Section 8 of the Companies Act of 2013 allows an NGO (non-profit organization) to be registered as a company, as well as a society or trust. A Section 8 Company is the most common type of NGO in India. Section 8 companies are easier to register, maintain, and handle than societies or trusts.
As defined in Section 8 of the Companies Act of 2013, a Section 8 Company is a company whose purpose is to incentivise sports, art, education, social welfare, science, charity, environmental preservation, or other similar endeavors.
Section 8 Companies are formed for non-profit purposes such as trade, business, arts, sports research, environmental protection, charity, and social welfare. In order to register a Section 8 organization, you need at least two directors. Furthermore, no minimum paid-up capital is required to establish such a corporation.
The purpose of this post is to inform you about the minimal requirements and eligibility requirements for forming a Section 8 company. Find out more by reading on.
What You Need to Know About Section 8 Companies
- According to Section 8 of the Company Act of 2013, NGOs may register with the Registrar of Societies or as Non-Profit Organizations in India.
- Profits made by Section 8 companies can only be used for charitable purposes. In addition, such profits cannot be distributed to stockholders.
- According to the previous Company Act of 1956, a Section 8 company is analogous to a Section 25 company. The current Company Act recognizes Section 15 companies as Section 8.
- Regulations of the 2013 Companies Act must be followed by Section 8 organisations. Consequently, these organizations must manage their account books and file returns with the Registrar of Companies.
- In the absence of government approval, such firms cannot change their charter papers, such as the MOA and AOA. The IT Act and GST laws must also be followed.
India’s Section 8 companies have a number of potential advantages
Section 8 companies in India offer several advantages, including the following:
- Tax exempt
A Section 8 Company incorporated under Section 12AA of the IT Act is eligible for a 100 percent tax exemption. Since they are used for charitable purposes, profits earned by such businesses are not taxed.
- Minimum Capital Is Not Required
Section 8 organisations do not have any underlying capital requirements, unlike public companies. Nevertheless, these organizations can adjust their capital structure as the company grows.
- Stamp duty is not required
When it comes to registering a Section 8 Company, it is not required to pay a stamp like other companies, such as private limited companies or public limited companies.
- Discrete legal entity (separate)
As with any registered company, a Section 8 Company has its own legal identity and enjoys independent legal standing. The idea of eternal existence is consistent with these beings.
- Credibility is enhanced
Section 8 Companies are more trustworthy in terms of their legal standing and compliance. A strict legal structure is usually devised by the relevant authorities for such entities. Once registered, these entities are subject to strict compliance requirements, unlike non-profit organizations and trusts.
- No title is required
The name of the Section 8 Company can be selected throughout the registration process. They aren’t required to use terms like “Section 8” in their names, unlike other registered frameworks.
Eligibility for Section 8 incorporation
The following criteria must be met to be eligible for a Section 8 company:
- Stockholders must number at least two
- There must be at least two directors (stockholders and directors may be the same person).
- There must be at least one Indian resident on the Board
- There is no minimum capital requirement
- Indian citizens are required to obtain an Income Tax PAN
- The following forms of identification are required: Aadhar Card, Passport, Voter Card, Driving License. For foreign nationals, however, a passport is required as proof of identity
- The following proofs of residence are required: a bank statement, an electricity bill, a mobile bill, or a telephone bill
- A copy of the current utility bill in the landlord’s name. Also, a letter of authorization from the premises’ owner, if it is rented)
- It is mandatory to submit any documentation proving ownership, such as the House Tax/Sale Deed receipt, with the NOC if the premises are owned by the Promoters or the Directors.
Legal Requirements for Forming a Section 8 Company in India
Before you can apply for a Section 8 Company Incorporation, you must meet the following requirements:
- In the case of a Section 8 Company operating as a limited liability company, how many directors will be required? Limited company; two directors are required in that case. A Section 8 organisation must also have at least three directors if it intends to operate as a public limited company.
- A business that wishes to operate as a private company must have a minimum of one member. For a Limited Partnership, the MCA restricts the total number of shareholders to 200. This restriction does not apply to Section 8 organizations that have a business framework, such as a public limited company.
- The 2013 Company Act does not require Section 8 enterprises to maintain a minimum paid-up capital. The use of terms such as “private” is not required for non-profit organizations operating under Section 8. Their names include “Ltd.”.
- Section 8 Company registration is available only to non-profit organizations. AOAs and MOAs should include the goals they were created to achieve. The profits of the Section 8 Company are either used to further the firm’s underlying goals, such as charity giving, or reinvested. Profits of such entities are not accessible or available to their members.
Documents Required for Section 8 Company Incorporation
For Section 8 Company Incorporation, the following documents are required:
- Memorandum of Association (MOA) and Articles of Association (AOA)
- Address proof for the office
- Affidavit of the first subscriber(s) and director(s) (no affidavit required)
- An image of a utility bill, such as an electricity, gas, or water bill
- The promoter firm’s resolution
- Nominees and subscribers must provide proof of residency and identification
- Verification of the applicant’s identity and residence
- Declaration of an unregistered company
In the case of AGILE-PRO:
- Evidence associated with the principal place of business
- GSTIN Authorised Signatory appointment evidence
- A copy of the resolution or the authorisation letter passed by the board of directors
- A letter of acceptance as well as a report from the management committee
- Authorized Signatory for opening a bank account
- EPFO Authorised Signatory Specimen Signature
Conclusion
In India, Section 8 Companies are governed by the 2013 Companies Act (and its amendments) and the rules and regulations enacted thereunder, and are controlled by the Ministry of Corporate Affairs. Registrars of Companies in each state handle this process for the Government of India. Regulations, requirements, methods, and processes for incorporating a business vary depending on the type of company.
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