Section-8 Company

Sonam Geda & Company

What is Section 8 Company

There are three type of NGO can be registered in form i.e. Trust, Society and Section 8 Company. Section 8 Company is registered with Ministry of corporate affairs for the charitable purpose whereas the Trust & Society Registration is governed by Registrar of state under the State Government and Section 8 Company has more benefits in comparison to trust and society.
Section 8 Companies are a legal form for Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs). A Section 8 Company has the authority to work anywhere in the country.

Purpose of Section 8 Company

Section 8 Company having following objectives:

Specific object:has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
Intends to apply its profits, if any, or other income in promoting its objects; and
No dividend: intends to prohibit the payment of any dividend to its members,

Features of Section 8 Company

These are limited companies, registered under the Companies Act, and will be treated as limited companies without the phrase “limited” added to their name. They may have been registered as private limited or public limited companies.
Suffix to name: It can be registered with names that have words like Association, Society, Council, Club, Charities, Foundation, Academy, Institute, Organisation, and Federation.
Annual Compliance: Section 8 Company must follow the provisions prescribed under the Companies Act, 2013 i.e.maintaining Book of Accounts, Audits, Board Meetings, Annual filing of accounts, statements and the returns of the company etc.
MOA & AOA: A Section 8 Company shall not make any changes to the provisions of its MoA & AoA without seeking prior approval from the Central Government.
Voting rights: The voting rights of the shareholders of a Section 8 Company are based on the number of shares held by them and same as any other structure of the Company.
GST applicability: If Section 8 Company comes under the purview of the GST Act, it must get registered with GST.
Dissolution: The Section 8 Company may be wind-up only by following the bye-laws of it. After settling all debts and liabilities, the funds and property of the Company are would be given or transferred to some other Section 8 Company, having a similar object and not to be distributed among the members of the company.

Minimum Requirement for Section 8 Company

Minimum 2 Shareholders (for Private Limited NGO) and 7 Shareholders (for Public Limited NGO)
DIN (Director Identification Number) for all the Directors
Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
*Indian Resident: At least 1 director must be a resident of India, i.e., have stayed in India for a total period of not less than 182 days in the previous calendar year
DSC (Digital Signature Certificate) for all of the Directors
The directors and shareholders can be same person

Documents Required for Section 8 Company

PAN card and address Aadharcard of directors and shareholders are mandatory.
ID Proof: Self attested Passport / Voter-ID / Driving License (any one)
Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
Passport size Photograph for each Director/ Shareholder.
Email and contact details of each director/member
Registered office Address proof :
1. Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill (not older than 2 month)-any one + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
2. Owned by any of the Director- Property Tax receipt/Electricity bill (not older than 2 month)-any one in the name of owner.
Projection of next 3 years income and expense.

Procedure for Incorporation of Section 8 Company

Overview of Web forms	A new Web based Form named 'SPICe+' (pronounced as 'SPICe Plus') is an integrated Web based form offering multiple services like 'name reservation', incorporation, 'DIN allotment', mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra), and 'Opening of Bank Account' & GST (Optional).
Name Reservation	Company has two option available either first reserve the name in Spice+ Part-A and then apply in Spice+ Part-B or directly apply name with incorporation form then challan will not be required. In case company reserves the name first then challan needs to be paid of Rs. 1000 and SRN will be generated.
Prerequisites for a Section 8 Company	• There shall be at least 7 members/shareholders in the public company. There is no upper limit for the maximum no. of the shareholder/member. • There shall be at least 3 directors in the company. One of the directors must be Resident of India i.e. in India not less than 182 in the previous calendar year. • The name of a Public Limited Company shall have suffix "Limited" at the end of the name.
Fill in Part B of Spice+	• All first subscribers of SPICe+ MOA (INC-33) must have DSC, if they are less than 7 then it will be signed in the form itself no annexure will be required & in case if more than 7 then separate attachment of MOA will be annexed without DSC. • Articles of Association is entrenched with brief description about the clause (Make sure the article number matches with form SPICe+ AOA (INC-34) )-Select the particular table which is applicable and make the appropriate changes and incorporate first directors name and in case subscribers are more than 7 then AOA will attached separately (as there are only 7 member so DSC slot available in the form) • Declaration by the subscribers and the first directors in INC – 9 shall be auto-generated in PDF format and submitted electronically. • The object clause should be relevant and company must be engaged in that business only. • There is no separate application to be filed for allotment for DIN .it will be allotted with the details filled in the form in the tab directors not having DIN. • After filling all the details stamp duty fees need to be paid which can be done through MCA or without MCA portal. • Application for PAN number and TAN number also will be processed with spice e Plus form by selecting respective area code, AO type, Range code & AO No. After completion of these form, it should be acknowledge by DSC of CS/CA/CWA. • Spice + AGILE PRO form is mandatory for all companies which includes following registration that is GST Registration which is optional, ESIC(Employee State Insurance Corporation) Employees' Provident Fund organization (EPFO) Registration (Mandatory) and Profession Tax Registration in case if company is of Maharashtra and Opening of Bank Account is compulsory. • After filling up Part B, we have to carry out a ‘pre-scrutiny’ check. Once the ‘pre-scrutiny; is successful, click on ‘submit’. A confirmation is displayed upon successful submission of the form. • After submission of these form, it should be acknowledge by DSC of CS/CA/CWA.A Service Request Number is generated for making a payment towards company incorporation. Once the payment is made successfully, the forms would be processed. • In case form is need to be resubmitted due to any error or omission, then form will be resubmitted in the same manner.
Certificate of Incorporation	After completion of process and successful approval of form, certificate of incorporation, Tan allotment letter, PAN card of Company and DIN of directors will be issued. Along with GST Registration certificate, ESIC and EPFO certificate, Professional tax registration (For Maharashtra), Opening Bank account.

Benefits of Section 8 Company

Why you should register a section 8 Company? There are several benefits associated in incorporating a section 8 company and they are as follows:

Exemption under Companies Act: There are several privileges and exemptions are available to section 8 company under Company Law. Companies Auditor's Report Order (CARO) is not applicable to Section 8 Company.
Minimum capital Requirement: There is exemption from requirement of Minimum Paid-up capital and the capital structure of the Company may be altered later on as per requirement.
Tax benefits: Under the income tax act, there are certain tax exemption given to a Section 8 company, it it obtained registration under section 12AA.
Exemption to the donors: Even the donors contributing towards Section 8 Company are eligible to claim the Tax Exemption against these donations u/s 80G.
Zero Stamp Duty: Section 8 Company is not required to pay stamp duty on the MoA and AoA either in form of private or public limited company.
It can be managed easily due to several privileges given to section 8 Company shall enjoy all the privileges and be subject to all the obligations of limited companies.
Membership: Registered partnership firm can be a member in its own capacity in the Section 8 Company.
Separate legal entity: Section 8 is separate from its owners, it has its own existence and legal identity that from its owners.
Limited liability Protection: The liability of the members of the company is limited to the extent of their share holding amount due to company.
Long term Existence: Section 8 are not affected by the existence of their owners . It continues even after the inability or death of the owners and does not hinder the workings of the company.
Better credibility: Section 8 Company has more credibility among donors, government departments and other stakeholders.
Capacity to Sue and be Sued: The Company in its own name can proceed legal Proceeding and even it can be initiated against company being its independent identity.

What is Section 8 Company?

There are three type of NGO can be registered in form i.e. Trust, Society and Section 8 Company. Section 8 Company is registered with Ministry of corporate affairs for the charitable purpose whereas the Trust & Society Registration is governed by Registrar of state under the State Government and Section 8 Company has more benefits in comparison to trust and society.
Section 8 Companies are a legal form for Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs). A Section 8 Company has the authority to work anywhere in the country.

What is the purpose of forming section 8 Company?

Section 8 Company having following objectives:

Specific object:has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
Intends to apply its profits, if any, or other income in promoting its objects; and
No dividend: intends to prohibit the payment of any dividend to its members,

What is the minimum requirement for Section 8 Company?

Minimum 2 Shareholders (for Private Limited NGO) and 7 Shareholders (for Public Limited NGO)
DIN (Director Identification Number) for all the Directors
Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
*Indian Resident: At least 1 director must be a resident of India, i.e., have stayed in India for a total period of not less than 182 days in the previous calendar year
DSC (Digital Signature Certificate) for all of the Directors
The directors and shareholders can be same person

What is DIN (Director Identification Number)?

DIN means an Identification Number which the Central Government may allot to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as such. It is an 8 digit unique identification number which has lifetime validity. DIN is required for all existing and new (proposed) directors of a company.

What are the steps for registration of Section 8 Company?

STEP 1: Name search: We will check the availability of the company names suggested.
STEP 2: Digital Signature Certificate: We will obtain digital signature certificate for all proposed directors.
STEP 3: Reserve Unique Name: We will file RUN E-Form for name reservation.
STEP 4: File SPICe Form: We will file company incorporation form SPICe with all required attachments.
STEP 5: Certificate of Incorporation: After successful approval of form COI, PAN, DIN, TAN, GST are provided.

What are the documents required for registration of Section 8 Company?

PAN card and address Aadharcard of directors and shareholders are mandatory.
ID Proof: Self attested Passport / Voter-ID / Driving License (any one)
Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
Passport size Photograph for each Director/ Shareholder.
Email and contact details of each director/member
Registered office Address proof :
1. Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill (not older than 2 month)-any one + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
2. Owned by any of the Director- Property Tax receipt/Electricity bill (not older than 2 month)-any one in the name of owner.
Projection of next 3 years income and expense.

What is DSC (Digital Signature Certificate)?

A Digital Signature is the electronic signature duly issued by certifying authority that shows the authority of the person signing the same. It is an electronic equivalent of a written signature. Every user who required to sign an e-form for submission with MCA is required to obtain a Digital Signature Certificate.

What are exemptions available under Companies Act for Section 8 Company?

There are several privileges and exemptions are available to section 8 company under Company Law. Companies Auditor's Report Order (CARO) is not applicable to Section 8 Company.

What is MOA (Memorandum of Association) and AOA (Articles of Association)?

The MOA is a document which sets out the constitution of a company and is therefore the foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations with the outside world.

The articles of association of a company are its bye-laws or rules and regulations that govern the management of its internal affairs and the conduct of its business. It deals with the rights of the members of the company inter se. They are subordinate to and are controlled by the MOA.

What are the advantages of Section 8 Company?

Exemption under Companies Act: There are several privileges and exemptions are available to section 8 company under Company Law. Companies Auditor's Report Order (CARO) is not applicable to Section 8 Company.
Minimum capital Requirement: There is exemption from requirement of Minimum Paid-up capital and the capital structure of the Company may be altered later on as per requirement.
Tax benefits: Under the income tax act, there are certain tax exemption given to a Section 8 company, it it obtained registration under section 12AA.
Exemption to the donors: Even the donors contributing towards Section 8 Company are eligible to claim the Tax Exemption against these donations u/s 80G.
Zero Stamp Duty: Section 8 Company is not required to pay stamp duty on the MoA and AoA either in form of private or public limited company.
It can be managed easily due to several privileges given to section 8 Company shall enjoy all the privileges and be subject to all the obligations of limited companies.
Membership: Registered partnership firm can be a member in its own capacity in the Section 8 Company.
Separate legal entity: Section 8 is separate from its owners, it has its own existence and legal identity that from its owners.
Limited liability Protection: The liability of the members of the company is limited to the extent of their share holding amount due to company.
Long term Existence: Section 8 are not affected by the existence of their owners . It continues even after the inability or death of the owners and does not hinder the workings of the company.
Better credibility: Section 8 Company has more credibility among donors, government departments and other stakeholders.
Capacity to Sue and be Sued: The Company in its own name can proceed legal Proceeding and even it can be initiated against company being its independent identity.

What is the limited liability protection?

The company, being a separate person, is the owner of its assets and bound by its liabilities. The liability of a member as shareholder extends to the contribution to the share capital of the company up to the nominal value of the shares held and not paid by them. In other words, a shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets.

What are Tax benefits for the Section 8 Company and exemption to the donors?

Under the Income Tax Act, there are certain tax exemption given to a Section 8 company, it obtained registration under section 12AA.

Even the donors contributing towards Section 8 Company are eligible to claim the Tax Exemption against these donations u/s 80G.

Who is ROC (Registrar of Companies)?

The Registrar of Companies is the government authority under the Ministry of Corporate Affairs which deals with registration, administration and regulation of Limited Liability Partnership (LLP) and Companies registered under Companies Act,2013 and Companies Act,1956.

What is the concept of separate legal entity?

A company being a legal person is entirely distinct from its members and is capable of enter into contracts, possess properties in its own name, sue and can be sued by others etc.

What is difference between Section 8 Company and different form of organisation?

We have prepared a detailed and easy to understand comparative table showing availability of features and advantages of one form of business to that of others. The same can be found at the end of this page.

Difference in Different Form of Business

Comparison Between Trust, Society & Section 8 Company

BASIS	TRUST	SOCIETY	SECTION 8 Company
Basic Document	Trust Deed	Bye-Laws
Object	A trust is an agreement between parties, whereby one party holds an asset for the benefit of another party.	Society is a group of persons, who join together for the initiating any literary, scientific or charitable purpose.	NGO in form of section 8 company enjoys all advantages of limited companies.
Governing Legislation	Indian Trusts Act, 1882	Indian Societies Act, 1860	Companies Act'2013
No. of Members Required	Minimum 2 person required and these person may be the artificial person created under the law.	7Minimum 7 members are required for formation of state level and 8 members from different states each required for national level and these should be individual only.	2 for Private limited company & 7 for public limited company.
Ownership	Trustees are the owner of Trust properties.	Properties of the society are own by society itself	Section 8 company is the owner of all properties.
Stamp duty	Non-Judicial Stamp duty is required as per the State Stamp Act and it depend on the value of the Trust property.	No stamp duty	No stamp duty
Authority for Registration	Sub-Registrar of the relevant area.	Registrar of Society of the area where premises of society is located.	Registrar of the Companies
Management Board	Trustees	Governing Body	Board of Directors
Meetings	Board of Trustees	Governing Body meeting as per bye-laws	Board of Directors
Grant of subsidy by the government	Low preference	Low preference	High preference
Annual Filing	No such requirement	Filing of Audited Financials & list of Governing Body	Audited Financials & Annual Return
Area of operation	The geographical area of operation of a Trust is all India.	It has to take all India registration for country-wide operations.	The geographical area of operation of is all India.
Foreign Contribution Regulation Act, (FCRA) registration	Less preferred	Less preferred	Most preferred
Compliance	Low	Medium	High
Voting Rights	Equal Rights to All Trustees	Equal Rights to All Members	As per Shareholding
Dissolution	Public trust cannot be dissolved.	Societies may be dissolved with the approval of at least three-fifths of the society’s members.	It can be dissolved in according with provisions of companies act.