Section 8 Company Registration

Section 8 Company Registration – An Overview

Contents

1 Section 8 Company Registration – An Overview
2 Benefits of Section 8 Company Registration
3 Donations/Funding of Sec 8 Company
4 Requirements for Online Registration of Sec 8 companies
5 Name Approval of Section 8 Company Registration
6 Sec 8 Company Registration Eligibility Criteria
7 Documents Required for Registration of Section 8 Company
8 Online Section 8 Company Registration – A Detailed Process
9 Section 8 Company Compliances
10 FAQs on Section 8 Company Registration Online

A Section 8 company registration, as per the Companies Act of 2013 or the previously existing Companies Act of 1956, refers to an organization that is established with the primary objective of promoting fine arts, science, literature, knowledge sharing, or charitable activities. Such companies are registered as limited companies under the Companies Act and are regulated by it. The government grants these companies an exclusive license under Section 8 of the Companies Act, subject to three main conditions that need to be met.

To be eligible for Section 8 company registration, the organization must be established for charitable purposes and must use its income and profits towards these objectives. Furthermore, the company must not distribute any dividends to its members.

The fees for Section 8 company registration vary and are as follows:

Company Name Reservation: ₹1000/-
Digital signature registration & DIN: ₹3000/-
Notary and stamps: ₹2000/-
Memorandum of Association (MoA) & Articles of Association (AoA) & Government Fees & Incorporation Fees: ₹6000/- to ₹8000/-
Professional Fees: ₹8000/- to ₹10000/-

section 8 company registration online

Benefits of Section 8 Company Registration

The companies registered under section 8, do enjoy certain benefits. The following are the advantages of section 8 company incorporation over other modes of online NGO registration:

It has organized operations and greater flexibility
Avoids the meticulous registration process and no physical presence is required
No requirement for a minimum paid-up capital
Seamless procurement of tax benefits under sections 12AA and 80G of the Income Tax Act
Any partnership registration can be a member in its individual capacity and obtain Directorship.

benefits-of-section-8-company

Donations/Funding of Sec 8 Company

Those who register a business under Section 8 may receive public donations, but they cannot raise money through deposits. This is a list of some of the ways it can raise money:

Foreign Donations: Foreign donations are only permissible after registering under the FCRA (Foreign Contribution Regulation Act of 1976). Applications for FCRA licenses are only accepted three years from the registration date. Nonetheless, if you need to make certain particularly urgent foreign donations, you can ask the commissioner for permission in advance.
Equity Funding: A Sec 8 firm may be able to raise money by issuing additional equity shares at a premium.

Domestic Donations: Domestic donations are not subject to any limitations. Nonetheless, a suitable system must be put in place to stop instances of money laundering.

Requirements for Online Registration of Sec 8 companies

The following requirements must be met in order to proceed with the section 8 company incorporation process:

The company is governed by the Companies Act, 2013.
It requires a minimum of two directors/shareholders to form a company.
Important documents for a company include Memorandum of Association (MoA), Articles of Association (AoA), and financial statements.
The Board of Directors is responsible for managing the affairs of the company.
All properties owned by the company are registered in its name and can be sold with the prior consent of the Board of Directors.
In case of closure or winding up of the company, the property and funds can be transferred to another company with similar objectives.
Annual compliance is mandatory, and the company must file its annual returns and accounts with the Registrar of Companies (RoC).

Name Approval of Section 8 Company Registration

The name chosen for the section 8 company incorporation should portray the theme of the NGO, be short, simple, and distinctive, as well as have the appropriate suffix. The company name must be formally registered and approved. By doing so, it is possible to steer clear of copyright issues and make sure that no other section 8 firms have the same name as yours. The company’s Registrar must receive a Form INC-1 application in order to receive approval (Central Registration Centre – CRC of Ministry of Corporate Affairs). In order to lessen the possibility of name repetition, the applicant will be required to submit six distinct names for name approval. The name is valid for up to 60 days after approval. According to the Company (Incorporation) Rules, 2014, the suggested names must contain words like foundation, association, forum, council, chambers, etc. in order to be approved as a valid section 8 company name.

Sec 8 Company Registration Eligibility Criteria

To register a Section 8 company in India, an individual, Hindu Undivided Family (HUF), or limited company can apply. However, they must fulfill all the necessary requirements and comply with the regulations, and at least one director must be a resident of India. It is also possible for a firm to become a member of the company registered under this section.

The company’s objective must be focused on promoting sports, social welfare, advancing science and art, education, or providing financial assistance to lower-income groups. The surplus generated by the company must be used to fulfill its principal objective.

To ensure that the company’s resources are directed towards achieving its objectives, the founders, members, and directors of the company cannot receive any remuneration. Additionally, there can be no direct or indirect distribution of profits to the company’s directors or members.

Finally, the company must have a defined three-year project plan and vision to ensure that its activities are well-planned and focused on achieving its goals.

Documents Required for Registration of Section 8 Company

Director’s DSC and Director’s DIN.
Company goals and the projected work.
Assets and liabilities, five-year projections, and other financial figures are included.
Personal papers of directors.
Documents indicating the registered office address include utility bills that are no more than two months old and a rental agreement or sale deed in the company’s name.

Online Section 8 Company Registration – A Detailed Process

Aside from document gathering, preparation, and drafting, there are three main processes in the incorporation of a Section 8 company. As follows:

The Reserve Unique Name (RUN) form is used to reserve a name for a new business or to change an existing business’s name. The process of forming a section 8 corporation begins with this.
Words like Foundation, Federation, Society, Council, Club, Charity, Institution, Academy, Organization, Federation, Chamber of Commerce, Development, Association, etc. must typically appear in a section 8 company registration.
The name will be valid for 20 days after being authorized.
The second and most important stage in the incorporation procedure is obtaining an RD 1 license.
While applying for the RD 1 license, the name approval must still be in effect.
A license known as a “RD 1 license” is one that is given out in accordance with Section 8 of the Companies Act to businesses that strive for advancing the arts, sciences, trade, ecology, etc. At this stage, all necessary paperwork, including the MoA, AoA, financial statements, and other declarations, have been filed. The authorization in question shall be good for 30 days.
Spice Form: When submitting the SPICe form, the name and the license must both be current.
The RD-1 license, the name approval certificate, and the paperwork pertaining to the registered office, such as rental agreements and utility bills, are filed during this final stage of section 8 company registration.

Section 8 Company Compliances

A Section 8 company, like any other company, must comply with annual compliances, and failure to do so may result in the company being classified as dormant and removed from the register. Additionally, a Section 8 company must comply with CSR obligations, and non-compliance may result in penalties.

If a Section 8 company violates legal requirements, its license may be revoked by the government. The penalty for non-compliance can range from a minimum of ₹10 lahks to a maximum of ₹1 crore for the company or entity, while officers and directors who violate the terms may be fined between ₹25,000 and ₹25 lakh, or both.

Contrary to popular belief, a Section 8 company is not automatically exempt from taxes. The company must apply for and obtain certification for tax exemptions, such as Section 12 A or 80G, from the Income Tax Authorities to be exempt from paying taxes.

FAQs on Section 8 Company Registration Online

1. How may my business become a Section 8 company?

For a name reservation, complete an RUN application. Submit an application in Form No. RD-1 to request approval for the conversion of an existing Company to a section 8 company along with this Form INC-12 application for awarding a license under a section 8 company.

2. Is Section 8 Company a public or a private company?

Nevertheless, if you’re wondering what kind of corporation a section 8 company is, they are non-profit organizations. Sec 8 firms can be registered as public, private, or as an LLP.

3. How can I check if a Section 8 Company is registered or not?

You may determine if a corporation is sec 8 or not by checking in the MCA portal.

4. Is there a maximum number of members that a Section 8 corporation can have?

There is no such upper bound.

5. What other options are there for forming an NGO?

Starting a Trust or Society based on the goals of your Organization is your other option.