Section 8 Company Registration in India: Complete Guide

Overview of Section 8 Company Registration

A non-governmental organization (NGO) has the option to register as a society under the Societies Act 1860, as a Section 8 company under the Companies Act 2013, or as a trust under the Trust Act 1882. An NGO can be formed by registering as a Section 8 Company under the Companies Act of 2013.

An NGO can promote art, commerce, science, technology, sports, education, social welfare, social research, religion, charity, and environmental protection, among other things, by registering as a Section 8 company. After completing the registration process successfully, a Section 8 Company can operate in any location in India.

What is a Section 8 Company?

In India, a Section 8 Company is a particular kind of non-profit organization that is created to promote social or charitable goals, including religion, science, education, arts, and other fields. This kind of business is registered under Section 8 of the Companies Act, 2013 and is subject to the regulations of Companies Act, 2013.

Similar to a trust or society, a Section 8 Company is registered under the Companies Act, giving it a legal personality and a more controlled and organized framework for its operations. The business is able to engage into contracts, have its own property, and sue and be sued in its own name.

All things considered, a Section 8 Company is the best option for people or organizations looking to form a non-profit in India for philanthropic or social purposes.

Important Points to Remember for Section 8 Company

NGOs in India may register as a non-profit organization under Section 8 Company of the Companies Act, 2013, or with the Registrar of Companies.
Section 8 Companies are prohibited from using their income for anything other than charity causes and from sharing them with their shareholders.
For Section 8 Companies, adherence to the Companies Act 2013 is essential. This includes upholding the GST and IT Act rules, keeping accurate books of accounts, and submitting reports to the Registrar of Companies (ROCs).
Government approval is needed for any modifications to the charter documents, which include the Memorandum of Association (MOA) and Articles of Association (AOA).

What are the Benefits of Section 8 Company Registration?

The benefits of Section 8 Company Registration are mentioned below:

Legal Recognition: A Section 8 Company is registered under the Companies Act, 2013, giving it a legal identity. This facilitates the process of making deals, acquiring property, and filing or facing lawsuits in court.
Perpetual existence: A Section 8 Company has perpetual existence, which enables it to carry on business operations even in the event that its directors or members change over time.
Limited responsibility: In the event of any legal or financial difficulties, the personal assets of members of a Section 8 Company are protected from liabilities.
Greater potential for fundraising: Unlike Trusts or Societies, a Section 8 Company is able to raise funds. This facilitates taking in investments from people and businesses.
Credibility: Because a Section 8 Company is subject to stricter laws and monitoring than a Trust or Society, it is seen as having greater credibility and reliability.
Improved governance: Compared to a trust or society, a Section 8 company is subject to stricter corporate governance guidelines, which can help avoid financial mismanagement and abuse.

Name Approval of Section 8 Company

The name that is submitted for section 8 company incorporation should be short, simple, distinct, have the appropriate suffix, convey the NGO's theme, and so forth. The company's name must be formally approved and registered. This helps to guarantee that there are no copyright issues and that the name is unique amongst other companies that have previously registered. In order to receive permission, the company's Registrar (Central Registration Centre, CRC of Ministry of Corporate Affairs) must receive a Form INC-1 application. To avoid any complications in the name approval process, the applicant must submit six distinct names for approval. The name is valid for 60 days after approval.

To be considered as a valid section 8 company name, the suggested names must contain terms such as foundation, association, forum, council, chambers, etc. in compliance with the Companies (Incorporation) Rules, 2014.

Requirements for Section 8 Company Registration

Certain legal requirements must be met before submitting an application for India's Section 8 business establishment process. The following criteria must be met:

1. Directors

In order to register as a private limited company, the Section 8 company must have a minimum of two directors. However, in order for the business to function as a public limited company, a minimum of three directors are needed.

2. Members

The Ministry of Corporate Affairs (MCA) has prescribed that there can be a maximum of 200 members in a Section 8 Company if it intends to operate as a private limited company. For Section 8 companies having a corporate structure similar to a public limited company, there is no such limit on maximum number of members.

3. Name and Capital Requirement

Companies Act of 2013 states that Section 8 companies are exempt from maintaining a minimum paid-up capital requirement. Furthermore, NGOs that function as Section 8 companies cannot use words like limited or private limited in their name.

4. Objective of the Company

The only organizations that can register under Section 8 are those with non-profit goals. These objectives, for which the company was founded, must be expressly stated in the Memorandum of Association and Articles of Association. The Section 8 company's earnings must either be reinvested in the organization or used for charitable purposes. Members of Section 8 companies are not entitled to any portion of the company's profit. These regulatory requirements guarantee transparency in the operations of Section 8 companies and their objectives of advancing social welfare.

Documents Required for Section 8 Company Registration

The submission of the following documents is necessary for the registration of a Section 8 Company:

All directors' and shareholders' PAN cards.
Every director and shareholder's Aadhaar card.
Latest Bank statement from each and every director and shareholder.
Each director's and shareholder's phone bill or electricity bill.
Each shareholder and director?s valid driver's license, passport, or voter Id card.
Each director and shareholder's passport-sized photograph.
If the registered office is rented, a copy of the rental agreement is also required.

Section 8 Company Registration Process

The following process is to be followed for registration of a Section 8 Company in India:

Step 1: Acquire a Digital Signature Certificate (DSC)

Obtaining a Digital Signature Certificate (DSC) for the intended directors of the Section 8 Company is the first stage. To file documents electronically with the Ministry of Corporate Affairs (MCA), the DSC is needed. The DIN can be obtained by completing Form DIR-3, which has to be submitted with the proposed directors' DSC.

Step 2: Obtain the Director Identification Number (DIN)

The appointed directors must next apply for a Director Identification Number (DIN) after receiving the DSC. The MCA assigns the DIN number, a special identifying number, to those who want to be directors of companies in India.

Step 3: Reserve the Company Name

The suggested company's name has to be reserved with the MCA. The name of the Section 8 Company must be original and distinct from any other name already in use. The company name is reserved using Form INC-1.

Step 4: Submit the Incorporation Application

The next step is to apply for Section 8 company incorporation once the business name has been authorized. Together with the company's articles of association (AOA) and memorandum of association (MOA), the application for incorporation is submitted in Form INC-32.

Step 5: Get a Section 8 Company License

Getting a license for the Section 8 Company is the next step after the incorporation application is accepted. The license is obtained via Form INC-12. It has to be submitted with the required documents.

Step 6: Get an Incorporation Certificate

The MCA issues a Certificate of Incorporation in Form INC-16 after getting the license and application. The incorporation certificate serves as a proof of Section 8 Company's formation.

Section 8 Company Registration Fees

Registering a Section 8 company costs 8,500 rupees. This fee covers the official registration process for non-profit organizations, ensuring they can operate legally and efficiently.

Annual Compliance for Section 8 Company

The following yearly compliances are mandatory for Section 8 Companies:

Section 8 Company is required to a yearly return to the Ministry of Corporate Affairs (MCA). Information on the company's operations, financial results, and governance must all be included in the annual return.
Section 8 Company is also required to submit a statement of finances and solvency to the MCA. Details on the company's assets, liabilities, revenue, and costs must be included in the statement of accounts and solvency.
For a Section 8 Company, a chartered accountant must audit the accounts of any company having a revenue of more than ? 40 lakhs or a capital commitment of more than? 25 lakhs.

Section 8 Company must compile a tax return for income despite not being taxed on their profits, businesses must file an income tax return.

PSR Compliance for Section 8 Company Registration

Do you wish to register Section 8 Company in India? We at PSR Compliance offer complete support for the Section 8 Company Registration procedure. Our professionals assess your company's eligibility and help with obtaining the Section 8 Company license and registration. We have a team of professionals for free answering your queries and assisting in the process of Section 8 Company registration.

Frequently Asked Questions

PSR Compliance will incorporate your Section 8 company in 15 to 20 days. The client's submission of pertinent paperwork and the pace at which government approvals are granted will determine how long it takes to register. Please select a distinctive name for your business and make sure you have all the necessary paperwork before beginning the registration procedure in order to guarantee a quick registration.

As long as the yearly compliance requirements are consistently fulfilled, a company that has been incorporated will remain active and operational. If the company does not follow the yearly compliance requirements, then the business will be declared as dormant and may be removed from the register. A company that has been struck off may be revived for a maximum of 20 years.

Yes, after receiving a Director Identification Number, a foreign national, or NRI, is eligible to serve as a director in a Section 8 company. On the other hand, the Board of Directors must have at least one Indian resident as a director.

Section 8 Companies must adhere to several yearly requirements, such as submitting annual reports, financial statements and holding board meetings. Depending on the operations and structure of the firm, the specific needs could change.

Only after completing the FCRA (Foreign Contribution Regulation Act of 1976) registration process. Application for an FCRA license is only possible three years following the date of registration. However, you can ask the commissioner for advance approval if you need to make certain really urgent international donations.