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Section 8 company registration in india

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A Section 8 Company is a type of non-profit organization in India that operates with the primary objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and protection of the environment. These companies are regulated under Section 8 of the Companies Act, 2013, and they enjoy various benefits, including tax exemptions. This guide provides a detailed overview of the Section 8 Company registration process, its benefits, requirements, and other essential aspects.

What is a Section 8 Company?

A Section 8 Company is a legal entity established to promote non-profit activities. Unlike other companies, it does not aim to make profits or distribute dividends to its members. Instead, any income generated must be reinvested in furthering the company’s objectives. These companies are often compared to NGOs, societies, and trusts but offer a more structured and transparent framework.

Key Features of a Section 8 Company

  1. Non-Profit Objective: The primary aim is to promote social welfare, education, charity, or other non-commercial activities.
  2. Limited Liability: Members’ liability is limited to their shareholding.
  3. Separate Legal Entity: The company is a distinct legal entity, separate from its members.
  4. Perpetual Succession: The company continues to exist even if its members change.
  5. No Minimum Capital Requirement: There is no requirement for a minimum paid-up capital.
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Benefits of Registering a Section 8 Company

  1. Tax Exemptions: Section 8 companies can avail of various tax exemptions under the Income Tax Act.
  2. Credibility: These companies are considered more credible due to their stringent regulatory requirements and transparent operations.
  3. Grants and Donations: They are eligible to receive donations and grants from government bodies, corporates, and international organizations.
  4. Separate Legal Identity: The company can own property, incur debts, and enter into contracts in its own name.
  5. Limited Liability: Members are only liable to the extent of their share in the company.

Prerequisites for Registration

Before section 8 company registration, ensure the following prerequisites are met:

  1. Directors: A minimum of two directors for a private limited company or three directors for a public limited company.
  2. Members: A minimum of two members for a private limited company or seven members for a public limited company.
  3. Name: The proposed name should not be similar to any existing company or trademark.
  4. Objective: The objective of the company must be clearly defined and aligned with promoting social welfare, charity, or other non-profit activities.

Step-by-Step Registration Process

1. Obtain Digital Signature Certificate (DSC)

The first step is to obtain a Digital Signature Certificate for all the proposed directors. This is necessary for signing electronic documents during the registration process.

2. Apply for Director Identification Number (DIN)

Next, apply for a Director Identification Number for all the proposed directors by filing Form DIR-3 along with the required identity and address proofs.

3. Name Approval

Choose a unique name for your company and submit it for approval to the Ministry of Corporate Affairs (MCA) through the RUN (Reserve Unique Name) service. Ensure the name complies with the naming guidelines set by the MCA.

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4. Drafting of MOA and AOA

Prepare the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA outlines the company’s objectives, while the AOA lays down the rules and regulations for the company’s internal management.

5. File Form INC-12

Submit Form INC-12 to the MCA to obtain a license under Section 8 of the Companies Act, 2013. Attach the following documents with the form:

  • Draft MOA and AOA
  • Declaration by professionals in Form INC-14
  • Declaration by directors in Form INC-15
  • Financial statements and asset/liability statements of the company
  • Estimated annual income and expenditure for the next three years
  • A brief description of the company’s work and how it will promote its objectives

6. File Forms SPICe+ INC-32, MOA, and AOA

Once the license is obtained, file the incorporation forms (SPICe+ INC-32, SPICe MOA, and SPICe AOA) along with the required documents to the MCA.

7. Payment of Fees

Pay the prescribed registration fees and stamp duty. The fee structure may vary based on the authorized capital of the company.

8. Certificate of Incorporation

After verifying the documents, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, along with the license under Section 8, signifying the legal existence of the company.

Post-Registration Requirements

Once the company is incorporated, there are several post-registration compliance requirements:

  1. Pan and TAN: Apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
  2. Bank Account: Open a bank account in the name of the company for all financial transactions.
  3. Statutory Registers: Maintain statutory registers, including the Register of Members, Register of Directors, etc.
  4. GST Registration: If applicable, register for Goods and Services Tax (GST).
  5. Compliance Filings: File annual returns and financial statements with the ROC.
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Common Documents Required

  1. Identity Proof: PAN card, passport, or voter ID of all directors and members.
  2. Address Proof: Recent utility bills, bank statements, or Aadhaar card of all directors and members.
  3. Registered Office Proof: Utility bill (not older than two months), and NOC from the property owner.
  4. Photographs: Passport-sized photographs of all directors.

Key Considerations

  1. Annual Compliance: Regular compliance with the Companies Act, 2013, and other applicable laws is essential to avoid penalties.
  2. Professional Help: Consider hiring a professional (CA, CS, or lawyer) to assist with the registration process and ongoing compliance.
  3. Objective Clarity: Ensure that the objectives of the company are clearly defined and strictly followed to avoid any regulatory issues.

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Conclusion

Registering a Section 8 Company is a strategic move for individuals and groups looking to make a positive impact on society through non-profit activities. This business structure not only provides a formal framework for operation but also offers various benefits like tax exemptions and increased credibility. By following this comprehensive guide, you can navigate the registration process smoothly and focus on achieving your organization’s mission of social welfare and development.

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