A Section 8 company is a special entity recognized under the Companies Act, 2013 in India, established for the promotion of charitable activities, such as education, art, science, religion, or social welfare. Unlike other companies, a Section 8 company does not aim to make profits. Instead, it is created to promote a not-for-profit cause, where any surplus generated is used solely for the advancement of its objectives.
If you are looking to start a Section 8 company, this guide will walk you through the steps required for Section 8 company registration and help you understand how NGO registration works in India.
What is a Section 8 Company?
A Section 8 company is a legal entity formed for promoting nonprofit objectives like education, charity, arts, and social welfare. These companies are exempt from certain provisions of the Companies Act, 2013, and their operations and governance are more straightforward compared to regular businesses.
Unlike trusts and societies, a Section 8 company is governed by the Ministry of Corporate Affairs, making it more structured and credible. The major advantage is that it enjoys benefits such as tax exemptions under the Income Tax Act, making it an attractive option for individuals and organizations looking to work in the not-for-profit space.
Benefits of Section 8 Company Registration
Starting a Section 8 company comes with several advantages, which make it a favorable choice for nonprofits. Here are some of the key benefits:
- Tax Exemptions: Section 8 companies can avail tax exemptions under Section 12A and 80G of the Income Tax Act.
- Separate Legal Identity: The company enjoys a separate legal status, which helps in easy transferability and perpetual succession.
- Limited Liability: The liability of the company’s members is limited to their share in the company.
- Credibility: Compared to trusts and societies, Section 8 companies are more credible due to their corporate structure and strict regulatory compliance.
- Zero Profit Sharing: The profits generated by a Section 8 company are solely used for charitable purposes, enhancing transparency.
Step-by-Step Process for Section 8 Company Registration
Now that you understand the advantages, let’s dive into the Section 8 company registration process:
1. Obtain DSC (Digital Signature Certificate)
The first step in registering a Section 8 company is obtaining a Digital Signature Certificate (DSC). A DSC is required to sign e-forms electronically while filing the Section 8 company registration. It is issued by certifying authorities and is valid for 1 or 2 years.
To obtain the DSC, you’ll need to provide:
- Passport-sized photograph
- Identity proof (such as Aadhaar or PAN)
- Address proof (utility bill, bank statement)
2. Apply for Director Identification Number (DIN)
After obtaining the DSC, the next step is to apply for a Director Identification Number (DIN) for all the proposed directors of the company. DIN is mandatory for becoming a director in any company in India. You can apply for DIN using the SPICe+ form.
3. Name Reservation
The third step is to choose an appropriate name for your Section 8 company. The name should align with the objectives of the company and must include words like “foundation,” “association,” or “institution” to indicate its charitable nature. You can reserve the name using the RUN (Reserve Unique Name) form on the Ministry of Corporate Affairs (MCA) portal. Ensure the name follows the naming guidelines set by MCA.
4. Draft Memorandum of Association (MOA) and Articles of Association (AOA)
To proceed with Section 8 company registration, you need to draft the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA outlines the objectives and aims of the company, while the AOA details the company’s rules and internal regulations. Both documents are crucial for defining the structure and governance of the company.
Ensure that the objectives mentioned in the MOA focus on promoting charity, education, or social welfare, as required under NGO registration norms.
5. Filing of SPICe+ Form
The SPICe+ form is an integrated web-based application used for company registration in India, including Section 8 company registration. The SPICe+ form allows you to apply for:
- Incorporation of the company
- Allotment of DIN for directors
- PAN and TAN registration
- EPFO and ESIC registration
- GST registration (if applicable)
You will need to attach the following documents while filing the SPICe+ form:
- Draft MOA and AOA
- Declaration from directors and subscribers in Form INC-14 and INC-15
- Estimated annual income and expenditure for the next three years
- Address proof of the registered office
6. Issuance of License under Section 8
Once the MCA verifies your application, they will issue a license under Section 8 of the Companies Act, 2013. This license signifies that your company is authorized to operate as a nonprofit organization. After receiving the license, your Section 8 company can officially start functioning.
7. Company Incorporation Certificate
After the issuance of the license, the Registrar of Companies (RoC) will review the documents and issue a Certificate of Incorporation. This certificate serves as legal proof of your company’s existence and allows you to commence activities related to your charitable objectives.
Compliance After Section 8 Company Registration
Once your Section 8 company registration is complete, you must adhere to certain compliance requirements:
- Annual Filing: File annual returns and financial statements with the RoC through Form AOC-4 and MGT-7.
- Audit: Ensure the company’s accounts are audited by a qualified auditor.
- Income Tax Filing: Since NGO registration often comes with tax exemptions, it’s essential to file income tax returns under the relevant sections, such as Section 12A and 80G of the Income Tax Act.
- Meetings: Conduct board meetings and annual general meetings (AGMs) as required by law.
Conclusion
Starting a Section 8 company is a rewarding way to contribute to society while enjoying legal recognition and tax benefits. By following the above steps and ensuring compliance with the law, you can smoothly complete Section 8 company registration and begin working towards your charitable objectives. Proper planning, documentation, and adherence to legal formalities are key to successfully setting up and running your Section 8 company.
Whether your focus is on education, social welfare, or any other charitable cause, a Section 8 company provides a structured framework for achieving your goals and making a meaningful impact on society. By understanding the process of NGO registration, you can ensure that your not-for-profit organization operates legally and enjoys the full benefits granted by the government for charitable activities.
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