A Section-8 Company under Companies Act, 2013 is the same as Section 25 Company under the old Companies Act, 1956. A Section 8 company is defined as one which:
- has the promotion of commerce, art, science, sports, education, research, welfare, religion, charity, protection of environment or any such other object as its objects;
- intends to apply its profits, if any, or any other income in promoting its objects; and
- does not intends to pay any dividend to its members
Eligibility and characteristics of registering Section-8 company
- Section-8 Company is distinct from its members as it a separate legal entity.
- A section 8 company is also known as Licensed Company as it has an additional requirement of obtaining a license from the central government under section-8 of Companies Act, 2013, unlike any other company. However, the license can be revoked by the central government if it fails to comply with the legal provisions.
- The liability of members is Limited, which implies that members shall not be personally liable. Liability of members is either limited by guarantee or limited by shares.
- On winding up of the company, the assets, remaining after discharging all the debts & liabilities, must be transferred to another section-8 Company with similar objects.
- A minimum of two directors with at least one of them being an Indian citizen and resident.
- Minimum of two shareholders (over the age of 18 years). Directors and shareholders can be the same persons
Our services include
- Filing for name approval via Spice+
- Obtaining DSC
- Acquiring Director Identification Number (DIN)
- Applying for Permanent Account Number (PAN) / Tax collection and deduction Account Number (TAN)
- Registration under EPFO
- Registration under ESIC
- GSTIN through AGILE Pro form is optional
- Bank Account opening
- Obtaining license from Central Government
- Obtaining 80G certificate
- Registration under Section 12A
- Accounting and booking services
- Trademark registration, if any
- Auditing and assurance services
- Registration, returns and certifications
- Handling representation, assessment and litigations
Documents required for incorporating section 8 company in India
For directors and shareholders of the company:
- PAN card of all the Indian directors and shareholders of the company and Passport for foreigners
- Any Id proof of all the directors and shareholders of the company (Except Aadhar Card copy)
- Latest bank statement / utility bill which is not older than 2 months
- Passport size photographs
For registered office of the company:
- In case of owned property
- Registry proof, or
- House tax receipt
- In case of rented property
- Latest utility bill,
- Rent agreement, and
- No objection certificate (NOC) from the owner of rented premises
Advantages of incorporating section 8 company in India
Section 8 company enjoys multiple benefits as mentioned below:
- It is exempt from the requirement of paying stamp duty on its MOA and AOA, which applies to other types of company structures.
- Tax deductions to the persons in respect of donations to the Company u/s 80G of the Income Tax Act
- There is no minimum capital requirement. The funds necessary for carrying out activities can be bought in the form of donations or subscriptions from members or the public, in case the company is formed without share capital. The structure of such companies can either be a private company or a public company.
- It is not required to add the phrase “limited” or “private limited” at the end of its name, however, should contain words like Association, Society, Council, Charities, Foundation, Academy, Institute, Federation, etc.
Concerns regarding section 8 company
- A company registered under this section cannot amalgamate with another company not registered under this section and not having similar objects.
- If section 8 company contravenes any of the requirements of this section or any of the conditions subject to which the license is issued or in case the affairs of the company are conducted fraudulently or in a manner that violates objects of the company or prejudicial to public interest, the license granted to the company may be revoked by the Central Government.
- the company shall be punishable with minimum fine of ten lakh rupees which may extend to one crore rupees If it makes any default in complying with any of the requirements laid down in this section, and the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than twenty-five thousand rupees but which may extend to twenty-five lakh rupees, or with both.
- Section 8 company shall apply its Profit or any other Income for the promotion of the main object only.
- A company registered under this section is not allowed to declare dividend or distribute profit to the members.
Every company does not have objectives of making profits by carrying out trade and commerce. Many companies primarily have charitable and non-profit objectives and go ahead with registration under Section 8 of Companies Act, 2013.
If you wish to start a Section 8 Company in India to promote some social good or charitable work we will be happy to assist you. For detailed procedure on incorporating Section 8 company in India click here.