Section 8 companies are a unique form of legal entity in
India, established for the purpose of promoting arts, commerce, science,
education, research, social welfare, religion, charity, or any other useful
object. These companies are commonly referred to as “Company limited by
guarantee” and are governed by the provisions of the Companies Act, 2013 and
other applicable laws.
One of the key features of a Section 8 company is that its
members have limited liability, which means that their liability is limited to
the amount of guarantee they have provided, as stated in the company's
memorandum of association. This makes Section 8 companies a popular choice for
non-profit organizations and charitable institutions that want to ensure that
their members are not personally liable for the company's debts or obligations.
Another important characteristic of Section 8 companies is
that they cannot distribute profits to its members or shareholders. All profits
generated by the company must be used to further its objectives and to promote
the purpose for which the company was established. This makes Section 8
companies different from other forms of legal entities, such as limited
liability companies (LLCs) and corporations, which are often established for
the purpose of making a profit.
To form a Section 8 company, a minimum of two members are
required. These members must draft a memorandum of association, which outlines
the company's objectives, the amount of guarantee provided by each member, and
other important details about the company. Once the memorandum has been
approved by the Registrar of Companies, the company can commence operations.
In terms of regulations, Section 8 companies are subject to
government regulations and must comply with the provisions of the Companies
Act, 2013 and other applicable laws. This includes filing annual returns,
keeping proper financial records, and holding annual general meetings to keep
members informed about the company's operations and financial status.
Everything you need to know about Section 8 companies and how they can be useful for various business types. Learn more by reading this article.
Some key features of a Section 8 company include:
- It must have the words "Section 8 Company" as
part of its name.
- The liability of its members is limited to the amount of
guarantee they have provided, as stated in the company's memorandum of association.
- The primary objective of a Section 8 company is to
promote arts, commerce, science, education, research, social welfare, religion,
charity, or any other useful object.
- It cannot distribute profits to its members or
shareholders, but can use profits for its objectives.
- A minimum of two members are required to form a Section 8
company.
Documents Required for the Registration of Section 8
Company
The following documents are required for the registration of
a Section 8 Company in India:
- DSC (Digital Signature Certificate) and DIN (Director
Identification Number) of all the directors.
- Memorandum of Association (MOA) and Articles of
Association (AOA).
- Affidavit of the subscribers to the MOA and AOA.
- Proof of registered office address of the company.
- PAN (Permanent Account Number) and TAN (Tax Deduction and
Collection Account Number) of the company.
- A declaration by an advocate, a chartered accountant,
cost accountant, or a company secretary in practice certifying that the company
is a Section 8 Company.
- NOC (No Objection Certificate) from the landlord if the
registered office of the company is located in a rented premise.
- Evidence of name availability and reservation.
Procedure for Section 8 Company Registration
The process for registering a Section 8 company in India
involves the following steps:
- Obtain a Digital Signature Certificate (DSC) and a
Director Identification Number (DIN) for each of the directors.
- Choose a unique name for the company and get it approved
by the Ministry of Corporate Affairs (MCA).
- File the Incorporation Application form (SPICE + Form)
along with the memorandum and articles of association, the DSC and DIN of the
directors, and the name approval certificate with the MCA.
- Obtain the Certificate of Incorporation from the MCA once
the application has been approved.
- Obtain a PAN and TAN for the company from the Income Tax
Department.
- Register for Goods and Services Tax (GST) if applicable.
- Open a current bank account in the name of the company.
- Comply with the other compliance requirements such as
holding statutory meetings, maintaining statutory records, and filing annual
returns with the MCA.
Conclusion
Section 8 companies are a unique form of legal entity in
India, established for the purpose of promoting arts, commerce, science,
education, research, social welfare, religion, charity, or any other useful
object. These companies offer the benefits of limited liability for members,
and the restriction on distribution of profits to its members or shareholders,
making them a popular choice for non-profit organizations and charitable
institutions.
FAQs of Section 8 Company
1) What is a Section 8 Company?
Ans: Section 8 Company is a type of not-for-profit company
registered under the Companies Act, 2013 and recognized by the Ministry of
Corporate Affairs (MCA). It is also known as a Social Enterprise or a
not-for-profit company.
2) What is the purpose of a Section 8 Company?
Ans: A Section 8 Company is formed for the promotion of
commerce, art, science, sports, education, research, social welfare, religion,
charity, protection of environment or any such other object.
3) What are the eligibility criteria for registering a
Section 8 Company?
Ans: To register a Section 8 Company, the company must have
at least two members and the main objective of the company must be for
promoting commerce, art, science, sports, education, research, social welfare,
religion, charity, protection of environment or any such other object.
4) What are the tax benefits of a Section 8 Company?
Ans:
Section 8 Companies are eligible for tax exemptions under section 80G and 12A
of the Income Tax Act, 1961.
5) Can a Section 8 Company raise funds through donations?
Ans: Yes, a Section 8 Company can raise funds through
donations, grants, sponsorships, etc.
