies under companies act 2013.

The license may be issued by central government such manner as may be prescribed, and on such conditions as it deems fit, approve that association of persons or person to be registered as a company under this section without the addition to its name of the word “Private Limited”, or as the case may be, the words “Limited”, and On application, in the prescribed form, Registrar may register such person or association of persons as a company under this section.

Section 8 Company is also a company that is registered for charitable or non-profit purposes. However, this Company is similar to a Trust or Society; an exception is that a Section 8 Company is registered under the "Ministry of Corporate Affairs (MCA)" of the Central Government while the Societies and Trusts are registered under the regulations of the State Government. However, this has numerous advantages as compared to Trust or Society and also has better credibility among donors, departments of government, and other stakeholders. Further, the key feature of this Company is that it is possible to incorporate the company name without using the word "Limited" or "Private Limited" as the case may be.

Eligibility for Section 8 Companies

If an individual or group of individuals has any of the following aims or goals, they are entitled to register as a Section 8 Company. The Central Government must be satisfied that the objectives have been accomplished.

• When a firm wants to advance commerce, science, education, art, sports, research, religion, charity, social welfare, environmental protection, or similar goals;
• when the business intends to use all profits (if any) or any income it receives after incorporation exclusively for the furtherance of such purposes;
• When the corporation has no intention of paying its shareholders any dividends.

The procedure for incorporating a section 8 company is outlined in the Companies Act, 2013, and according to this provision, an application in Form No. INC.12 must be filed to the Registrar of Companies together with the supporting documentation listed below.

Form no. INC - 13 - Company's Draft Memorandum of Association (MOA) and Articles of Association (AOA) in Form No. INC - 13 (as stipulated in Act) with Affixing of Photographs of Subscribers

Form No. INC-14 - A declaration that the draft MOA and AOA are in compliance with the rules and regulations of Section 8 and that the necessary steps have been made to meet Section 8 criteria must be attached to Form No. INC-14.

Note: The declaration must be written on stamp paper and notarized by a notary public who is a practising advocate, company secretary, chartered accountant, or cost accountant.

Form No. INC-15 - A statement in Form No. INC-15  on stamp paper that has been notarized by each member of the applying company.

First directors and each subscriber must complete Form No. INC-9, which must be properly notarized and stamped with the appropriate State's stamp.

An estimate of the company's projected yearly income and expenses for the following three years, along with information on the sources of income and the intended use of funds.

The requirement to file Form No. INC 12 has been eliminated by the New & Simplified Procedure of Incorporation of Section 8 Companies Companies (Incorporation) Sixth Amendment Rules, 2019 dated 7th June 2019 to simplify the incorporation process.

The incorporation process for Section 8 corporations is now just as straightforward and easy as it is for other companies thanks to this reform.

Section 8 Companies can be incorporated by reserving names in Spice+ Part A, followed by Spice+ Part B, or by filing Spice+ directly. During incorporation, Section 8 Company shall be issued License No.

Benefits of a Section 8 Company

➲ Distinct Identity

An entity means something that has a true existence; an object with a distinct existence. A company is a legal entity and a legal entity established under the Law. Hence a company is a form of the organization having broad legal potential and that may own property and also incur debts in its own name. The members of the company have no liability towards company debts because the company and members both are the separate people in the eye of the law, hence company is an artificial person having a separate legal identity.

➲ Liability is Limited

Limited Liability means the status of being legally responsible for a company's debts only to a limited sum. Like proprietorships and partnerships, the Member's responsibility for the company's debts is limited in a limited liability company. In other words, the responsibility of a company's members is limited only to the sum of the face value of the shares they take over

➲ No Minimum Capital Required

As per the point of view of incorporation, there is no minimum capital required for incorporating a private limited company. As per company law 2013, you can start a private limited company with 0 paid-up capital

➲ Less stamp duty:

While incorporating section 8 companies there is minimum stamp duty liveable. The government give privileges to section 8 on the incorporation of the company, hence it charges less stamp duty on incorporation.

➲ No suffix  

Section 8 companies may not use suffixes like the private limited company or limited company, it is optional for them.

➲ Tax Benefits

Section 8 company can get the benefit, if it gets registration under section 80G and 12AA of IT act. [12A & 80G REGISTRATION]

Procedure for incorporating section 8 company’s:

STEP 1: APPLY FOR THE DESIRED NAME

The first step in incorporating a company is for reserving the name of the proposed company in part-A of SPICe Plus (SPICe+) form. In this form choose your business activity and file for two proposed names, if CRC will reject the proposed name then file again with two new names within a certain time limit from the date of rejection (15 days).

STEP 2: APPLY FOR A DIGITAL SIGNATURE CERTIFICATE (DSC)

The process of incorporation of a Company is 100 percent online in India. Hence, we need to apply for a DSC (Digital Signature Certificate), which will be used for electronically signing the forms by proposed directors and proposed members respectively. DSC has to be mandatorily applied for each and every single member/shareholder and director of the Company.

STEP 3: FILL THE APPLICATION FOR INCORPORATION (SPICe plus Form - SPICe+)

Once, your name gets reserved under it will be valid for 20 days from the date of approval, within 20 days you have to fill-up the respective application form for incorporation along with all the requisite attachments and documents and upload it online. SPICe+ is an advanced form combination of 8 forms in one. Through this proposed company can apply for at once:

• Name reservation
• Incorporation
• Apply for DIN
• TAN application
• PAN application
• EPFO registration
• ESIC registration
• GSTIN registration

Next step is to fill the part-B of SPICe + which will contain all the detail related to incorporating company like number total number of directors and members, Authorized share capital, paid-up capital, number of share hold by members, company registered address detail, directors and member detail and will required attachments for proof. Then draft the MOA (memorandum of association) and AOA (Article of Association) of the proposed company, then fill form required for EPFO and ESIC registration with detail, then Fill the AGILE form for procuring GSTIN. After filling all these attach the signature and then upload it on the MCA website.

For section 8 company applicants need to attach additional documents with SPICe+ form in part –B

• A physical copy of MOA draft duly signed by members and witnesses
• A physical copy of AOA draft duly signed by members and witnesses
• Declaration in form INC-14 by any practicing professional

STEP 4: CERTIFICATE OF COMMENCEMENT OF BUSINESS AND LICENSE UNDER SECTION 8

Once the application of incorporation of the company is approved and the Certificate of Incorporation and license under section 8 is issued by the ROC, the Company shall file for seeking approval for commencing the business within 180 from the date of incorporation of the Company

Documents required for Incorporating Section 8 Company

1. ID proof of proposed Directors and members:

• PAN card (Mandatory)
• Aadhar card (Mandatory)
• Passport  or Voter’s ID or Driving License

2. Address proof of proposed members and directors (anyone):

• Telephone bill
• Mobile Bill
• Bank statement
• Electricity bill

3. Address proof for the principal place of business of the proposed company (anyone)

• Utility bill like telephone bill, electricity bill, gas bill, water bill
• Rent agreement with rent slip
• Proof of ownership

Characteristics of Section 8 company :

➲ Incorporate for social welfare

This type of company incorporated for charity, social welfare, social promotion, their main aim is to promote social welfare and work for society, not to earn profits. Their main objects depict the reasons for their incorporation, objects are like Sports, Promote commerce, art, science,  education, research, social welfare, religion, charity, protection of the environment, or any such other object.

➲ No minimum capital:

As compared to other companies, section 8 companies don’t require any prescribed minimum paid-up share capital.

➲ Licensed by government

These types of companies are licensed by the central government under section 8 of the companies act 2013 and these companies work for society and receive a donation from other general public for the welfare work.

➲ Limited liability:

Section 8 company also forms as a private limited or public limited company having limited liability. Members of this company have limited liability as per their share subscribed.

➲ No dividend distribution

This form of companies doesn’t issue a dividend to its members, because it is restricted from the law. They cannot distribute their earned profit as dividends to its member; they can use their profit in promoting their business objectives.

Difference between various type of non-profit organization