Section 8 Company Registration in India: A Complete Guide

Section 8 companies in India, governed by the Companies Act, 2013, are unique entities dedicated to promoting charitable objectives.

Introduction

Section 8 company in India, governed by the Companies Act, 2013, are unique entities dedicated to promoting charitable objectives. These organizations are established to advance fields such as arts, commerce, science, sports, education, research, social welfare, religion, charity, protection of the environment, and more. Unlike traditional companies, Section 8 companies do not distribute profits to their members. Instead, they reinvest any income or profits back into furthering their objectives. This article explores into the intricacies of registering a Section 8 company in India, detailing the eligibility criteria, documentation, and step-by-step registration process.

Eligibility Criteria

To register a Section 8 company, the following conditions must be met:

1. Objectives: The company's primary objective should be to promote fields such as arts, commerce, science, sports, education, research, social welfare, religion, charity, or environmental protection.
2. Profit Distribution: The company must apply its profits if any, or other income solely towards the promotion of its objectives. Profits cannot be distributed among members.
3. Directors: A Section 8 company must have a minimum of two directors (for a private company registration) or three directors (for a public company).
4. Members: There should be at least two members for a private company and seven for a public company.

Documentation Required

The registration of a Section 8 company necessitates the submission of several key documents:

1. Director Identification Number (DIN) and Digital Signature Certificate (DSC) for all proposed directors.
2. Memorandum of Association (MoA) and Articles of Association (AoA): These documents outline the company’s objectives and regulations.
3. Declaration by Promoters: A declaration confirming the purpose of establishing the Section 8 company, in the prescribed format.
4. Affidavits and Declarations: An affidavit from each director and subscriber to the MoA, ensuring they are not involved in any fraudulent activities.
5. Proof of Address: For the registered office of the company, such as a utility bill or property tax receipt.
6. Identity and Address Proof: For all directors and members, such as a PAN card, passport, voter ID, or driving license, and a bank statement or utility bill.
7. NOC from Property Owner: If the registered office premises are rented or leased, a No Objection Certificate (NOC) from the property owner.

Step-by-Step Registration Process

1. Obtain a Digital Signature Certificate (DSC)

All proposed directors must obtain a DSC, which is necessary for filing electronic forms with the Ministry of Corporate Affairs (MCA). This can be acquired from certified agencies.

2. Apply for Director Identification Number (DIN)

Once the DSC is obtained, the next step is to apply for a DIN for all proposed directors. This is done by filing Form DIR-3 on the MCA portal.

3. Name Approval

The company’s name must reflect its objectives and must be approved by the Registrar of Companies (RoC). An application for name reservation is submitted using the RUN (Reserve Unique Name) form on the MCA portal. It is advisable to suggest at least two names in order of preference to increase the chances of approval.

4. Drafting MoA and AoA

The Memorandum of Association (MoA) and Articles of Association (AoA) are critical documents that define the company’s objectives and governance structure. These should be carefully drafted to reflect the charitable nature of the organization.

5. Filing Form INC-12

Form INC-12 is submitted to the RoC to obtain a license for operating as a Section 8 company. This form is accompanied by the MoA, AoA, declaration by the directors, and other relevant documents.

6. Issuance of License

Upon satisfactory review of the submitted documents, the RoC issues a license under Section 8 of the Companies Act, 2013. This license is necessary for incorporating the company.

7. Incorporation of the Company

Following the issuance of the license, the incorporation process is completed by filing Form INC-32 (SPICe) along with the necessary attachments. Upon approval, the RoC issues a Certificate of Incorporation, officially recognizing the entity as a Section 8 company.

Post-Incorporation Compliance

Once registered, a Section 8 company must adhere to various compliance requirements, including:

1. Annual General Meetings (AGMs): Conducting AGMs and filing annual returns with the RoC.
2. Financial Statements: Maintaining proper books of accounts and filing audited financial statements.
3. Income Tax Returns: Filing annual income tax returns.
4. Regular Board Meetings: Holding regular board meetings as per the statutory requirements.
5. Reporting Changes: Reporting any changes in the company's structure or management to the RoC.

Advantages of Section 8 Companies

1. Tax Benefits: Section 8 companies enjoy various tax exemptions and benefits under the Income Tax Act, of 1961.
2. Credibility: The stringent registration process and regulatory compliance enhance the credibility and trustworthiness of Section 8 companies.
3. No Minimum Capital Requirement: Unlike other companies, there is no minimum capital requirement for Section 8 companies.
4. Limited Liability: The liability of the members is limited to their share capital.

Conclusion

Section 8 company Registration in India is a detailed process that requires adherence to specific legal and procedural requirements. The establishment of such entities plays a crucial role in promoting social welfare and contributing to various charitable causes. By ensuring compliance with the regulatory framework, Section 8 companies can effectively achieve their objectives and make a significant impact on society.