Section 8 Company – Companies with Charitable Objects
In India, a non-profit organisation can be registered as Trust by executing a Trust deed or as a Society under the Registrar of Societies, or as a private limited non profit company under Section 8 Company under the Companies Act, 2013. A Section 8 Company is the same as the popular Section 25 company under the old Companies Act, 1956, which was one of the most popular forms of Non- Profit Organisations in India. But, as per the new Companies Act 2013, Section 25 (as per the old act) has now become Section 8.
As per Section 8(1a, 1b, 1c) of the new Companies Act, 2013, a Section 8 company can be established for “promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object”, provided it “intends to apply its profits, if any, or other income in promoting its objects” and “intends to prohibit the payment of any dividend to its members.”.
To register a section 8 company in India, the process is similar to the incorporation of other companies (except an additional license is required). The applicant looking to start a section 8 company is required to file Form INC-1 for name availability. Once the name is approved, there is a further requirement of obtaining a license for a Section 8 Company, for which Form RD-1 is to be filed in order to obtain a license for such company. After obtaining license number, applicant can proceed further to incorporate a company by filing e forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and DIR-12 as the case may be.The text of the Section 8 provision in the 2013 Companies Act reads:COMPANIES ACT, 2013, Section 8 Formation of companies with charitable objects, etc.:Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company:has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other objectintends to apply its profits, if any, or other income in promoting its objects; andintends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.the company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
A Non-profit Company or Section 8 Company is a Company which:
Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any such other object;Intends to apply its profits, if any, or other income in promoting its objects; andIntends to prohibit the payment of any dividend to its members.
Benefits of Section 8 Company Registration:
Exemption from Stamp Duty;
Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act;
Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and the general public;
Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name; and
A Section 8 Company has more credibility as compared to any other Non-profit organization structure like Trust or Society
Documents for Section 8 company registration process
Mentioned Below are documents required for Section 8 company registration process:
An idproof ( PAN card any of the IDs: – Aadhar card, passport, driving license ).
Address proof both permanent and present with electricity /telephone/mobile bill etc., which should not be older than 2 months
Disclosure of directorship of other companies with ref. to section 2(69).
Specimen signature with photo duly attested by a notary or a banker.
The following list of documents are required to be filed by the directors:
Affidavit inform INC-9
Affidavit for non-acceptance of deposits
Consent to act as a director in DIR-2 along with the ID and address proof.
Other documents like- mail id, phone number, pan no. , address proof, and the list of the companies of which he is a member.
Certificate of commencement of business
Certificate of incorporation of a business.
Section 8 Company registration is easy to form and mentioned above are some mandatory requirements for registration.
The list of pre-incorporation procedures to obtain registration of Section 8 Company:
1. Draft Article of Association
It is a document which includes all the necessary obligations like, responsibilities of the directors, kinds of business to be undertaken etc.
2. Draft Memorandum of Association
It is a document which works as the constitution to the company. It provides the outline for working of the company with outside organization.
3. Obtain a DIN no
Which is envisaged as per Section 153 with form DIR-3 has to be filled.
4. Obtain a digital signature
Which can be applied by the subscriber with any of the DSC vendors.
5. Apply for a suitable name
And draft the MOA and AOA under section 7(1)(a) add their photo, name, address, and occupation in front of a witness.