Under Section 8 of the Companies Act, an individual or an organization can petition the Registrar of Companies (ROC) to form a company. What are the requirements for forming a Section 8 company?
The Section 8 Corporation: What Is It?
Companies under Section 8 of the Companies Act are those with a purpose of advancing arts, commerce, science, research, education, sports, charity, social welfare, religion, or environmental safety, among others. Moreover, these corporations do not pay their partners any income from their revenues.
There are more or less the same requirements for these corporations under Section 25 of the Companies Act, 1956. Section 8 companies are now allowed to have more purposes under the new Act. Confederation of Indian Industries (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) are representations of Section 8 companies. These firms facilitate exchange and commerce by facilitating trade.
Criteria for Section 8 companies
The company must have at least 2 shareholders/directors. There is a limit of 200 shareholders.
The minimum capital requirements are determined by business regulations, not by law. The registration payment is based on the capital percentage.
A resident director must be an Indian citizen and reside in India.
Section 8 company names must be unique and not similar to those of other companies or trademarks.
Objects of Social or Welfare: Section 8 companies should focus on improving these areas:
- The sciences
- The arts
- The research process
- Welfare Services
- Environmental protection
Revenues from Section 8 companies should be used only for the purpose for which they were formed. Members of the company should not use the money for their own benefit.
Registration Documents for Section 8 Companies
- Members’ passport-size photos
- Proof of identification for all company partners
- Director and supporter list
- Proof of address for all managers and supporters
- A lease agreement (if the premises are rented)
- From the landlord, a letter of no objection (NOC).
- (If self-owned property), electricity or water bill with residence articles.
Section 8 Company Registration in India: Steps to Follow
Tax benefits can be obtained under Sections 12A and 80G of the Income Tax Act by registering a Section 8 company. A Section 8 company must have a non-profit intention and cannot incur separation expenditures. Section 8 Company revenue, if any, must be used for the purpose for which it was established. In India, section 8 companies must follow these steps:
- The Reserve Unique Name (RUN) application must be filed with a petition for name availability.
- Sec 8 Companies name shall consist of words such as Foundation, Forum, Association, Federation, Chamber, Confederation, Council, Electoral Trust, etc.
- The RUN facility allows for one resubmission and a maximum of two recommendations at a time.
- The cost of RUN is Rs100. The proposed corporation’s object section should be connected.
- The name is valid for 20 days after it is authorized.
- The RD 1 license must be applied for within this timeframe. RD won licenses are valid for 30 days.
- The second step is to obtain the digital signatures of the first directors of the company. The ROC requires a grade 3 digital signature of initial subscribers and managers for incorporation documentation.
- The firm should draft documents such as a memorandum of association (MOA) and articles of association (AOA). The MOA of a Section 8 company must be in form INC-13, while the AOA of a Section 8 company does not require any configuration. Each director of the company shall approve the MOA & AOA by referring to his name, address, definition, and employment in the presence of at least one bystander who shall witness the signature and add his name, address, description, and occupation as well.
- A SPICE application can be filed after receiving the permission. Both the name and RD 1 license should be filed within their validity periods. Incorporating a Section 8 company is the final step.
Central government commissions a license for Section 8 companies. The following grounds apply to all such licenses:
- There is a breach of the company’s contrived Section 8 terms of the license
- As a result of dishonest conduct or a failure to meet its own goals and public policy objectives.
Under certain circumstances, the government can order the firm to be wound up or merged with another related corporation. Before passing an order, the Government must cross-verify with the corporation.
Dissolution of a Partnership under Section 189
Are Section 8 Companies subject to the Following Regulations?
How do Section 8 companies comply with their administrative and reporting requirements?