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Section 8 Company Registration

March 30, 2019

Section 8 Company Registration 

A Section 8 company under the Companies Act, 2013 or a Section 25 Company as per the Companies Act,1956 is an organization registered with an objective of promoting the fine arts, science, literature, or knowledge sharing for a purposeful matter or for charity. These are the limited companies established under the Companies Act. The Government grants these companies an exclusive license under Section 8 Companies Act. There are three main conditions for granting the license is.
  • The company should form for the charitable purpose.
  • Income and profits should be used towards these objects.
  • The company should not pay any dividend to its members.

Requirements for online registration of Section 8 Company

For registering a Section 8 company, the following criteria must be fulfilled:
  • Governed by: Companies Act, 2013.
  • Members: Minimum of 2 Directors/Shareholders.
  • Important Documents: MoA, AoA and financial statements.
  • Board: Directors.
  • Property management: The property of the company vests in the name of the Company and the same can be sold as per the rules mentioned under the Companies Act. (Ex: With the consent of the Board of Directors in the form of a resolution).
  • Winding up or closure: Dissolution as per the bye-laws of the society, upon dissolution and after settlement of all debts and liabilities, the funds and property of the society may not be distributed among the members of the company, rather, the remaining funds and property must be given or transferred to some other section 8 company, preferably one with similar objects.
  • Annual compliance: There is a requirement of annual compliance by the filing of annual accounts and the returns of company with the RoC.

Documents Required

The following documents are required during the registration of the Section 8 company:
  • DSC and DIN of the Directors.
  • Objectives and proposed work of the company.
  • Financial statements like assets and liabilities, the projection for five years etc.
  • Directors personal documents.
  • Registered office address documents viz. rental agreement or sale deed in the name of the company, utility bills not older than two months.

Why register Section 8 Company - Benefits

The following are the advantages of incorporating a Section 8 company over other modes of registering an NGO:
  • It has organised operations and greater flexibility.
  • Avoids meticulous registration process and no physical presence required.
  • No requirement of a minimum paid-up capital.
  • Seamless procurement of tax benefits under section 12AA and 80G of the Income Tax Act.
  • Any partnership firm can be a member in its individual capacity and obtain Directorship.

Online Section 8 company registration - A detailed process

There are three major steps in incorporating a Section 8 company apart from the document collection, preparation and drafting. They are

STEP 1: RUN APPROVAL:

  • Reserve Unique Name (RUN) is a form filed for reserving a name for a new company or for changing its existing name. This is the first step of incorporating a section 8 company.
  • A section 8 company shall usually have words like Foundation, Federation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation, Chamber of Commerce, Development, Association, etc.
  • The name so approved shall be valid for 20 days

STEP 2: RD 1 LICENSE:

This step is the most crucial in the process of incorporation.
The name approval shall be valid at the time of applying for the RD 1 License.
RD 1 license is a license granted under section 8 of companies act as they work on a specific objective which is for the enlistment of arts, science, commerce, environment, etc., and the profit they earn shall also be used towards their objectives. All crucial documents like the MoA, AoA, financial statements and other declarations are filed at this stage.
The license so approved shall be valid for 30 days.

STEP 3: SPICE FORM:

Both the name and the license shall be valid at the time of filing the SPICe form.
This is the final stage of incorporating the section 8 company where the documents relating to the registered office like the rental agreements and utility bills are filed along with the RD-1 license and the name approval certificate.

Section 8 Compliances

  • A Section 8 company has to comply with the annual compliances like other companies.
  • In case of non-compliance, the company will be treated as a dormant company and it can be struck off from the register.
  • A section 8 company is also required to do the CSR compliances and the CSR must be done.

Applicability of tax exemption

There is a general notion that a Section 8 company need not pay tax as they work towards the welfare of the public at large. But this is not true. A Section 8 company, like any other legal entity, is liable to pay tax. In order to be exempted from Tax, a Section 8 company is required to obtain certification for the said exemptions such as Section 12 A, 80G etc. from the Income Tax Authorities.

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