Section 8 Company NGO and its Object

A Section 8 company under the Companies Act, 2013 is a special type of company that is formed to promote charitable objectives.

The concept of Section 8 Company Registration has evolved significantly since its introduction. A Section 8 company under the Companies Act, 2013 is a special type of company that is formed to promote charitable objectives. These include activities related to commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other object. 

Objectives:

• Formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment, or any other object.
• The profits or income are applied solely to promoting the objectives of the company.

Profit Utilization:

• No part of the profit or income of the company shall be distributed as dividends to its members.

Historical Background and Evolution of Section 8 NGO

1. Companies Act, 1913:

   • Introduction: The concept was first introduced, allowing companies with charitable objectives to be registered without the words "Limited" or "Private Limited".
   • Profit Restriction: Profits were to be used solely for the purpose for which the company was established, with a prohibition on dividend distribution.

2. Bhabha Committee and Companies Act, 1956:

   • Recommendation: The Bhabha Committee recommended adopting provisions from the English Companies Act, 1948.
   • Section 25: Introduced in the Companies Act, 1956, allowing partnership firms to be members of these companies, and addressing membership cessation upon dissolution of the partnership.

3. Companies Act, 2013:

   • Continuation and Expansion: Maintained the provisions for such companies under Section 8.
   • Objectives: Specified purposes include sports, education, research, social welfare, and environmental protection.
   • Profit and Dividend: Continued restrictions on using profits only for the company's objectives and prohibiting dividend distribution.
   • Membership: Continued allowance for partnership firms to be members.

Incorporation Requirements under the Companies Act, 2013

To incorporate a Section 8 company registration, an application must be made to the Registrar of Companies with the following documents:

1. Draft MOA and AOA:

   • Form INC-13: Includes subscribers' photographs.

2. Declaration:

   • Form INC-14: From a professional (Advocate, Chartered Accountant, Cost Accountant, or Company Secretary) affirming compliance with Section 8 provisions.

3. Financial Estimate:

   • Next Three Years: Estimated annual income and expenditure.

4. Declaration by Applicants:

   • Form INC-15: Normal declaration by each applicant.

5. Declaration by Subscribers and Directors:

   • Form INC-9: Web-based form needs to be furnished by all the Subscribers

Post Incorporation

• Once Section 8 company incorporated, a Section 8 company is required to follow all standard compliance procedures as mandated by the Companies Act, 2013, including maintaining proper financial records, filing annual returns, and adhering to audit requirements including Dematerialisation of Shares, must issue and convert their existing securities into dematerialized form as per the demat provisions. Section 8 companies are always considered non-small companies regardless of their turnover or paid-up share capital.

Regulatory Benefits

• Tax Exemptions: Section 8 companies may be eligible for certain tax exemptions under the Income Tax Act subject to 80G & 12 A registration, subject to specific conditions and approval by the Income Tax Department.
• Grants and Donations: These companies often qualify for grants and donations from government bodies, international organizations, and other philanthropic entities.

Naming and Objectives

• Name Requirements: Section 8 company must include words like foundation, forum, association, federation, chambers, confederation, council, or electoral trust.
• MOA Format: As per Form INC-13, it should allow for activities necessary for achieving the company's objectives.
• Geographical Scope: Objects can extend beyond the state and even outside India, subject to compliance with relevant regulations.

Activities and Services

• Microfinance Section 8 Company: Section 8 companies can engage in microfinance activities if they align with the promotion of activities mentioned in Section 8(1)(a).
• Advisory and Consulting Services Section 8 Company: Permissible if they align with the charitable objectives outlined in Section 8(1)(a).

Hence, Section 8 companies, as regulated under the Companies Act, 2013, continue to focus on charitable objectives, restrict profit use, and prohibit dividend distribution. Section 8 company registration process involves detailed documentation and declarations, ensuring compliance with the stipulated charitable purposes.