Overview

A Section 8 company under the Companies Act, 2013 is an organization registered with an objective of promotion of arts, science, sports, education research, social welfare, religion, charity, protection of environment or any other such object. These are the limited companies established under the Companies Act. The Government grants these companies an exclusive license under Section 8 Companies Act.
Section 8 Company has more advantages in comparison to a trust and society. Its registration is governed by the Ministry of Corporate Affairs whereas the Trust & Society registration is governed by the registrar of state under the State Government.
For Section 8 Company, it is not required to use words 'LTD' or 'PVT LTD' in their name. With effect from June 5, 2015, under the act, there is no such requirement regarding the minimum capital.

Advantages

Some of the advantages of registering a Section 8 Company are:

Tax Exemption:

Since, it is a non-profit organization; hence they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits.
They gain benefits under section 80G of the Income Tax Act, 1961. Also, they pay less stamp duty as compared to other organizations.

No requirement of title:

It need not include the terms “private limited” or “limited” as a suffix in the name of the Company.

Ease in Transferring Ownership:

Not like other businesses, where it is not possible to transfer ownership easily, for a Section 8 Company it is easier to leave the membership of Section 8 Company or to transfer its ownership.

Capital Flexibility:

Apart from the share capital of the Company, the necessary funds are brought in the form of donations, subscriptions from members or the general public.

Zero Stamp Duty

A Section 8 company do not have to pay stamp duty at the time of incorporation.

Minimum Compliances

Section 8 Company is required to do lesser legal formalities as compared to any other company. It gets special exemptions and privileges under the Companies Act, 2013. Therefore, in Section 8 Company, less number of compliances are required.

Donations/Funding of Section 8 Company

Section 8 Company is not allowed to raise capitals by way of deposits. However, they can accept donations from the general public. Below are some of the ways by which it can raise funding:


  1. Foreign Donations: Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been taken. FCRA license can only be applied after 3-years from the date of registration. However, if some really urgent foreign donations are necessary, then you may apply for prior permission from the commissioner.
  2. Equity Funding: Section 8 Company can also raise funds by issuing new equity shares at a higher value.
  3. Domestic donations: There is no limitation to the domestic donations. But to avoid money laundering cases, a proper system must be laid down to keep them in check.

DOCUMENTS/DETAILS REQUIRED FOR SECTION 8 COMPANY REGISTRATION

    1. Two proposed names of Proposed Company.
    2. Main Objectives of company

  • From Directors (2 Persons Minimum)

    1. Copy of PAN card
    2. Copy of Identity proof (Aadhaar Card/Passport/Driving License/Voter Card)
    3. Copy of Address Proof (Latest Bank statement/Electricity Bill/Telephone bill/Postpaid Mobile Bill)
    4. Passport Size photograph
    5. Mobile No. and Email ID.
    6. Educational Qualification
    7. Shareholding Details For Registered office proof of the company
    8. Utility Bill such as electricity bill/telephone bill/Postpaid Mobile Bill/Gass Bill for proposed Registered office address of company.
    9. NOC/Rent Agreement

FREQUENTLY ASKED QUESTIONS

CAN A SINGLE INDIVIDUAL FORM A SECTION 8 COMPANY?

No, at least two Members/Promoters are required to incorporate a Section 8 company.

CAN BODY CORPORATE OR COMPANY BECOME DIRECTOR IN A SECTION 8 COMPANY?

No, only Individual person can become a Director in a Section 8 company.

WHAT IS THE MEANING OF RESIDENT IN INDIA?

Resident in India means any person who has stayed in India for a total period of not less than 182 days in the previous financial year.

WHAT WORDS SHALL BE THE PART OF A SECTION 8 COMPANY NAME?

Yes, A company can change its registered office any time after following specified procedure. The changed address can be situated within the same state or in a different state from the state in which it was originally registered.

CAN I USE “PRIVATE LIMITED” OR “LIMITED” AT THE END OF THE SECTION 8 COMPANY NAME?

No, words like “Private LIMITED” or “LIMITED” should not be there in the company name, if it is a Section 8 Company.

CAN I PAY DIVIDEND OR OTHER BENEFITS IN MONEY TO ANY OF THE MEMBERS OF SECTION 8 COMPANY?

No, Dividend or other benefits shall not be given by the Section 8 Company to any of its members.

IS IT NECESSARY TO HAVE 2 DIRECTORS FOR SECTION 8 COMPANY REGISTRATION?

Yes, you need a minimum of two directors for a section 8 company registration.

IS IT NECESSARY TO HAVE A CHARITABLE OBJECT TO REGISTER A SECTION 8 COMPANY?

Yes, it is necessary to have a non-profit motive to incorporate a Section 8 company.