Meaning of Section 8 Company
Section 8 Company is a Company that is licensed under Section 8 of the Companies Act, 2013 (the Act), earlier known as the Section 25 Company under the Companies Act, 1956, are companies which have the objectives promoting research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment or any such other object, provided that any profits, , or the other income is applied for promoting only the objects of the company. It is pertinent to note that the shareholder of a section 8 company do not receive dividend in any form whatsoever.
In India, the Section 8 Company is regulated by the Companies Act, 2013 (and the amendments thereof) and the rules & regulations that are made thereunder and it is administered by the Ministry of Corporate Affairs, Government of India through the Offices of Registrar of Companies (‘RoC’) in each of the state of the union of India . The Company Incorporation rules, the requirements, process, and the procedures may vary depending particularly on the type of the company that is to be incorporated by the promoters.
Therefore, Section 8 Company is a company which is registered for charitable or for any not-for-profit purposes. This, however, has numerous advantages when it is compared to Trust or Society and it also has higher credibility among the donors, Government departments, and the other stake-holders of the company. Further, the key feature of this Company is that the name of the Company can be registered without using the terms “Limited” or “Private Limited” as the case may be in respect of other companies incorporated under the Act.
The requirements that are necessary for such company are:
• There must be at-least of two shareholders;
• There must be Minimum of two Directors (Directors and shareholders can be the same individual);
• At least one of the Director shall be the resident in India at the time of incorporation;
• There is no specific requirement of Minimum capital
• The Income-tax Permanent Account Number is a mandatory requirement in case of the Indian nationals;
• Any one of the Identity Proof has to be produced, be it Voter ID/Aadhar Card/Driving License/Passport is required; Passport is, however, a mandatory requirement for the proof of identity in case of the foreign nationals;
• Any one document to prove the Residence (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);
• The Registered Office address must be proved through a document (that is, documents such as the rent agreement along with latest rent receipt and a copy of the latest utility bill in the name of the landlord and a no objection certificate from the owner of the premises, in case the premises are rented is necessary);
• In case the premises are owned by either the proposed Director and the proposed Promoters, any of the documents establishing the ownership such as Sale Deed/House Tax receipt etc along with the no objection certificate permitting such an usage of the premises.
The Procedure for Section 8 Company Registration
- The following documents are to be submitted along with the application of incorporation
1.1 Identity Proof: A copy of the Permanent Account Number of all the Directors/Promoters which is mandatory
1.2 Address Proof: A Copy of a valid Passport/Driving Licence/Aadhar/Telephone Bill/ latest Electricity Bill which is not older than 2 months
1.3 A Latest passport size photograph of all the Directors/Promoters
1.4 A Rent Agreement or a lease & Licence Agreement, if the registered office premise is taken on rent.
1.5 The Utility Bills of the proposed registered office of the company
1.6 The Consent of the proposed directors to act as a Director in Form DIR-2
1.7 The Directors Directorship details in any other Companies/LLPs.
2.The second step is to apply for the DSC which is required for filling the forms electronically to the Ministry of Corporate affairs which can be obtained only from certified agencies.
3.The promoter is then required to Obtain the Digital Signature Certificate (DSC) for the proposed Directors not having the Directors Identification Number (DIN). Obtaining the DIN from the Ministry of Corporate Affairs by filing Form DIR-3, if the director does not have DIN.
4.The most important step is to apply for the name of the company which is a crucial step in registration of a company.
5.The next step is to draft the Memorandum of Association and the Articles of Association of the proposed company in Form INC – 13
6.The next step is to obtain the license under section 8 of the Companies Act,2013. The person who is interested in incorporating a company under section 8 is required to file an application in form INC 12 along with the prescribed fees to register the license.
7.Certificate of incorporation – If after the filing of the requisite forms, that is, INC 7, INC 22 and DIR 12 for the incorporation with the registrar of the companies along with the prescribed fees, ROC gets satisfied with the contents of the documents that are filed, the company will issue Certificate of Incorporation in Form INC 16.
There are thus certain privileges and the advantages under the Companies Act for the Section 8 companies:
• Forming of Section 8 company is a comparatively easy process.
• The Minimum paid-up capital is not required for registration.
• It is exempted from Stamp duty for registration.
• Any of the registered partnership firms can be a member in its individual capacity as a person.
• The Tax deductions benefits u/s 12AA and u/s 80G of Income Tax Act to the donors of the incorporated company
• It has Greater flexibility when compared to other form of companies.
• It generally takes around 30-45 days to register a Section 8 company. This duration can, however, be lesser in case the Regional Director approves the application at an earlier point of time.
Section 8 companies, operate without any intention to earn profits or revenue out of its activities. They are mere organizations that are set up for the betterment of the country. NPO’s provide a platform where one can join hands to work for the society and the community, and ultimately in order to make this world a better place to live. India being a vast country lacks behind in many of the areas like employment generation, food, and safety, education, healthcare, etc.
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