Section 8 of Companies Act 2013 for Non-Profit Entities

A Section 8 of Companies Act 2013 gives the legal framework for NPOs. NPOs means non-profit organizations in India. It is useful for contributing art, science, education, and social welfare. All profits are reinvested into their mission. It is because they cannot give out dividends. A Section 8 company recognized by the Ministry of Corporate Affairs. They gain higher credibility and tax benefits. In this blog, you will get guidance on Section 8 of the Companies Act 2013.

What is a Section 8 company?

A Section 8 company is a non-profit organization registered under Section 8 of the Companies Act, 2013, formed to work for social or charitable purposes instead of making profits. It focuses on promote things such as art, science, education, social or welfare. Any extra money it makes is used to support its goals. It is not given out as profits. These entities have limited liability for their members. They are also officially recognized. This type of company are similar to trusts or associations. They also have a business structure which is looked by the government.

What is Section 8 of Companies Act 2013?

Section 8 of Companies Act 2013 manages the non-profit organizations (NPOs) in India. These companies are created to give:

a) Arts

b) Social Welfare

c) Sports

d) Education

e) Science

f) Research

g) Charity

h) Environmental protection, etc.

A Section 8 company is different from regular for-profit companies. This is because it uses its profits and income to support its goals. On the other hand, regular for-profit companies share profits with owners. These companies does not use the term "Limited" in their name. They also cannot use the term "Private Limited”. This can lead to a nature of non-profit. Section 8 companies usually get some special rules. They also get benefits under the Companies Act and Income Tax Act. They also get benefits from other regulations. Section 8 companies are subject to specific regulatory compliances under the Companies Act and Income Tax Act. It is related to other companies.

Key Features of a Section 8 Company

The Following key features of a Section 8 Company:

a) Limited Liability

A company member has the benefit of limited liability protection. It means that they are not personally liable for the company’s debts or financial losses. Their liability is limited to what they invested in shares.

b) Separate Legal Entity

This company runs as an entity which is different from its members. A company has the right to own property, enter into contracts, file lawsuits in its name, etc.

c) Tax Benefits

Section 8 of companies act 2013 can get some tax benefits under the Income Tax Act if they follow certain rules. Donations to these organizations might help you get tax deductions under Section 80G.

d) Credibility

If a company registers as a Section 8 organization, it builds trust with donors and stakeholders. It shows that the organization follows the rules and is dedicated to its charity goals.

e) No Minimum Capital Requirement

Section 8 companies are different. Unlike earlier provisions, Section 8 companies do not require any minimum paid-up capital.

6. Perpetual Succession

A Section 8 company keeps existing no matter who owns it or runs it. This feature keeps things steady and running smoothly.

Documents Needed to Register a Section 8 Company

Listed below are the key documents:

1. Identity and Address Proof for Directors/Shareholders

It includes:

a) A PAN Card for Indian nationals

b) A passport for foreign nationals

c) Aadhaar Card, Voter ID, Driving License, etc as an additional identity proof.

d) A recent passport-sized photographs of all directors

e) Address Proof

A recent utility bill such as electricity, water, broadband, etc.

f) Bank Statements

A Bank Statement which is not older than 2 months.

2. Registered Office Proof

It includes:

a) Utility Bill

A recent electricity, water, broadband bill, etc for the office premises.

b) No Objection Certificate (NOC) from the property owner (If the office is rented)

c) Rent Agreement (If applicable)

3. Key Incorporation Forms

The forms can include:

a) Form INC-13

b) Form INC-14

c) Form INC-15

d) Form INC-32 (SPICe): Simplified Preformat for Incorporating Company Electronically.

e) Form INC-33: e-Memorandum of Association.

f) Form INC-34: e-Articles of Association.

g) Form AGILE-PRO-S

4. Additional Requirements

a) A Digital Signature Certificate (DSC) is required for all proposed directors.

b) Director Identification Number (DIN) for all proposed directors.

c) Name Approval Letter

d) Estimated income and expenditure statement for the forthcoming financial years.

Steps for the Incorporation of Section 8 Company

How to Incorporate Section 8 Company?

Listed below are the steps to incorporate a company as per the Section 8 of Companies Act 2013:

Step 1: Get a Digital Signature Certificate (DSC)

Every proposed director needs to get a Digital Signature Certificate (DSC). This certificate serves as an online version of a physical signature. They can sign it and submit the electronic forms on the MCA portal.

Step 2: Apply for Director Identification Number (DIN)

As a proposed director, you also need to apply for a DIN. A DIN means a Director Identification Number. They can get this number through the incorporation application. Once they get a DIN, it will be valid for their lifetime.

Step 3: Choose and Reserve a Company Name

This step allows you to choose and reserve a company name. You must choose a unique name of your company. This means that your chosen name is different from the existing one. The name must have the non-profit nature of your work. Then, you need to submit the name through the SPICe+ Part A. The name must be submitted on the Minister of Corporate Affairs (MCA) portal. You can add words such as:

a) "Foundation"

b) "Society"

c) "Association"

d) "Organization", etc

These names will confirm that the company works for charitable objectives.

Step 4: Draft MoA and AoA

You must prepare two important documents. The documents can include:

a) Memorandum of Association (MOA)

b) Articles of Association (AoA)

These documents needs to follow the format that is given under Section 8. This format is specified in the company rules. You can file them electronically by using INC-13 and INC-33 forms.

Step 5: Fill and Submit the SPICe+ Form

You must fill out and submit the SPICe+ (INC-32) form. This form takes various services in one place. It includes:

a) Name Reservation

b) Company Registration

c) DIN allotment

d) Applications for

PAN (Permanent Account Number),

TAN (Tax Deduction and Collection Account Number)

GST (Goods and Services Tax)

The form consists of two parts:

a) Part A

You need to put the proposed name of the company.

b) Part B

In this form, you must fill out the

• Company details

• Capital structure

• Directors details

• Office Address

Once you have filled out and complete the form, you must upload it the MCA portal for approval.

Step 6: Attach Important Declarations

This step allows you to submit some additional declarations. This includes:

a) INC-14

A chartered Accountant or Company Secretary checks that your company follows all the laws.

b) INC-15

All founders confirm that they know the purpose of the company. They also agree to operate it as a non-profit.

c) INC-9

All shareholders and directors assure that they never suffered from charges of fraud or similar crimes.

It also confirms that only genuine applicants can register. This applies to Section 8 of Companies Act 2013.

Step 7: Pay the Government Fees

You need to make a payment of government charges during form filing. This contains fees for name approval and stamp duty as per your state. Once you complete the payment, you will get a receipt as proof.

Step 8: Get a Section 8 License from RoC

The Registrar of Companies (RoC) will check your submitted forms and documents. Upon approval, the Registrar of Companies grants Section 8 status through the SPICe+ process, and the Certificate of Incorporation reflects the Section 8 license. This license allows your company to operate as a Section 8 Company in India officially.

Step 9: Receive the Certificate of Incorporation

Once the license is approved, you will get the Certificate of Incorporation from the RoC. This shows that your Section 8 Company is officially registered. It has your Company Identification Number (CIN) and the date of incorporation.

Then, you can:

a) Start your operations

b) Open a Bank Account

c) Apply for Tax Exemptions

d) Get grants or donations officially.

Conclusion

Section 8 of Companies Act 2013, gives a framework for Section 8 Companies. This fosters non-profit initiatives. This helps to give commerce, art, science, social welfare, etc. This has a limited liability and legal recognition with a motive of “non-profit”. A Section 8 structure brings credibility, tax benefits, and donor trust. This is considered as an ideal structure for charitable ventures. If you still have a query about it, get help from Online Legal India.

FAQ

Q1. What is Section 8 of Companies Act 2013?

A Section 8 of Companies Act 2013, handles the formation of non-profit organizations (NPOs) in India. It focuses on giving commerce, sports, science, charity, education, and so on. This company has its own profits and income for its purpose.

Q2. Where can I register a Section 8 company?

You can register a Section 8 company through the Ministry of Corporate Affairs (MCA) portal.

Q3. Can a Section 8 Company be closed easily?

No. A Section 8 company requires approval from the Central Government and compliance with strict procedures for closure.

Q4. Can a Section 8 Company pay dividends to its members?

No, a Section 8 Company cannot pay dividends to its members. It is because, these companies are registered as non-profit organizations under the Companies Act, 2013.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.