How to register a Section 8 Company in India- Meaning, Features, Advantages & Process

If you want to form an NGO (Non-Government Organisation) in India, you have 3 options to choose as either Trust or Society or a Section 8 Company. An NGO which is formed as Section 8 Company is registered under the Companies Act, 2013 and regulated by Ministry of Corporate Affairs. Section 8 company finds more credibility amongst Government bodies, donors and other stakeholders as compared to a trust or society.

In this article, we will learn what is a Section 8 Company, its salient features, advantages and the procedure of forming Section 8 Company. Let’s discuss…

What is a Section 8 Company?

Section 8 Company is a form of NGO (company with limited liability) registered under the provisions of the Companies Act 2013. The main objects of Section 8 Company are to promote non-profit causes namely:

Commerce
Art
Science
Sports
Education
Research
Social Welfare
Religion
Charity
Protection of environment
Any such other object

The profit/ surplus of Section 8 Company is to be applied only for the purposes of promotion of its objects and are prohibited from distribution of dividends to its shareholders.

Features of the Section 8 Company

A Section 8 Company has the following features as below:

Charitable Objects: Section 8 Company is formed for non-profit activities. The main objects of the Section 8 Company are to promote charitable activities including commerce, science, sports, education, research, social welfare etc.
Separate Legal Entity: A company is having a separate legal entity which is distinct from its shareholders. A Section 8 Company can purchase assets/ properties in its own name, incur debts and open bank accounts.
Limited Liability: The liability of the members of the Section 8 Company is limited to the extent of share capital held by the shareholders of the company.
Perpetual Succession: The existence of company remains unaffected from the shareholders of the company. Even if all the shareholders of the company die, the company remains into existence.
Transferability of shares: The shares of a company are easily transferable from one person to another. Any shareholder of the company can sell his/ her shares any time with the approval of Board of Directors.
No minimum paid up capital: Section 8 Companies, unlike all other companies, do not require a prescribed minimum paid-up share capital.

Benefits of a Section 8 Company in India

Following are the important benefits of a Section 8 Company registration in India:

No Stamp Duty

Unlike other companies, no stamp duty is payable on registration of Section 8 Companies. There is no obligation to pay stamp duty on documents like Memorandum of Association (MOA) & Articles of Association (AOA).

Separate Legal Entity

A Section 8 company carries a separate legal identity from its members. In the eyes of law, the section 8 company and its members are considered a separate person. Thus, the company enjoys perpetual existence, unaffected by change in the shareholding of the company.

No minimum capital requirement

Section 8 company generally fulfils its fund requirements from donations and grants from members and the public. Therefore, a Section 8 Company in India is not required to have a minimum prescribed paid-up capital to incorporate the company.

Tax Exemptions

A section 8 company which is also registered under section 12AA/12AB & section 80G of the Income Tax Act, 1961 enjoys several tax exemptions which are not available to other companies.

Better Creditability

Section 8 companies have higher creditability as compared to the other forms of NGOs like trusts & societies etc. Government and funding institutions prefer section 8 company due to stricter compliances & audit requirements.

Flexibility of Name

Unlike other companies, Section 8 company is not required to put “Limited” or “Private Limited” words along side its name. A section 8 company rather can use terms such as foundation, forum, association, federation, chambers, confederation, council etc.

Process of Registering a Section 8 Company

The process of incorporating a Section 8 Company is simple. Register your company with Taxwink hassle free. You have to follow the following steps to get your Section 8 company registered:

Step-I: Obtain Digital Signature Certificate (DSC)

First obtain Digital Signature Certificates (DSC) for the proposed directors of the section 8 company. DSC is mandatorily required for electronic filing of documents with Ministry of Company Affairs (MCA).

Step-II: Obtain Director’s Identification Number (DIN)

After obtaining DSC, the next step is to obtain DIN of all the proposed directors. The DIN is a unique identification number allotted by MCA to every director of a company. Application for DIN in case of a new company is made through e-form SPICe. The applicant is required to attach the proof of identity and address along with the application. For any person intending to be a director in an existing company, eForm DIR-3 is to be filed.

Step-III: Apply & Reserve the proposed name of company

After DSC and DIN registration, the next step is to apply and reserve unique name for the Section 8 Company. An application for reserving name has to be filed in the Reserve Unique Name (RUN) form. One can recommend a maximum of 2 names at a time and 1 resubmission is allowed in the RUN facility. Government fees for applying and reserving name is INR 1000 only. Once reserved, the name is available for 20 days.

Step-IV: Apply for approval from Regional Director

Within the given time in Step-III, you need to apply for approval from Regional Director. Once, license from RD is obtained, you may proceed for incorporation of company.

Step-V: Apply for Section 8 Company registration

Once you have got approval from the Regional Director, you need to file SPICe+ forms to RoC for the incorporation of the section 8 company. Necessary documents are required to be attached along with the application SPICe+ form. The filing is done online on MCA portal.

Step-VI: Issue of Incorporation Certificate by Roc

On successful submission of documents, the RoC will look into the documents and on satisfaction, it will issue a “Certificate of Incorporation” carrying a distinct corporate identification number (CIN).

Documents needed for registration of Section 8 Company

For registering a Section 8 Company, you need to submit the following documents to RoC:

PAN Card of all directors and shareholders
Aadhar Card of all the directors and shareholders
Latest Bank Statement of all the directors and shareholders
Utility Bill i.e. Telephone Bill or Electricity Bill of the location where the registered office shall be situated
Rental Agreement/ Lease Deed copy where the registered office is rented/ leased
Passport size photograph of all the directors and shareholders
Voter ID or Passport or Driving License of all the directors and shareholders
Mobile number and email id of all the directors and shareholders

How Taxwink can help you in registering Section 8 Company?

The process of incorporating a Section 8 Company is a time taking affair. After name approval, you have only 20 days’ time to complete the incorporation of the company. That is where Taxwink comes to your rescue. Taxwink team will help you register your Section 8 Company hassle-free.

Disclaimer: This article is meant for educational purposes only and does not carry any legal or persuasive value. Taxwink shall not be responsible for any loss or damage caused to any person from use of the information contained in this article. Readers are therefore requested to act diligently and under consultation with any professional before applying the information contained in this article. For any user support mail at: support@taxwink.com

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