Section 8 Company Registration – An Overview
A company that has been registered under the Companies Act of 2013 as a Section 8 company or under the Companies Act of 1956 as a Section 25 company is one that has been registered with the intention of promoting the fine arts, science, literature, or the sharing of knowledge for the purpose of charity. The Companies Act of 2013 governs Section 8 businesses. These restricted risk organizations were outlined in the Organizations Act. In accordance with Section 8 of the Companies Act, these businesses receive an exclusive license from the government. Three primary conditions must be met before the permit can be issued.
The company’s income and profits should be donated to charitable causes, and dividends should not be paid to shareholders.
Benefits of Section 8 Company Registration
Certain advantages are available to companies that are registered under section 8. Section 8 company incorporation has the following advantages over other online NGO registration methods:
It has well-organized operations and a greater degree of adaptability. It does not require a meticulous registration process and does not require a physical presence. There is no minimum paid-up capital requirement. It is easy to get tax benefits under sections 12AA and 80G of the Income Tax Act. Any partnership registration can be a member in its own right and become a director.
Donations/Funding of Sec 8 Company
Section 8 company registration allows for public donations, but it cannot use deposits to get capital. Some ways it can get money are as follows:
Donations from abroad: Foreign donations can only be made after you register under the Foreign Contribution Regulation Act of 1976 (FCRA). After the date of registration, FCRA license applications are only accepted for a period of three years. However, if certain extremely urgent international donations are required, you may request prior approval from the commissioner. Funding for Equity: By issuing new equity shares at a premium, a Sec 8 company may be able to raise funds: domestic donations Domestic contributions are unrestricted. However, in order to avoid instances of money laundering, an appropriate mechanism needs to be established.
Requirements for Online Registration of Sec 8 companies
The following requirements must be met for the procedure to incorporate a company under Section 8:
supervised by: 2013 Companies Act Members: Two directors or shareholders minimum Important Documents: Board: MoA, AoA, and financial statements Property Management for Directors: A company’s name is the legal owner of all of its assets. These can be sold in accordance with the Companies Act of 2013’s provisions. According to the Act, the sale can take place only if the Company Board of Directors approves it in a resolution.
A company’s closure or winding down: According to the bylaws of the society, upon the society’s dissolution and settlement of all liabilities and debts, the members of the company may not receive an equal share of the society’s property and funds. Instead, the same thing can be given to another business, preferably with similar items, or transferred.
Conformity each year: By submitting its annual returns and accounts to the RoC, the business is required to ensure compliance each year.
Name Approval of Section 8 Company Registration
The name given for the sec. 8 company incorporation needs to be short, easy to remember, and unique. It also needs to have the right suffix, reflect the NGO’s theme, and so on. It is important to enroll and endorse the organization’s name authoritatively. This ensures that no other section 8 companies have already been registered under the same name and helps to avoid copyright concerns. A Form INC-1 application needs to be sent to the Registrar of the company (Central Registration Centre – CRC of Ministry of Corporate Affairs) in order to get approval. To prevent 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. Words like foundation, association, forum, council, chambers, and so on must be included in the names that are suggested. to be accepted as a legitimate section 8 company name in accordance with the Company (Incorporation) Rules, 2014.
Sec 8 Company Registration Eligibility Criteria
A Section 8 company registration can be started by an individual, a HUF, or a limited company in India. Two or more people who will be shareholders or directors of the company must meet all of the Section 8 company registration requirements. However, a company can be a member of a company that is registered under this section. The goal should be to promote sports, social welfare, the advancement of science and art, education, and financial assistance to lower-income groups. The surplus that is generated must be used to meet the main goal of the company registration under Section 8. The founders, members, and directors of the company cannot receive any compensation. There should be no direct or indirect distribution of profits to the directors and members of the company.
Documents Required for Registration of Section 8 Company
- DIN of the Directors and DSC.
- the company’s goals and proposed work.
- Assets and liabilities, five-year projections, and other financial statements are examples.
- Documents pertaining to directors.
- Documents with the registered office address, such as utility bills that are not 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
Apart from document collection, preparation, and drafting, incorporating a Section 8 company entails three major steps. These are:
Step 1: Run Permission:
Hold Exceptional Name (RUN) is a structure petitioned for saving a name for another organization or for changing its current name. The first step in incorporating a section 8 business is this.
The words “Foundation,” “Federation,” “Society,” “Council,” “Club,” “Charities,” “Institute,” “Academy,” “Organization,” “Federation,” “Chamber of Commerce,” “Development,” and so on” are typically
The name will be in effect for 20 days.
Step 2: RD 1 Permit:
This is the most important step in the incorporation process. The name approval must be submitted with the application for the RD 1 license. The RD 1 license is a section 8 license that allows businesses to work toward a specific goal, such as improving the arts, sciences, commerce, environment, etc. and they will also use the profit they make to achieve their goals. All significant archives like the MoA, AoA, fiscal summaries and different announcements are documented at this stageThe permit so endorsed will be legitimate for 30 days.
Step 3: Spice Shape:
At the time of filing the SPICe form, the name and license must both be valid. This is the final step in section 8 company registration, where rental agreements and utility bills, as well as the RD-1 license and name approval certificate, are filed.
Section 8 Company Compliances
Like different organizations, a Part 8 organization should perform yearly compliances. The business will be considered dormant and may be removed from the register if it does not comply. A Segment 8 organization enrollment is likewise expected to perform CSR compliances, and CSR should be performed. If a violation of the Act’s legal requirements occurs, the government will revoke the Section 8 Company Registration.
The license could be revoked if the company’s goals are mishandled or not in line with the ones that were established. Any company or other entity that breaks the rules could face a fine of up to one crore yen. Ten lakh yen is the minimum penalty. Any Company Officers and Directors who violate the terms will be subject to a fine of at least 25,000 or up to 25 lakh, or both.
Tax Exemption Applicability It is commonly held that a Section 8 company that works for the public good does not have to pay taxes. But this is not true. Similar to any other legitimate entity, a Part 8 organization is subject to charge. In order to be exempt, a Section 8 company must obtain certification for the aforementioned tax exemptions, such as Section 12 A and 80G. from the Income Tax Authorities.
FAQs on Section 8 Company Registration Online
1. How can I determine whether a Section 8 company is registered?
By checking the MCA portal, you can determine whether a company is sec 8 compliant or not.
2. Does the Section 8 company have a maximum number of shareholders?
There is no such limit as a maximum.