Steps for the Incorporation of Section 8 Company

Forming a Section 8 Company under the Companies Act, 2013, is a suitable option for anyone looking to start a non-profit organisation in India. These companies focus on activities that benefit society, such as education, social welfare, art, science, sports, and environmental protection. Their main goal is to use any income or profit to support these causes. Unlike regular businesses, they do not distribute profits as dividends to their members. Incorporating a Section 8 Company in India involves a structured legal process. In this blog, you will learn about the steps for the Incorporation of a Section 8 Company.

What is a Section 8 Company?

A Section 8 Company in India is a non-profit entity registered under Section 8 of the Companies Act, 2013. It is created with the aim of advancing charitable purposes like education, art, science, sports, environmental care, and social development. Unlike regular companies, it reinvests any profits back into its mission rather than sharing them as dividends. This structure ensures that the organization remains focused on its social and public welfare goals.

Eligibility Criteria for Section 8 Company

Here are the eligibility criteria for Section 8 Company:

• Charitable Objectives

A Section 8 Company must focus on specific charitable purposes. These purposes include promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection. The company cannot engage in activities that aim to make profits for its members. Its work should benefit society or a particular community.

• Application of Profits

The company uses all its income and profits solely to advance its charitable goals. It does not distribute profits or dividends to its members or directors. This means any money earned goes back into the organization’s activities, programs, or services that align with its mission.

• Incorporation Requirements

A Section 8 Company must register as either a private limited or a public limited company under the Companies Act, 2013. It cannot operate as a sole proprietorship, partnership, or trust. The company must follow the rules and procedures applicable to limited companies in India.

• License Requirement

Before starting operations, the company must obtain a license from the Central Government under Section 8 of the Companies Act, 2013. This license authorizes the company to function as a Section 8 entity. The government grants this license after confirming that the company meets all legal requirements and its objectives are genuine.

• Minimum Number of Members and Directors

A Section 8 Company needs a certain minimum number of members and directors. A private limited company requires at least two members and two directors, while a public limited company needs a minimum of seven members and three directors. This structure helps maintain effective management and smooth governance from the beginning.

• Registered Office

The company must have a registered office located within India. This office serves as the official address for communication with the government and other entities. The registered office must be a physical location where the company keeps its records and conducts official business.

• No Distribution of Profits

The company cannot share its profits or income with members, directors, or any other individual. All funds must support the company’s charitable activities. This rule helps maintain the non-profit nature of the organization and builds trust with donors, government agencies, and the public.

Documents Required for Section 8 Company Incorporation

Below is the list of key documents required for Section 8 Company Incorporation:

1. Identity and Address Proof for Directors/Shareholders

• A PAN Card is mandatory for Indian nationals.
• Passport is required for foreign nationals.
• Aadhaar Card, Voter ID, or Driving License as additional identity proof.
• A Passport-sized Photographs: Recent photos of all directors.
• Address Proof: Recent utility bills (electricity, water, broadband) or bank statements (not older than 2 months).

2. Registered Office Proof

• Utility Bill: Recent electricity, water, or broadband bill for the office premises.
• No Objection Certificate (NOC) from the property owner, if the office is rented.
• Rent Agreement (If applicable).

3. Key Incorporation Forms

• Form INC-12
• Form INC-13
• Form INC-14
• Form INC-15
• Form INC-32 (SPICe): Simplified Proforma for Incorporating Company Electronically.
• Form INC-33: e-Memorandum of Association.
• Form INC-34: e-Articles of Association.
• Form AGILE-PRO

4. Additional Requirements

• Digital Signature Certificate (DSC) for all proposed directors.
• Director Identification Number (DIN) for all proposed directors.
• Name Approval Letter
• Estimated Income & Expenditure Statement for the next three years.

Steps for the Incorporation of Section 8 Company

Here is the step-by-step process for the incorporation of Section 8 Company:

Step 1: Get a Digital Signature Certificate (DSC)

Each proposed director must get a Digital Signature Certificate. This acts like an online version of a physical signature. It helps to sign and submit electronic forms on the government portal. You can get this from any government-approved agency. The process usually requires a PAN card, photo, and ID proof.

Step 2: Apply for Director Identification Number (DIN)

A Director Identification Number is a unique number for every company director. If the director does not have it, the application goes through the SPICe+ form during company registration. The system auto-generates the DIN after the form submission.

Step 3: Choose and Reserve a Company Name

The name of your company must reflect the non-profit nature of your work. You can submit your name choices through the RUN (Reserve Unique Name) service on the Minister of Corporate Affairs (MCA) portal. Make sure the name does not match any existing company and suits the company’s purpose. Add words like "foundation," "society," "association," or "organization" to show that the company works for charitable objectives.

Step 4: Draft MOA and AOA

Prepare two important documents:

• Memorandum of Association (MOA): This states the main purpose of your company. It lists goals like promoting art, science, education, environment, or charity.
• Articles of Association (AOA): This defines the rules for managing the company. It covers the roles of directors, meetings, the decision-making process, and more.

Both documents must follow the format given under Section 8 Company rules. You can file them electronically using forms INC-13 and INC-31.

Step 5: Fill and Submit the SPICe+ Form

The SPICe+ (INC-32) form combines many services in one place. It covers name reservation, company registration, DIN allotment, and applications for PAN, TAN, and GST.

The form has two parts:

• Part A: You enter the proposed name of the company.
• Part B: You fill in company details, director details, capital structure, and office address.

Once complete, you upload it on the MCA portal for approval.

Step 6: Attach Important Declarations

Along with the main form, you need to submit some additional declarations:

• INC-14: A professional like a Chartered Accountant or Company Secretary confirms your company follows all legal rules.
• INC-15: All founders declare they understand the goals of the company and agree to run it as a non-profit.
• INC-9: All directors and shareholders confirm they never face charges of fraud or similar crimes.

These declarations add transparency and ensure only genuine applicants register under Section 8.

Step 7: Pay the Government Fees

You must pay government charges while filing your forms. This includes fees for name approval and stamp duty (as per your state). Once you make the payment online, you receive a receipt as proof.

Step 8: Get a Section 8 License from RoC

Once you submit all forms and documents, the Registrar of Companies (RoC) checks everything. If all details are correct, the RoC issues a license in Form INC-16. This license gives your company the legal right to work as a Section 8 Company in India.

Step 9: Receive the Certificate of Incorporation

After license approval, the RoC gives the Certificate of Incorporation. This is the final proof that your Section 8 Company is now officially registered. It includes your Company Identification Number (CIN) and the date of incorporation.

You can now start your operations, open a bank account, apply for tax exemptions, and receive grants or donations legally.

Post-Incorporation Compliance

Here is a detailed explanation of post-incorporation compliance:

1. Declaration of Commencement of Business (Form INC-20A)

Every Section 8 Company with a share capital must file Form INC-20A. This declaration confirms that the subscribers of the company have paid their share of capital. You must file this form within 180 days from the date of incorporation. Without this, the company cannot start business activities or open a bank account.

2. Obtain PAN and TAN

The company needs a Permanent Account Number (PAN) to file income tax returns. It also needs a Tax Deduction and Collection Account Number (TAN) if it deducts tax at source. The PAN and TAN are issued by the Income Tax Department. These are essential for all financial and legal transactions.

3. Open a Bank Account

The company must open a current account in its name. To do this, it submits the Certificate of Incorporation, PAN, address proof, and a Board Resolution. All money the company receives or spends must go through this account to maintain transparency.

4. Appointment of First Auditor

The company must appoint its first statutory auditor within 30 days of registration. If the Board does not appoint one within this time, the company members must appoint an auditor at an Extraordinary General Meeting within 90 days. The auditor checks the company’s accounts and submits an audit report every year.

5. Issue of Share Certificates

The company is required to provide share certificates to all its subscribers. It does this within 60 days of incorporation. The company must also pay stamp duty on these certificates within 30 days. This confirms each member’s ownership of the company.

6. Setup of Registered Office

Every company must set up its registered office within 15 days of incorporation. It must inform the Registrar of Companies through Form INC-22. This office becomes the official place for communication and storage of legal records.

7. Maintain Statutory Registers

The company must maintain important registers at its registered office. These include:

• The Register of Members keeps a simple record of who owns shares in the company, along with their contact details.
• The Register of Directors stores names, contact details, and roles of all company directors.
• The Minutes Book notes all key decisions made during board and general meetings for future reference.
• The Books of Accounts keep a detailed record of all money received and spent by the company.

These records help in audits, inspections, and legal filings.

8. Conduct of Board Meetings and AGM

The company must hold its first Board Meeting within 30 days of incorporation. After that, it must hold at least two Board Meetings every year, with a gap of no more than 180 days between them.

It must also hold its first Annual General Meeting (AGM) within nine months from the end of its first financial year. In later years, it holds the AGM within six months from the end of the financial year. In the AGM, members review the company’s financials and other key matters.

9. Filing of Annual Returns and Financial Statements

Every year, the company must file two important documents with the Registrar of Companies:

• Form MGT-7: Form MGT-7 is the company’s annual return that summarizes key details and must be filed within 60 days after the AGM.
• Form AOC-4: Form AOC-4 includes the company’s audited financial statements and must be submitted within 30 days after holding the AGM.

These filings ensure the company stays compliant with the Companies Act.

10. Filing of Income Tax Return (ITR)

The company must file its Income Tax Return every year using Form ITR-7. This is necessary even if the company qualifies for income tax exemption. It shows that the company runs transparently and meets its legal obligations.

11. Director KYC (Form DIR-3 KYC)

Each director must update their KYC details with the Ministry of Corporate Affairs. They do this through Form DIR-3 KYC. The form includes basic personal and contact details. This must be filed every year to keep the Director Identification Number (DIN) active.

12. Apply for Section 12A and 80G Registration

To enjoy income tax exemption and allow donors to claim deductions, the company must apply for 12A and 80G registrations with the Income Tax Department. These certificates prove that the company exists for charitable purposes.

13. FCRA Registration (if applicable)

If the company wants to receive foreign donations, it must register under the Foreign Contribution Regulation Act (FCRA). This registration comes from the Ministry of Home Affairs. Without this, the company cannot accept any foreign contributions.

14. Display of Company Information

As per law, the company must display certain details:

• Name of the company
• Registered office address
• Corporate Identification Number (CIN)
• Contact number and email

This information must appear on all company signboards, letters, invoices, and official documents. This ensures clear identity and accountability.

Benefits of Section 8 Company

Listed below are the key benefits of Section 8 Company:

• Tax Exemptions

A Section 8 Company receives tax relief under Sections 12A and 80G of the Income Tax Act. This helps the company reduce its own tax burden. Donors also benefit, as they claim deductions on the donations they make. This makes fundraising easier and encourages public support.

• No Minimum Capital Requirement

Unlike other companies, a Section 8 Company does not need a fixed minimum capital to register. It can start with any amount of money. This helps small groups and individuals start a non-profit organization without facing financial pressure.

• Stamp Duty Exemption

When a Section 8 Company registers, it does not pay stamp duty on its formation documents. This reduces the cost of incorporation and makes the process more affordable for non-profits with limited funds.

• Separate Legal Identity

A Section 8 Company has a legal identity that stands apart from its members. It signs contracts, opens bank accounts, and owns property in its own name. If any legal issue arises, the company is held responsible, not its individual members.

• Limited Liability

Members of the company face limited risk. Their personal assets stay safe even if the company has debts or financial losses. This helps build trust and motivates more individuals to get involved.

• Perpetual Succession

The company does not stop functioning if its members leave, retire, or die. It keeps running smoothly without disruption. This ensures that the organization’s mission continues without delay or confusion.

• Enhanced Credibility

Being registered under the Companies Act gives a Section 8 Company legal status. This increases trust among donors, government bodies, and the public. It becomes easier to attract funding, partnerships, and volunteer support.

• Flexibility in Name

Unlike other companies, a Section 8 Company does not need to use the words “Private Limited” or “Limited” in its name. This gives the organization more freedom to reflect its purpose clearly in its identity.

• Eligibility for Government Grants

Government bodies often prefer working with Section 8 Companies because they follow strict legal standards. This makes the company eligible for grants, funding programs, and special projects run by state or central governments.

• Ease of Property Transfer

A Section 8 Company can transfer ownership of its land, buildings, or other assets without facing complex rules. This helps the company manage its resources more freely and respond to changing needs.

Conclusion

A Section 8 Company creates a strong platform for individuals who aim to bring positive change to society. It follows a legal structure that supports charitable goals, ensures financial accountability, and builds public trust. This type of company attracts donations, qualifies for tax relief, and earns government support. It suits social entrepreneurs who want to serve the community, manage funds legally, and ensure long-term impact without focusing on personal profit. Contact Online Legal India to get assistance regarding Section 8 Company incorporation. They have a large team of CA/CS.