The term "Non-Governmental Organization" (NGO) refers to a nonprofit group that works for charitable objectives. A Section 8 business incorporated under the Companies Act, 2013 (Act) is supervised by the Ministry of Corporate Affairs (MCA), whereas a trust or society registered with the State Government is supervised by the Registrar of States.

Section 8 company creation delivers more benefits than trust and society. Governmental bodies, financial backers, and other stakeholders have a higher level of confidence in this type of firm. In this article, we'll explain how to register your organisation as a non-profit under the 2013 Companies Act.

What are the requirements for Section 8 Company Incorporation?

Directors

If the Section 8 company is to be established as a private limited company, a minimum of two directors are needed; if the firm is to be incorporated as a public limited company, a minimum of three directors are needed. A private limited corporation can have a maximum of 200 members, but a public limited company has no such restriction.

Name and Capital Requirement

When a Section 8 company is incorporated, no minimum paid-up capital is necessary. NGOs formed as Section 8 companies are exempt from the requirement to include "Limited" or "Private Limited" in their name.

Charity-related Items

Companies under Section 8 are formed with charitable intentions. The non-profit mission or purpose for which it is created must be included in the MOA and AOA. Any earnings made by the section 8 corporation are either reinvested in the business or used to advance the principal goals of the organisation, which are philanthropic causes. Members will not receive a share of the revenues.

Management

In contrast to other trusts, which are managed by the Trustees in accordance with the Trust Deed, Management Section 8 companies are managed by the Board of Directors in accordance with the MOA and AOA of the firm.

Rules established by several Acts

The 2013 Companies Act's rules and regulations must be followed by a Section 8 company. It must keep accurate financial records and submit reports to the Registrar of Companies. Without the prior consent of the Central Government, Section 8 Company is not permitted to alter the terms of the MoA or the AoA in any way. Additionally, it must adhere to the terms of the GST Law and the Income Tax Act.

Acquire Digital Signature Certificate

Since the paperwork for the registration procedure is filed online and should be digitally signed, the prospective directors of the business must provide digital signatures. A government-recognized certifying agency issues digital signature certificates (DSC). You may find the list of these certified organisations here. The price for a DSC varies based on the certifying organisation. The Class 3 category DSC is required to be acquired by you.

Application for Director Identification Number

For the company's prospective directors, you must submit an application for a DIN. Form DIR-3 or the SPICe+ form for registration must be used to submit the application for DIN allocation. When submitting the form online through the MCA site, you must also upload a scanned copy of the required supporting documentation, including the directors' identity and address verification and a self-attested copy of their PAN. A practising professional who can be a cost accountant chartered accountant or a company secretary must certify the form.

Forms Required for Section 8 Company Incorporation
 

Purpose of the Section 8 Company Forms (4 Important forms)

Form INC 12

For the purpose of granting the licence to function as a Section 8 company, Form INC-12 is filed. Applicants must provide a draught copy of the Articles of Association (AOA) and the Memorandum of Association with this application (AOA).

Form INC 13 specifies the format for a Section 8 company's Memorandum of Association. Each subscriber must sign the MOA and AOA subscription papers in the presence of at least 1 witnesses, including their name, residence, description, and employment.

The following attachments must be supplied with Form INC 12:

• INC-13 - Memorandum of Association 
• Draft Articles of Association 
• INC-15 for the certification by each MOA subscriber that the draught documents have been drafted in accordance with Section 8 
• Estimated statement of Income and Expenditure for the following three years
• A list of the company's potential promoters and directors

SPICE+ Form

The application for the Section 8 company's incorporation is on the SPICe+ form. In the first section of the SPICe+ plus form, the business may be reserved. Only one name, though, can be submitted for approval on this form. It is advised that candidates use the MCA portal's free name search function for existing firms before selecting a name. Based on the search parameters, the system will offer a list of names of existing firms that are similar to each other. This will assist you in avoiding selecting a name that's similar to one already used by a corporation.

The following papers must be submitted with the SPICe+ Form:

• Articles of incorporation and memorandum have been correctly signed by each subscriber.
• The initial directors and each subscriber have asserted their innocence of any misconduct or infringement.
• Each candidate must submit a Form INC 14 and Form INC 15 with a Chartered Accountant's declaration.
• Official communication addresses up to the registered office
• Address and proof of identification for each MOA subscriber and the original directors of the company
• Passport-sized photos of all the directors and shareholders
• A copy of the lease is necessary if the company's registered office is situated on rented property.

INC Form 22

For the purpose of notifying the location of the company's registered office, Form INC 22 is submitted. Within 30 days after the company's establishment, it must be submitted.

DIR Form 12

For the appointment of the company's directors, Form DIR 12 is submitted. It must be submitted within 30 days of the directors' appointment date.

Procedure for Section 8 Company Incorporation

Create a digital signature certificate & approve the file name

The first step in registering a Section 8 company is to prepare the DSC. Apply for a DSC as soon as feasible (Digital Signature Certificate) Section 8 companies should use terms like "foundation," "society," "association," "council," "club," "charity," "academy," "organisation," "federation," "institute," "chamber of commerce," and others.

Request a licence under Section 8 of the Companies Act from the regional director of the Ministry of Corporate Affairs (MCA) (INC-12)

You must submit an application to the Regional Director for a Section 8 company registration licence following Name approval.

Before issuing a Section 8 Company incorporation permit, the regional director will evaluate the objectives and plans. RD typically grants a section 8 company operating licence within 15 days.

Section 8 Incorporation Forms Can Be Filed Online Through The Ministry of Corporate Affairs (MCA) Website

Following approval from the regional director, you must proceed to submit the section 8 company incorporation application together with the necessary supporting documents to the ROC. The ROC will offer a Certificate of Incorporation & a Company Identification Number after obtaining all necessary information (CIN). This would be carried out in compliance with SPICE plus (Spice +) standards.

Providing MOA and AOA

You must first draught the Memorandum of Association & Articles of Association before you can submit section 8 company incorporation forms (AoA).

The objectives of the firm are described in the MOA, the rules, and the bylaws.

Bank Account, PAN, and TAN

Before incorporating a Section 8 Company in India, you must have your Permanent Account Number, Temporary Account Number (TAN), and bank account ready.

Registration Fees For Section 8 Companies In India

Directors' Identification Number and Digital Signature Certificate are both worth Rs. 3000

Reservation of the company name costs Rs. 1000 for MOA and AOA, Rs. 6000–8000 for incorporation expenses and government taxes.

Stamps & Notary: 2000 Rupees

Professional Fees: 8000–10,000 rupees

Eligibility for Section 8 Company Registration

In India, a Section 8 company can be founded by an individual or HUF.

The Act's Section 8 business incorporation criteria should be followed by two or more people who will serve as directors or shareholders.

The Section 8 corporation must have at least 1 director who is an Indian resident.

Encouragement of sports, social programs, the growth of science and the arts, education, and financial aid to lower-income people must all be goals.

The company's founders, directors, and members cannot get any compensation in the form of money or other goods.

Direct or indirect profit distribution to the company's directors and members is not permitted.

Seven advantages of section 8 company incorporation that you should be aware of

No minimum investment

A Section 8 company can be established with no minimum capital requirement and its capital structure can be altered whenever necessary to accommodate the business's expanding demands. Because of this, the money required to maintain the business may later be obtained by donations & subscriptions from members & the general public.

Legally distinct identity

Article 8 Members of the company are given distinct legal identities upon registration. A registered partnership firm may become a director of a Section 8 company by joining as an individual member. The entry or departure of any member has no effect on the operation of the Section 8 corporation because it is an indefinite entity.

Tax Advantages

The Corporation Auditor's Report Order does not apply to the Section 8 company (CARO). A Section 8 corporation is entitled to tax benefits under Section 80G of the Income Tax Act of 1961.

Credibility

More reliable and trustworthy than any charitable organisation is a section 8 company. The Memorandum of Association referring to the company's non-profit objectives cannot be modified since it is bound by the Act's regulations, which necessitate yearly audits.

Small Liability

Based on the number of shares they have acquired, members of a Section 8 company have limited responsibility. The losses suffered by the business are not directly their fault.

The Donors Are Exempt

Donations generated by Section 8 corporations are tax deductible in accordance with Sections 12A & 80G of the Income Tax Act of 1961.