Overview of Section 8 Company

An Indian equivalent of a trust or society, an organisation registered with the aim of advancing the fine arts, science, literature, or the exchange of knowledge for charitable or purposeful purposes, is referred to as a Section 8 company under the Companies Act, 2013. It makes a major contribution to the evolution and upgrading of civilisation. Those entrepreneurs who are not motivated by profit develop these kinds of firms.

Merits of Section 8 Company Registration

Tax Exemption:
Section 8 companies enjoy 100% tax exemption as their profits are utilised for charitable purposes, providing a notable tax advantage.
No Minimum Capital Requirement:
Entities covered by Section 8 are free to modify their financial structure in accordance with their growth, eliminating the need for a minimum financial requirement.
No Stamp Duty:
Section 8 companies are exempt from paying stamp duty during the registration process, reducing the cost of establishment.
Separate Legal Entity:
Section 8 companies have a separate legal identity and perpetual existence, enhancing credibility and providing autonomy.
Increased Credibility:
Strict legal compliance frameworks ensure that Section 8 companies have a higher level of credibility and trustworthiness compared to NGOs and trusts.
No Title Required:
Section 8 companies have the freedom to choose a name without the requirement to add the term 'Section 8' to their name, allowing for greater naming flexibility.

Disadvantages of Section 8 Company

Limited Benefits:
Profits from the company may only be used for specific purposes, such as the promotion of the arts, sciences, sports, environmental conservation, and similar fields. The income will not give any merits or benefits to the company's members. Only potential out-of-pocket expenses incurred during the course could be reimbursed.
No Profit Distribution:
The profits could not be divided among partners or shareholders.
Stringent Rules and Regulations:
In compliance with the central government, you must include a number of regulations and mandates in your AOA and MOA. Should these conditions not be fulfilled, you may be subject to legal repercussions. For Section 8 businesses, a unique license from the federal government is necessary.
Alteration in MOA and AOA:
Without the government's prior permission, changes to the MOA or AOA are not allowed.

Section 8 Company Registration Process in India

Apply for a Digital Signature Certificate
The application of Digital Signature Certificates is the first step in the section 8 company registration procedure. A DSC is a kind of certificate that may be used to register a business or serve as identification when signing online forms. The application process for DSC is completely online, and it can be availed from the concerned authorities within 24 hours of application. Once the DSC is received, Form DIR-3 is to be filed with ROC to get a DIN from the ministry.

Reserve a Unique Name
To register a Section 8 company, a unique name has to be approved by the concerned authority, and the process of checking the name availability is completely online through a web application called Reserve Unique Name, introduced by the Ministry of Corporate Affairs to reserve a unique name for your Section 8 Company.

Apply for Section 8 Company License
Form INC-12 must be completed and submitted to the company registrar in order to proceed with the registration of a Section 8 company. This is a crucial stage as, in accordance with Section 1 of the Companies Act of 2013, obtaining a certificate of incorporation requires first requesting a licence from the Ministry of Corporate Affairs (1). Following the Form's approval by the government, you will be assigned a six-digit Section 8 licence number.

SPICe Form (INC-32) Filing
Submitting a SPICe form, a proforma for online Section 8 business incorporation, is the next step after obtaining a DSC and Section 8 company licence. The information shown below is what you need to complete the form:

Details of the Company
Details of Members and Subscribers of MOA and AOA.
Application for Director Identification Number (DIN)
Application for PAN and TAN
Declaration by Directors and subscribers
Declaration and Certification by professional

e-MoA(INC-33) and e-AoA (INC-34) Filing
Important paperwork that must be submitted in order to apply for Section 8 business incorporation are the SPICe, eMoA, and eAoA. While AoA is defined by Section 2(5) of the Companies Act, 2013, which specifies internal structure and rules and regulations of the management, MoA is defined under Section 2(56) of the Companies Act, 2013, which also outlines the powers and purposes of any organisation.

The Certificate of Incorporation is Issued
The Ministry of Corporate Affairs issues the certificate of incorporation as the last step following the documents' approval. Within two months of receiving the incorporation certificate, the business must create a current bank account for the firm.

Minimum Specifications for Section 8 Companies

A minimum of two shareholders is needed;
A minimum of two directors is required (directors and shareholders may be the same individual);;
A minimum of one director must be an Indian resident.
There is no minimum capital requirement.
For Indian nationals, it is necessary to have an income-tax PAN;
It is necessary to provide identification, such as a voter ID, Aadhar card, driver's license, or passport; however, in the case of foreign nationals, identification verification requires a passport.;
Any proof of residence, such as an electricity bill, phone bill, mobile bill, or bank statement;
The proof of the Registered Office address, which is the lease agreement accompanied by the most recent rent receipt, a copy of the landlord's utility bill, and, in the event that the premises are rented, a no objection certificate from the owner;
If the Director or the Promoters own the premises, any ownership documentation (sale deed, house tax receipt, etc.) should be submitted with the no objection certificate.

Section 8 Company Registration Eligibility

In India, an Individual or HUF may establish a Section 8 company.
At least two individuals who are going to serve as directors or shareholders must comply with all of the Act's Section 8 business formation criteria.
The Section 8 company must have at least one director who is an Indian citizen.
At least one of the following must be the objective: education, financial aid to lower-income groups, scientific and artistic advancement, social welfare, sports promotion, and science.
No profit should be distributed among the company's members and directors, either directly or indirectly.
Founders, directors, and member directors are not eligible to receive any kind of payment, cash or otherwise.

Forms required for registration

SPICe + Part A – Name Reservation
SPICe + Part B (INC-32) – Incorporation Application
INC-13 – E-Memorandum of Association
INC-31- E-Article of Association
INC-35 – Agile Pro
INC-9 – Declaration by Directors/Subscribers

Note: INC-12 – Application for License for Section 8 Company has been merged in Form SPICe+Part B itself

Compliance Required for Section 8 Company

The following are the annual compliance tasks necessary for Section 8 companies:

Auditing:
The Section 8 company is required to appoint an auditor by filing the form ADT-1 to manage the annual financial filings of the company.

Maintaining the Register:
Section 8 Businesses must keep the statutory records up to date in the statutory registers. The membership details, loans, investments, and fees are all included in the register.

Meetings:
The Company should conduct all the statutory meetings including shareholders meetings, board meetings at the prescribed time interval mentioned in the Companies Act, and this compliance is a continuous process.

Report by Directors:
The director's report is a document that includes a set of financial, accounting, and corporate social responsibility guidelines, along with information about the company and its compliance. The production of this report is the responsibility of the board of directors. It is mandatory for all Section 8 Companies in India to produce a director's report.

Accounting of the Company:
Each Section 8 company must submit an electronic copy of its financial statements in the format specified by e-form AOC-4. The financial statement must be submitted no later than thirty days following the date of the most recent annual general meeting.

Tax Returns:
At the latest on September 30th, tax returns must be filed by the end of each assessment year. You can file your income tax returns online and receive an overview of the company's profits. If a business registers under Sections 80G and 12A, it might not have to pay taxes.

Filing of Annual Return With RoC:
The annual return in form MGT-7 must be submitted to RoC within 60 days following the annual general meeting. Also, the company should perform the below-mentioned compliance whenever required. Within thirty days of the director's appointment, the Director's Consent Form (Form DIR-2) must be submitted. Within sixty days of the appointment of the managing director, manager, etc., the returns form (Form MR-1) needs to be filed.

Time Taken for Section 8 Company Registration

Subject to MCA approval, the Certificate of Incorporation can be obtained in seven to fifteen days. Things that delay a registration process

Some common factors responsible for delays are-

Incomplete or Incorrect Documents
Technical error or low server in the MCA website
Additional legal permits
Delay in the Verification and Payment

Getting Registration Number

The business's registration number, sometimes referred to as its unique identification number, is a number that is used to identify the company and provides details about its registration, such as the state in which it was established and the kind of institutional framework.

Following approval of the SPICe+ Form and assignment of the RD License, you will receive notification from the MCA along with the Certificate of Incorporation, PAN, and TAN.

Penalty Under Section 8

The corporation may be accused of fraudulent behaviour and subject to fines in line with Section 8 of the Companies Act of 2013's subsection (11) if the terms and regulations of the section are broken:

A fine of Rs. 10 lakhs that can exceed a maximum of Rs 1 Crore
Every Director of the organisation will be punishable. They would be imprisoned for three years with a minimum fine of Rs. 25000, though this can exceed Rs. 25 lakhs.
Or the responsible person will experience both.

Donations on Registration of Section 8 Company

Accepting Donations for Section 8 Company - Once the Section 8 Company is successfully registered, it can begin accepting donations. However, certain crucial aspects must be considered.
Legal Requirements for Accepting Donations - Section 8 Company must have 12A registration from the Tax Department to avail of tax exemptions.
For availing tax benefits on their contributions, 80G certification is required.
The company needs to register under FCRA to accept donations from foreign sources.

Revocation of License by Central Government

The Central Government may revoke the license granted to the company on the following grounds:

The company contravenes any of the requirements mentioned in the provisions of the Act;
Objects of the Company are conducted in a forgery manner or prejudicial to the public interest; and
The terms of the license are violated.

If a company registered under section 8 has had its license revoked, the company must apply to the Registrar using Form No.INC.20 and provide the free to convert its status and change of name accordingly as directed by the Central Government.

Why Aperio Fincraft?

Aperio Fincraft gives you the option to register a Section 8 company from the comfort of your own home. Send us the document via WhatsApp or email to our team of experts in company registration.

DIN (Director Identification Number) for two Director
DSC (Digital Signature Certificate) for two Directors
MoA (Memorandum of Association)
Registration fees and stamp duty
Company Incorporation Certificate
PAN & TAN
AoA (Article of Association)

Documents for Normal FCRA Registration

Documents for Prior Permission FCRA Registration:

Why Choose Aperio Fincraft?

Aperio Fincraft is a leading business platform and innovative idea that offers end-to-end incorporation, compliance, advising, and management consulting services to clients in India. Registering a Non-profit Organization under section 12AA is easy, seamless, cheapest and quickest with Aperio Fincraft . Apart from this, Aperio Fincraft also helps register trusts / NGOs / NPOs under section 80G(5)..

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