Section 8 Company

What is a Section 8 Company?

A Section 8 Company is a type of non-profit organization in India, governed by the Companies Act, 2013. It is established with the objective of promoting arts, commerce, charity, education, protection of the environment, sports, research, social welfare, religion, or any other such objective. Unlike other companies, a Section 8 Company does not aim to make a profit; any income or profits earned must be used to promote its objectives.

Key Features of Section 8 Company

1. Non-Profit Objectives:   Established for promoting commerce, arts, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other beneficial objective.


2. No Dividend Distribution:   Profits or income cannot be distributed as dividends to members. All income must be used to promote the company’s objectives.


3. Limited Liability:   Members have limited liability, meaning their personal assets are protected in case of the company’s debts and liabilities.


4. Legal Entity:   Separate legal entity from its members, allowing it to own property, incur debts, and enter into contracts in its own name.


5. Perpetual Succession:  The company continues to exist even if the members or directors change.

Benefits of Section 8 Company

1. Tax Exemption:   Eligible for various tax exemptions and benefits under the Income Tax Act.


2. Credibility:  High level of credibility and trust among donors, government bodies, and other stakeholders due to strict compliance requirements.


3. No Minimum Capital Requirement:   No prescribed minimum paid-up capital requirement.


4. Separate Legal Entity:   Distinct legal identity provides continuity and stability.


5. Exemption from Stamp Duty:   Exempt from stamp duty on registration.

Eligibility Criteria for Section 8 Company

1. Objectives:   The company must be established for promoting commerce, arts, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other beneficial objective.


2. Profit Utilization:   Profits or income must be applied solely towards promoting the objectives of the company and not for distributing dividends to members.


3. Members:   Can be formed with a minimum of two members (for a private limited company) or seven members (for a public limited company).


4. Directors:   Must have a minimum of two directors (for a private limited company) or three directors (for a public limited company).

Required Documents for Section 8 Company Registration

1. Digital Signature Certificate (DSC):  DSC for all proposed directors and members.


2. Director Identification Number (DIN):   DIN for all proposed directors.


3. Name Reservation Application (INC-1):  Application for name reservation.


4. Memorandum of Association (MOA):   Draft MOA outlining the objectives of the company.


5. Articles of Association (AOA):  Draft AOA outlining the governance structure of the company.


6. Incorporation Form (INC-12):   Application for license under Section 8.


7. Identity Proof:   Identity proof of all proposed directors and members (Aadhaar, PAN, passport, etc.).


8. Address Proof:  Address proof of all proposed directors and members (utility bills, bank statements, etc.).


9. Registered Office Proof:   Proof of the registered office address (rental/lease agreement, utility bills, etc.).


10. Affidavit and Declaration:   Affidavit and declaration by the proposed directors and members regarding compliance with the Companies Act and rules.

Post-Registration Compliance

1. Annual Filing:   File annual financial statements and returns with the ROC.


2. Income Tax Returns:   File annual income tax returns.


3. Audit:   Get accounts audited annually.


4. Compliance with Laws:   Ensure continuous compliance with the Companies Act, 2013, and other applicable laws and regulations.

Conclusion

A Section 8 Company is an ideal structure for non-profit organizations aiming to promote commerce, arts, science, sports, education, social welfare, and other beneficial objectives. It offers various benefits, including tax exemptions, credibility, and limited liability. By following the steps outlined above and maintaining the necessary documentation, businesses can successfully register and operate a Section 8 Company.For more detailed assistance with the Section 8 Company registration process, feel free to contact us at ATHWISE Services Private Limited. Our expert consultancy team can guide you through the documentation and application process efficiently.

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