The Ultimate Guide to SECTION 8 COMPANIES
Section 8 companies are charitable institutions which are registered under the companies act and have more benefits than traditional charitable institutions. Companies were permitted to use their profit for the promotion of the company’s objective for which it is formed and pay-out of dividends is not allowed.
Under this section, companies are easy to manage, run and register. In the Companies Act, 2013 section 8 companies were added to allow companies with charitable purposes to register without limited and private limited.
Table of Contents:
- What is Section -8 company
- Benefits of section 8 company
- Documents required for section 8 company
- Process of registration for section 8 company
- Cost of registering a section 8 company in India
- How much time does it take to incorporate a section 8 company
What is Section 8 company?
Section 8 companies meaning is the companies that have an objective of promoting the field of science, commerce, art, education, research, sports, social welfare, charity, environment protection, or other similar objectives
These companies were defined earlier under section 25 with almost the same provision. The new act has set down more objectives in Section 8 companies than before. Examples of Section 8 companies are the Confederation of Indian Industries (CII) and the Federation of Indian Chambers of Commerce.
From April 1, 2021, form CSR-1 on the MCA portal needs to be filled out by all NGOs to register themselves with the central government. All social organizations need to fill out a form to get CSR funds and CSR implementation. CRS-1 forms are aimed to monitor CSR spending in the country.
What are the various benefits of a Section 8 company?
Many benefits encourage people to form Section 8 companies other than NGOs and associates formed to conduct charitable activities are mentioned below :
No minimum capital requirements – Minimum Paid up capital for the Section 8 Company registration is not required.
More Credibility – These companies have a license issued by ROC and activities undertaken by them help them to create their credibility. They have more credibility than NGOs, trusts, and societies.
Tax benefit – They get various tax benefits.
Eligible for grants and donations –Section 8 companies are eligible for many grants provided by the Government of India and can receive many donations from the general public.
Members have limited liability –The personal assets of the members are not used to pay a debt of the company. They have limited liability.
Separate Legal Entity – Directors and Section 8 Company have different entities. Even if the Director of the company becomes incompetent to run the business, the company will continue to exist. A company has separate legal status and perpetual existence.
Less Compliance – Companies are exempted to follow several procedural compliances and even stamp duties and other fees are also not high.
Various documents required by the Section 8 Company
To get themselves registered as per the Companies Act 2013, companies need to submit identity and address proof on the Ministry of Corporate Affairs portal.
Address and Identity proof of directors and shareholders
- Copy of Aadhar Card
- Copy of latest bank statement and utility bill
- Copy of Driving license and Voter ID
- Passport-size photographs of the directors
- Copy of Passport or PAN Card
Address Proof of Registered Office
- No objection certificate (NOC) from the owner of the property.
- Copy of electricity/water/gas bill(not older than two months)
- Rent agreement in case of rented office
Section 8 company registration process
Application for Digital Signature Certificate(DSC) – Directors as well as subscribers of the Section 8 Company needs to apply for Digital Signature Certificate. It can be completed within 24 hours as it has to be done online.
Name availability application – industrial activity code and object clause of the company has to be defined while making an application of the name. SPICe+ form needs to be filed.
Application for Section 8 license – INC-12 needs to be filled to get the license under Section 8 company by the registrar of companies. After approval of the form 6 digit section 8 license number is given by ROC.
INC-32 has to be filled – After approval of the name, detail has to be given for the registration in SPICe+ Form. It is an electronic incorporation of the company. Detail mentioned below –
1. Declaration by subscriber and directors
2. Application for Director Identification Number (DIN)
3. Detail of the company
4. Application for PAN and TAN
5. Detail of members and subscribers
6. Declaration & Certification by professional
Filling of e-MoA and e-AoA – SPICe e-MoA and e-AoA also need to be filled at the time of company registration.
COI Issuance – Concerned department will issue PAN, TAN, and Certificate of Incorporation. By using this document a bank account will be opened.
Cost of Section 8 company registration process
Registration of Section 8 company will cost 4999/- which includes different fees as mentioned below –
|Digital signature Certificate||2400/-|
Time is taken to complete the Section 8 company registration process
Registration of the Section 8 company takes 10-14 days depending on the verification of the documents. by the Ministry of Corporate Affair.
Section 8 companies provide many benefits to companies which are a big attraction for many companies to register but Section 8 Companies have to face strict regulations regarding the non-distribution of their profit to shareholders, and other non-profit-making institutes. If they do so their registration will be cancelled. They can only use the money to develop the objective for which they are formed.