What is Section 8 Company?
Popularly known as Section 8 company is a company registered with charitable objects such as the promotion of Arts, commerce, science, education, sports, protection of the environment, religion, charity, etc. By promoting it as a not-for-profit organization, the Act does not bar the company from profit creation but rather prohibits distributing profit among members. This says that all the income or profit from any activity of the company must be utilized towards charitable purpose for which it is registered.
The charitable company is registered under Section 8 of the Companies Act, 2013, which provides it special status due to its objects. Compared to other types of companies, Section 8 company enjoys various exemptions and relaxations.
Benefits of incorporation of Section 8 Company
Tax and compliance exemptions
With its registration under Section 8 of Companies Act, it obtains a special status – distinct from other entities. Not only the company enjoys tax exemptions, but also the donors can claim an exemption for the donation made (under Income Tax). Apart from tax exemption, the company is also exempted from the applicability of many compliance-related provisions.
Limited Liability
A company registered under Section 8 ensures limited liability to its members. The liability of the members is limited only to the extent of the capital subscribed and unpaid. The losses and obligations do not create a charge over the personal properties of members or directors. This helps the promoters to freely run the non-profit organisations.
No corporate title
Although the company enjoys the benefit of the corporate entity, it is not labelled as the corporate entity. The company does not need to add the suffix “Private Limited” or “Limited” after its name. This exemption is provided so that third parties offer their attention to the company’s purpose and not its status assuming it is profit making organisation.
Separate legal identity
Being registered as a company, it obtains a separate identity apart from its members. Therefore, it can own and hold the assets and liabilities in its own name irrespective of the connection with the members. The change in members or the directors neither affects its existence or the assets & liabilities or rights & obligations.
Documents required for formation of Charitable Company
Photograph
Latest Passport size photograph of Shareholders and Directors
Rent Agreement
Rent Agreement of the registered office should be provided, if any
PAN Card
PAN Card of shareholders and Directors. Foreign nationals must provide a valid passport.
Business Address Proof
Electricity Bill/ Telephone Bill of the registered office address in India
Statement of Income & Expenditure
Estimated Statement of Income & Expenditure for next three years
Address Proof
Telephone Bill /Electricity Bill/ Latest Bank Account Statement of Shareholders and Directors
Identity Proof
Voter ID/ Passport/ Driving License of Shareholders and Directors
NOC from owner
No Objection Certificate to be obtained from the owner(s) of registered office
Formulation of Section 8 Company Name
Unique Name
Mainly it builds the company brand and preferably be a coined word
Business Object
Second part of name should suggest the business activity of the company
Suffix
Its name must include suffix like Foundation, Forum, Federation, Chambers, Association, Council, etc.
Constitution Type
The name does not require to add any suffix like “Private Limited” or “Limited”
Register a company in 3 easy steps
1. Answer Quick Questions
- Fill in our questionnaires that take less than 10 minutes
- Provide basic details & documents required for registration
- Make payment through secured payment gateways
2. Experts are Here to Help
- Assigned Relationship Manager
- Procurement of Digital Signatures (DSC)
- Application for Name Reservation
- Documents drafting including MOA and AOA
- Application to grant license u/s 8
- Certificate of Incorporation
3. Your Company is Registered
- All it takes is 25 working days*
Section 8 company registration procedure
Day 1
- Application for Digital Signature Certificate
Day 2 - 4
- Checking Name availability
- Application for Name Reservation under “RUN“
- Reservation of Name
Day 5 - 8
- Drafting of MoA, AoA & other required documents
- Payment of Stamp Duty
- Notarization of required documents
Day 9 - 13
- Application to grant a license in form INC-12
- Government processing time for approval
- License under section 8 in form INC-16
Day 14 - 16
- Filing application for company registration
- Application for DIN Allotment
- Application for PAN and TAN of company
Day 17 - 19
- Government processing time
- Certificate of Incorporation
Section 8 Company Registration
To register such company, the promoters have to ensure the following:
1) The main object of the company must be to operate for a charitable purpose and among those prescribed in law
2) Minimum 2 members of the company, who shall subscribe to capital on incorporations
3) Minimum 2 directors in the company, one of which must be Indian citizen and resident
4) The registered office of the company must be situated in India
There is no minimum amount of capital prescribed for the charitable company. The promoters may introduce the amount sufficient to start and run business.There is no minimum amount of capital prescribed for the charitable company. The promoters may introduce the amount sufficient to start and run business.
The name of the company should be formulated as per the naming guidelines. The application for reservation of name is made in web-form called “RUN” with a maximum of 2 unique names. The registrar may ask to re-submit the application with a different name if the names do not fulfill the requirements.
The promoters shall apply in e-form INC-12 for said approval from Central Government. The form is accompanied with MoA – AoA of the company, declarations from promoters, estimated statement of income & expenditure for next three years, etc. If the application is approved, the approval letter is issued in form INC-16.
No. The registration process is completely online, the physical presence of the promoters is not required. All the documents and details can be transmitted through the mail or uploaded on our portal.
Yes, an NRI or Foreign National can be a Director in a Section 8 Company after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be an Indian citizen and a resident.
The Section 8 company is popularly known as NGO. However, NGOs can be registered as other business structure like trust, society, etc.
A Section 8 or Charitable Company shall not pay any dividend to its members, but apply the surplus of receipts over payments for the promotion of its objectives.
Once the company is incorporated, it is in existence and active as long as the annual compliances are met with regularly or it is wound-up voluntarily.
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