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Section 8 Company Registration in India
Under the Companies Act 2013, a Section 8 company is a non-profit entity established to promote sectors such as trade, arts, science, sports, education, research, social welfare, environmental protection, and other charitable causes. Unlike traditional profit-oriented companies, Section 8 companies are formed to serve society and are legally prohibited from distributing profits among their members. If any profit is generated, it has to be reinvested in the company to fulfill its objectives.
Features of Section 8 Companies
- Formed with a Non-Profit Objective: The primary aim is to promote charitable activities without the intention of earning profits.
- No "Limited" or "Private Limited" Suffix: These companies do not use "Ltd." or "Pvt. Ltd." in their name.
- Limited Liability: Members have liabilities limited to their shares, protecting personal assets.
- No Minimum Capital Requirement: Section 8 Companies can be incorporated without any minimum capital.
- Separate Legal Entity: These companies enjoy a distinct legal identity allowing them to own property and incur liabilities independently.
Benefits of Forming a Section 8 Company
- Perpetual Succession: Continues to exist despite changes in leadership or membership.
- Limited Liability: Members and directors are shielded from company liabilities.
- Tax Benefits: Eligible for exemptions under Section 12A and 80G of the Income Tax Act, 1961.
- No Stamp Duty: Exempt from stamp duty on incorporation documents in many jurisdictions.
- Efficient Management: Professional board of directors ensures streamlined operations.
- Enhanced Credibility: Strict regulatory compliance fosters trust and transparency among stakeholders.
Eligibility Criteria for Section 8 Company Registration
- No Minimum Share Capital: Incorporation can be done without any share capital requirement.
- Charitable Purpose: Must promote non-profit activities such as education, health, environment, etc.
- No Profit Sharing: Surplus income must be reinvested to achieve the company's objectives.
- Minimum of Two Directors: At least two directors are required (they can also be shareholders).
- Indian Resident Requirement: At least one director must be a resident of India.
- Clear Organizational Plan: A well-defined vision and detailed strategy are necessary.
- Name Requirements: The name should reflect its non-profit nature like “Foundation,” “Association,” or “Society.”
Documents Required for Section 8 Company Registration
1. For Directors
- Aadhar Card, PAN Card, or Passport (for foreign nationals)
- Recent Passport-size Photographs
- Digital Signature Certificate (DSC)
- Director Identification Number (DIN)
2. For the Shareholders
- Aadhar Card, PAN Card, or Passport (for foreign nationals)
- Recent Passport-size Photographs
- Declaration using the INC-15 Form
3. For the Company
- Address of the Registered Office
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Form INC-12 (Application for Section 8 License)
- Name Reservation Certificate
- Declaration by a Practicing Chartered Accountant or Company Secretary confirming compliance of the MoA and AoA with the Companies Act, 2013
Forms Required for Registration/Incorporation of a Section 8 Company
- SPICe+ (INC-32): A comprehensive form used for name approval, DIN allotment, and incorporation of the company
- INC-12: Application form for obtaining a Section 8 Company license from the Central Government
- INC-13: Prescribed format for the Memorandum of Association (MoA)
- INC-14 & INC-15: Declarations from professionals and subscribers confirming adherence to Section 8 norms
- DIR-2: Consent form from each proposed director to act as a director
- AGILE-PRO (INC-35): Used to apply for GST, EPFO, ESIC, and opening a bank account for the company
Section 8 Company Registration Process in India
Follow the following steps to register a Section 8 company in India:
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STEP 1: Obtain Digital Signature Certificates (DSC)
All proposed company directors must acquire DSCs from authorized Certifying Authorities (CAs) like eMudhra, Sify, or NSDL to sign electronic documents.
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STEP 2: Apply for Director Identification Number (DIN)
File Form DIR-3 via the Ministry of Corporate Affairs (MCA) portal to acquire DIN for all proposed directors.
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STEP 3: Name Reservation
Choose a name that reflects your charity’s purpose. File Form INC-1 on the MCA portal. The reserved name is valid for 20 days.
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STEP 4: SPICe Form (INC-32) Filing
File SPICe+ (INC-32) online. It includes name reservation, DIN allotment, PAN, TAN, and company incorporation. Required details:
- Company details
- Details of members, subscribers of MoA & AoA
- Declarations by directors and professionals
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STEP 5: Draft MoA and AoA
Draft the Memorandum of Association (MoA) and Articles of Association (AoA) to reflect the charitable objectives and governance structure.
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STEP 6: File Incorporation Forms
Submit Form INC-12 to apply for Section 8 License. After approval, file SPICe+ along with MoA and AoA.
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STEP 7: Obtain Certificate of Incorporation
The Registrar of Companies (RoC) will issue the Certificate of Incorporation with a unique CIN upon verification.
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STEP 8: Apply for PAN and TAN
Apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) for the company.
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STEP 9: Open a Bank Account
Use the Certificate of Incorporation, PAN, and supporting documents to open a company bank account.
Restrictions & Limitations of Section 8 Companies
- Profits cannot be distributed and must be used for charitable purposes only.
- Subject to government audits and monitoring.
- Conversion into other company types requires NCLT approval.
- Upon dissolution, assets must go to another Section 8 Company or government entity.
Penalty Under Section 8
If any rules are violated:
- Fine from ₹10 lakh to ₹1 crore.
- Imprisonment for directors up to 3 years and fines ranging from ₹25,000 to ₹25 lakh.
Donations on Registration of Section 8 Company
- Section 8 Company can accept donations after registration.
- Must obtain 12A registration from the Income Tax Department for tax exemption.
- 80G certification allows donors to claim tax deductions.
- FCRA registration is required for accepting foreign donations.
Revocation of License by Central Government
The government may revoke the license if:
- Conditions of Section 8 are violated.
- Operations are conducted fraudulently or against public interest.
Compliance Requirements for Section 8 Company
- Appoint auditor using Form ADT-1 within 30 days of incorporation.
- Maintain books of accounts and statutory registers.
- Conduct at least two board meetings annually.
- Hold Annual General Meeting (AGM) within 6 months of financial year-end.
- Prepare and file audited financials using Form AOC-4 within 30 days of AGM.
- File annual return using Form MGT-7 within 60 days of AGM.
- Submit income tax return by September 30 each year.
- Ensure timely filing of DIR-3 KYC for directors.
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