We have heard a lot about non-profit organization and companies with charitable objectives. The concept of Section 8 companies was introduced in the Companies Act 1913 that permitted companies with charitable objectives. These companies are registered without the words ‘Limited’ or ‘Private Limited’. The main objectives behind Section 8 companies are to promote commerce, art, science etc. The profits earned by such companies shall be used only for promoting the objective of the company and no dividend shall be paid to the members of Section 8 companies.
If you have similar objectives in mind and are confused on how to go about it then this article is for you.
Let us know all about Section 8 Company:
1. What are the preliminary checks to proceed with incorporation of Section 8 Company?
Any person or association of person who has the following object in mind can proceed with the registration of Section 8 Company:
1. promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
2. intends to apply its profit, if any, or other income in promoting its objects;
3. intends to prohibit the payment of any dividend to its members.
2. What are conditions for the proposed name of Section 8 Company?
The name of Section 8 Company must include the word-
1. Foundation
2. Forum
3. Association
4. Federation
5. Chambers
6. Confederation
7. Council
8. Electoral
9. Trust
Such companies will not have the word ‘Limited’ or ‘Private Limited’ as the case may be after the company’s name.
3. What are the documents required to incorporate a Section 8 Company?
The following documents are required to incorporate a Section 8 Company-
1. Passport size photographs of the proposed directors.
2. Identity and Address Proof of the proposed directors.
3. Utility bill not older than 2 months confirming the residential address of the proposed directors ( i.e., Bank Statement/ telephone bill/ electricity bill).
4. Proof of registered office (i.e., Lease Deed/ Rent Agreement) along with the utility bill not older than 2 months. The utility bill can be telephone bill/ electricity bill/ Water Bill.
5. No Objection Certificate (NOC) for use of registered office of proposed company from owner and person whose name is mentioned in the utility bill.
6. Declaration of Authorised Signatory for GSTIN, if the company wishes to apply for the same.
7. Specimen Signature Card for online application for registration with Employees’ Provident Fund Organisation. Click here to download the format.
8. Class-3 Digital Signatures (DSCs) of all the proposed Directors.
9. Declaration in form of an affidavit from the proposed directors and subscribers, in case where the main object of the company requires approvals from sectoral regulators like RBI or SEBI.
10. Draft Memorandum and Articles of Association of the Company where the photographs of the subscribers shall be affixed.
11. A declaration in Form INC-14 which shall be executed by a CS/CA/CMA.
12. An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
13. A declaration in Form INC-15 by each of the persons making the application.
4. How can I make the application for registration?
In order to make the application, you will have to decide the name of your company. It should be a unique name and the name should not be similar to any existing company’s name or trademark. If that is the case, the name of the proposed company will be rejected.
In order to check the name for your company, you will have to visit www.mca.gov.in and go to MCA Services and check the proposed name on company master data and trade mark search.
Once you are fairly convinced that there is no existing company by the proposed name, you can proceed with the application process for formation of Section 8 Company. You are required to login to MCA Portal and complete the application process.
Since, the process of filing will require professional certifications by a CS/CA/CMA and includes drafting of documents, it is suggested to take a professional help to register your company.
Where the proposed directors already have the DIN, you need to ensure that the KYC verification for those directors are done. Without this in place, you will not be allowed to proceed with filing up the Spice+ form.
Note: DIN stands for Directors’ Identification Number which is an 8 digit unique identification number allotted to the individual who wants to be director of any company.
5. What are the benefits of incorporating a Section 8 Company?
The following are the benefits-
1. It is exempted from the payment of stamp duty on registration as applicable on other types of company.
2. It has more credibility when compared to other non-profit organizations i.e., societies or trusts. Since, the company is registered under the Companies Act, 2013, it requires to comply with the provisions of the act making it easy to trust the company.
3. A Section 8 Company enjoys the privileges and exemptions under the Companies Act, 2013. However, it must comply with the obligations under the Act.
4. A firm can be a member of a Section 8 Company.
5. Being a non-profit organization, they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits.
Important points to be noted:
1. Name application can be done making an application in Form Spice+ Part A. You can immediately proceed with filling the Spice+ Part B if you are sure to get the proposed name. However, it is suggested to have the name reserved prior to making an application as it would ensure that your name is reserved. The fees for filing RUN Form is Rs. 1,000/-.
2. Only one re-submission is allowed in case of name reservation. So you need to be careful before resubmitting the application. In case the name is rejected, the amount paid for name reservation will not be refunded.
3. There will be an OTP verification for the authorised person in AGILE-PRO form and hence the mobile number and Email Id of the proposed directors should be active.
4. The size of forms i.e., Form INC-32 (Spice+ Part B), INC-35 (AGILE-PRO) and INC-9 (Declaration by Directors) should not exceed 6 MB each. Hence, you need to ensure that the size of the attachments are not huge.
5. The form should be uploaded as linked form and in the following manner-
a. Spice+ Part B
d. AGILE-Pro
e. Declaration by Directors.
Note: Please note that after incorporation of the company, it shall not commence its business unless a declaration for commencement of business is filed in Form INC-20A with the RoC. The time limit for filing the form is 180 days from the date of incorporation of the company.
If you have any specific query with regard to Section 8 Company or is looking for a professional help to incorporate one, you may write to at anjalibansalcs@gmail.com or reach out to me at +91 9148973085.