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KNOW SECTION 8 COMPANY

  • The concept of non-profit making company is quite old in India. In erstwhile Companies Act, 1956 it was regulated by Section 25 and that is why it was popular as Section 25 Company. However in Companies Act 2013 provisions related to non-profit making company are given in Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014.
  • Section 8 Company is named Section 8 of the Companies Act, 2013, which pertains to a established 'for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object', provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. 
  • There may be 3-4 forms of a Charitable Organization in India and such organization can be formed/registered as trusts, societies, or as a non-profit company incorporated under Section 8 of the Companies Act, 2013. 
  • The Name of Section 8 Company can end without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”. ((Section 8(1) )
  • Section 8 company also has higher credibility amongst donors, Government departments and other stakeholders.
  • A Section 8 Company is similar to a Trust or Society; but a section 8 Company is registered under the Central Government's Ministry of Corporate Affairs. Whereas Trusts and Societies are registered under State Government regulations.
  • The Registration Procedure of Section 8 Company is that of Similar to Private /Public Company as the case may be except of additional requirement of taking License from CG after name approval.

A Non-profit making Company is a Company which:

  • 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
  • intends to prohibit the payment of any dividend to its members.

Quick Enquiry

 

  1. EASE OF FORMATION- A Section 8 company can be formed by two persons only, by complying with the prescribed formalities of the Companies Act. Many privileges and exemptions under Company Law. Registered partnership firm can be a member in its own capacity.
  2. LIMITED LIABILITY: The greatest benefit of Section 8 Company is limited liability. If any liability arises then its member is not personally affected; members are only liable for unpaid shares held by them and not more than that. Being the biggest advantage with this type of company, it means that the owners are not personally responsible for business debts and obligations of the incorporation.
  3. SEPARATE LEGAL ENTITY: This is the most prominent quality of a Section 8 Company. It refers to the statement that company and its members are completely distinctive. The biggest advantage of a section 8 company is that its identity is distinct from that of its members. A company is a separate person having its own rights & Obligations
  4. CONTINUITY OF EXISTENCE: Death, insolvency and insanity etc of any of the member does not affect the continuity of the company. Thus the life of the company does not depend upon the life of its members.In case of death of the owner or transfer of shares, your business won’t get affected. There will be no effect on firm’s continuance..
  5. MINIMUM NUMBER OF SHAREHOLDERS : The Minimum Members need to start the business are only2.
  6. GREATER FLEXIBILITY: A Section 8 company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law..
  7. TAX BENEFITS: A Section 8 company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets.
  8. OWNING PROPERTY: A company being a legal person, can acquire, own, enjoy and alienate, property in its own name. No shareholder/director can make any claim upon the property of the company so long as the company is a going concern.
  9. CAPACITY TO SUE AND BE SUED: The company being legal person has full right like a natural person to institute legal proceedings against or to bring a suit in a court of law and also can be sued in its own name.

 

10-20 days (Subject to ROC Response) after receipt of all the necessary Documents, The breakup of the Number of days is as follows

 

Activity Days
Taking Digital Signature of Directors 1-2 Day
Taking Directors Identification Number (DIN) 1 Day
Reservation of the name of the Company 0-3 Days
Application For License 1-5 days
Preparation of other documents such as MOA,AOA, Forms etc 0-1 Days
Filling of documents with Authorities 0-1 Day
Getting Final Certificate of Incorporation 3-7 Days
Total Number of Days 10-20 Days

DOCUMENTS REQUIRED FOR COMPANY-

  1. Self attested Copy of PAN Card of all the proposed directors.
  2. Self attested Copy of ADDRESS PROOF (Voter ID/DL/Passport/Aadhar Card)of all the proposed directors.
  3. Self attested Copy of Bank Account Statement/Electricity Bill/Mobile Bill of all the proposed directors.
  4. Passport size 4 Photographs of all the proposed directors.
  5. Duly signed DSC Form of all directors of the proposed company.
  6. Copy of current Electricity Bill/Water Bill/House Tax etc. for the     premises proposed to be used as registered office of the Company.
  7. If the property is rented, then Rent Agreement and NoC from owner of property.

INFORMATION REQUIRED WITH REGARD TO THE COMPANY

Ø Directors Detail:

  1. Educational Qualification of all the Directors.
  2. Profession/Occupation of all the directors with area of Operation
  3. Citizenship alongwith Residential Status of all the Directors
  4. Place of Birth of all the Directors
  5. Permanent & Present Residential Status of all the Directors
  6. Contact Numbers of all the Directors
  7. Email Ids of all the Directors

Ø Company Detail

  1. Preference wise Proposed names of the Company with Significance of the name 
  2. State in which Company is to be registered.
  3. Authorized and Paid Up capital of the Proposed Company
  4. Main Object of the Proposed Company
  5. Division of paid Up capital among the Subscribers.
  6. Number of Proposed Directors
  7. Number of Proposed Shareholders
  8. Whether the promoters are carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied for?
  9. Whether the proposed name(s) contain(s) name of any person other than promoter(s) or their close blood relatives.?
  10. Whether the proposed name(s) include(s) the name of relatives?

WHAT YOU GET

  1. Unique Director Identification Number(DIN) for Life time.
  2. Digital Signature Certificates (DSC)
  3. Reservation the Name for your Company
  4. Certificate of Incorporation.
  5. Rubber Stamp of the Company
  6. PAN Card of the Company.
  7. Proper Incorporation File
  8. Bank account Opening Documents
  9. Draft Copies of MOA & AOA.
  10. Share Certificates

 

 

What is Section 8 Company?

  • Answer: Section 8 Company is named Section 8 of the Companies Act, 2013, which pertains to a established 'for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object', provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. The term No Profit does not mean that the Company cannot generate profit or income, but what it means is applying the income for promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefitted out of those profits.

What are The Benefits or advantages to work as a private limited company?

Answer: Many privileges and exemptions are available to section 8 company under Company Law.

  • Exemption from requirement of Minimum Paid-up capital
  • Exemption of Stamp duty for registration
  • Registered partnership firm can be a member in its own capacity
  • Tax deductions to the donors of the Company u/s. 80G of the Income Tax

What is the Procedure to incorporate a company?

Answer: The Procedure to incorporate Section 8 Company is very Similar as in case of Private Limited Company except the difference that after name approval the requirement of applying for License under Section 8 of the Companies Act 2013 is also required.  

What is the Time Frame for Company Incorporation?

     Answer: The Minimum Time Taken To Incorporate a Section 8 Company is 20-30 days.

What are the Charges for Incorporating a Company?

Answer:Fees for the incorporation decide on company capital, state and total number of directors.

How many Persons are required to incorporate a company?

Answer:

  • The Minimum number of 2 persons are required to incorporate a company.
  • Legally minimum 2 directors are required and 2 shareholders are required.
  • These two persons can act in both capacity as directors and as shareholders.

What is the difference between Directors and shareholders?

Answer:

  1. In simple words,
  2. is the person who takes the responsibility to run the business and manages the day to day business of the company. Generally are the managers or agents of the actual owners of the company who act in fiduciary (trustworthy) position. Only individual persons can become directors.
  3. are the owners of the company who invest their monies in the company. Shareholders get part in the profits of the company in the form of dividend. They aren't responsible for the day-to-day management of the company, but they do have voting rights with which they can affect the decisions of the company. Any individual, company or other entity can become shareholder.

What is DIN?

Answer:

Director Identification Number (DIN) is a unique identification number for an existing director or a person intending to become the director of a company. 

What is DSC?

 Answer: Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Certificates serve as proof of identity of an individual for a certain purpose. A digital signature certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally. Its valid for maximum 2 years.

What is the validity of Certificate of Incorporation Issued by the ROC?

Answer:Once a Certificate of Incorporation is issued by the ROC, it is valid for the     lifetime of the company unless it goes for winding up.

Who can form a Sec 8 Company?

Answer:

  • Any person or association of persons (including a partnership firm)
  • Any existing company
  • One Person Company cannot be a Sec 8 Company (Rule 3(5))

What Type of Name can Be Applied For Section 8 Company?

Answer: Rule 8(7) pf the Companies Act says that a Section 8 Company must have any of the following names-

The name shall include the words

- Foundation

- Forum

- Association

- Federation

- Chambers

- Confederation

- Council

- Electoral Trust and the like etc.

The name does not include the words “Private Limited” or “Limited”

What is the Eligibility Criteria for Incorporating a Section 8 Company ?

Answer:

The main objects should ensure promotion of

- Commerce

- Art

- Science

- Sports

- Education

- Research

- Social Welfare

- Religion

- Charity

- Protection of Environment

- or any such other object

  1. Intends to apply its profits, if any, or other income in promoting its objects
  2. Intends to prohibit the payment of any dividend to its Members

WHAT ARE THE KEY CONDIOTIONS FOR SECTION 8 COMPANY:

Answer:

  • Profit or Income of the Company shall be applied for the promotion of the main object.
  • Declaration of dividend or distribution of profit to the promoters is not allowed.
  • No member shall be appointed as a remunerated officer.
  • No remuneration / benefit shall be paid to a member being a servant / officer of the Company (except reimbursement of out of pocket expenses, reasonable interest on money lent or reasonable rent on the premises)
  • Subsequent alteration of MoA & AoA requires prior approval of Central Govt. (i.e. ROC)

What is the Procedure for Obtaining License from Central Government ?

Answer:

  1.  FOR NEW COMPANIES

After Successful Reservation of Name with the Registrar the Applicant is required to file Application for License under Section 8 in Form INC-12 with Following Documents

  • Draft copy of Memorandum of Association as per Form INC 13
  • Draft copy of Articles of Association (Format not prescribed)
  • A declaration in by professional.
  • Details of promoters and Directors.
  • An estimate of the future annual income and expenditure of the company for the next 3 years specifying the sources of income and the objects of the expenditure
  • Declaration by the subscribers.
  • A statement specifying briefly the grounds/objects on which the application is made.

Hard copies of the above application with all the attachments along with 3 copies of MOA and AOA to be forwarded to ROC

IF APPROVED LICENSE ISSUED IN Form INC 16

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