A Section 8 Company, also known as a Section 8 of the Companies Act, 2013, is a non-profit organisation with a primary mission to advance charitable activities, arts, sciences, education, and sports. Unlike regular companies, Section 8 Company registration in India is not driven by profit generation. Instead, any profits generated through their activities are exclusively employed to further their stated objectives and are not distributed among the company’s members or shareholders. This unique legal structure allows Section 8 Companies to focus solely on their charitable and social goals without the primary motive of financial gain. In this blog, we shall see the process of Section 8 company registration in India.
Understanding Section 8 Company Registration in India
A Section 8 company is described as an entity whose core objectives are centred on promoting a range of activities like arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or similar endeavours, which makes it important to learn the process of Section 8 company registration in India. This legal framework underscores their dedication to social and charitable causes over pursuing financial profits.
Advantages of Section 8 Company Registration in India
The process of Section 8 company registration in India provides several compelling benefits, which are outlined below:
1. Tax Exemption
Section 8 companies registered under section 12AA of the Income Tax Act enjoy a remarkable advantage of 100% tax exemption. This privilege arises from their commitment to utilising their profits solely for charitable purposes, making all generated profits non-taxable.
2. No Minimum Capital Requirement
Unlike public limited companies, Section 8 entities are not bound by a minimum capital requirement. This flexibility allows them to adapt their capital structure according to their growth and financial needs, offering greater operational freedom.
3. No Stamp Duty Obligation
Section 8 companies are exempt from the payment of stamp duty during the registration process. This exemption significantly reduces the initial setup costs associated with forming a Section 8 company in comparison to other types of registered entities.
4. Separate Legal Entity
Section 8 companies possess a distinct legal identity, much like other registered companies. This characteristic grants them perpetual existence and enhances their credibility. It also empowers them with legal autonomy and standing.
5. Enhanced Credibility
Section 8 companies are subject to rigorous legal compliance requirements, bolstering their credibility and legal standing. Unlike NGOs and trusts, Section 8 entities adhere to stringent post-registration compliance measures, making them more trustworthy in the eyes of stakeholders.
Eligibility Requirements for Section 8 Company Registration in India
Before going into the process of Section 8 company registration in India, some specific eligibility criteria must be met. These criteria are designed to ensure that the company’s primary purpose aligns with promoting social welfare and contributing to the betterment of society. The essential eligibility requirements are:
1. Indian National or Hindu Undivided Family (HUF)
Individuals who are Indian nationals or Hindu Undivided Families are eligible for Section 8 Company registration in India. This requirement underscores the preference for local involvement in philanthropic and charitable endeavours.
2. Minimum of One Director
The entity seeking to establish a Section 8 Company must have at least one director. This director plays a crucial role in the governance and decision-making processes of the company, ensuring responsible management.
3. Charitable and Social Objectives
The primary objective of a Section 8 Company should be related to one or more of the following:
- Promoting art and science
- Advancing sports
- Undertaking charitable activities
- Promoting education
- Providing financial assistance to individuals from lower-income groups
These objectives emphasise the company’s commitment to activities that benefit society and contribute positively to various aspects of social welfare.
Documents Required for Section 8 Company Registration in India
To complete the process of Section 8 company registration in India, several essential documents must be provided. These documents serve as crucial evidence and compliance with legal requirements. The list of the required documents is as follows:
1. Articles of Association and Memorandum of Association: These documents outline the company’s rules, regulations, and objectives. They are fundamental to the company’s structure and operations.
2. Declaration by the First Directors and Subscribers: An affidavit is not required. Instead, a declaration by the first directors and subscribers attesting to the accuracy and authenticity of the incorporation documents is necessary.
3. Proof of Office Address: This can be substantiated with a copy of utility bills, such as an electricity, water, or gas bill. This document verifies the company’s registered office address.
4. Copy of the Certificate of Incorporation of an Overseas Corporate Body (if applicable): If the Section 8 company involves an overseas corporate body, a copy of its COI is required for verification.
5. Resolution Passed by the Promoter Company: This resolution demonstrates the approval and intent of the promoter company to establish the Section 8 company. It outlines key decisions related to the incorporation.
6. Consent of Nominee (INC-3): This document includes the consent of the individual nominated to be on the board of directors or governing body of the Section 8 company. It is filed with the Registrar of Companies.
7. Residential and Identity Proof of Nominees and Subscribers: Identification and residential proofs of the nominees and subscribers to the Section 8 company, such as Aadhar card, passport, or voter ID, are essential.
8. Applicant’s Identity and Residential Proof: The identity and residential proof of the applicant who initiates the incorporation process.
9. Digital Signature Certificate: A DSC for all the directors and subscribers involved in the incorporation process is required. It facilitates online filing and ensures document security.
10. Declaration of Unregistered Companies: This declaration asserts that the promoters are not part of any unregistered companies. It is a declaration of compliance with legal requirements.
Process of Section 8 Company Registration in India
The process of Section 8 company registration in India is as mentioned below:
Step 1: Obtain Digital Signature Certificate
The first step in the process of Section 8 company registration is to obtain a DSC.
- Acquire a Digital Signature Certificate for the proposed directors of the Section 8 Company. This certificate is crucial for secure online document filing with the Ministry of Corporate Affairs.
- Relevant Form: DIR-3
Step 2: Obtain Director Identification Number
Next in the process of Section 8 company registration is acquiring a DIN.
- Apply for a Director Identification Number for the proposed directors. The DIN is a unique identifier issued by the MCA to individuals wishing to become directors of Indian companies.
- Relevant Form: DIR-3
Step 3: Reserve the Company Name
- Reserve a distinctive name for the Section 8 company. The name should not resemble that of any existing company to avoid confusion.
- Relevant Form: INC-1
Step 4: File the Application for Incorporation
- Submit an application for the Section 8 Company registration. This application is filed using Form INC-32, along with the Memorandum of Association and Articles of Association of the company.
- Relevant Forms: INC-32, MOA, AOA
Step 5: Obtain a Licence for Section 8 Company
In this step of the process of Section 8 company registration, Form INC 12 is used.
- After approval of the application for incorporation, obtain a licence for the Section 8 Company. This is done through Form INC-12, accompanied by the required documents.
- Relevant Form: INC-12
Step 6: Obtain a Certificate of Incorporation
To end the process of Section 8 company registration, the final certificate of incorporation is obatined
- Upon obtaining the licence, the Ministry of Corporate Affairs issues a Certificate of Incorporation in Form INC-16. This certificate serves as official confirmation of the Section 8 Company’s incorporation.
- Relevant Form: INC-16
Final Thoughts
The process of Section 8 Company registration in India follows a meticulously structured process to ensure adherence to legal and regulatory frameworks. From obtaining Digital Signature Certificates and Director Identification Numbers for directors, to reserving a unique company name, filing incorporation documents, obtaining a licence, and ultimately receiving a Certificate of Incorporation, each step is vital.
These measures aim to guarantee the Section 8 Company’s commitment to charitable and social objectives while maintaining transparency and legal compliance. This process reflects the Indian government’s dedication to facilitating philanthropic initiatives and enabling organisations to contribute meaningfully to societal welfare.
