Checklist for Incorporation of Section 8 Company

Ashish M. Shaji

15 Jan, 2021

A Non-Profit Organization can be registered as a company, trust or society. Section 8 Company registration can be completed as a company under section 8 of the Companies Act, 2013.

Incorporation of section 8 company can be for the Following Purposes-

• For promoting arts, commerce, science, education, research, social welfare, religion, charity, for environment protection or for any other purpose related to social welfare.
• Provided that they apply their profits in promoting the object of the company.
• It also prohibits dividend payment to its members.
• Section 8 Company is Registered for the charitable purpose or for not-for-profit business.

The registration of section 8 company is governed by the Ministry of Corporate Affairs^[1] whereas the Trust & Society registration is governed by the registrar of state under the State Government.

Section 8 Company has more benefits in comparison to trust and society. This type of company has more credibility among donors, government departments, and other stakeholders.

Requirements

• It is not required for section 8 company to use the words ‘LTD’ or ‘PVT LTD’ in their name.
• There is no such requirement regarding the minimum capital with effect from June 5, 2015, under this act.

Documents-

The list of the following documents is required for incorporation of section 8 company:

• Identity Proof of all the directors – a copy of the PAN card (Mandatory);
• Address Proof –copy of Aadhar/ Driving License/ Passport/ Telephone Bill/ Electricity Bill.
• Passport size photograph of all the directors.
• Rent Agreement in case the registered office of the company is on rent;
• Utility Bill of registered office;
• Form DIR-2 which is consent to act as director;
• Director’s interest in other entities.

A Section 8 Company has to comply with the annual compliances like other companies, and in the case of non-compliance, the company will be treated as a dormant company and it can be struck off from the register.

The Procedure of Incorporation of Section 8 Company

Here are the steps required to incorporate a Section 8 Company:

• DSC

First, obtain the Digital Signature Certificate (DSC) of all the directors and promoters of the company, in case they don’t have the same. For obtaining DSC, an application is made to the certifying authority.

• DIN

Secondly, obtain the Directors Identification Number (DIN)for all the directors of the company.

• Name Approval

For name approval, an application will be filed in Form INC-1 to the registrar of a company. Maximum six names can be provided for the name approval by the applicant. An approved name is valid for 60 days. It is required for section 8 companies to include words such as foundation, association, forum, council, chambers, etc. in accordance with the company, incorporation rules 2014.

• Draft MOA & AOA

After name approval, the next step is to draft MOA & AOA and then it is required to file it to ROC with other documents for the license under section 8 of the companies act, 2013. The MOA & AOA must be signed by the subscribers of the memorandum.

• Application for License

Form INC 12 is filed with the ROC for the issuance of a license to the section 8 company under the Companies Act, 2013.

With the following attachments:

1. INC 13 (Memorandum of Association);
2. The Article of Association(AoA);
3. INC 15 (Declaration by subscribers of the MOA);
4. Statement of Income & Expenditure;
5. List of directors of the company;
6. The subscriber page of MOA & AOA should be handwritten by subscribers and witnesses.

After approval of the form, the license is issued in Form INC 16.

• Incorporation Application

Incorporation application is filed in form INC 7 along with the following attachments:

1. Memorandum of Association;
2. The Article of Association;
3. Declaration by professional in form INC 8;
4. Affidavit by each subscriber of the memorandum in form INC 9;
5. Address Proof of the subscribers;
6. Identity proof of subscribers;
7. Specimen Signature in Form INC 10;
8. PAN card;
9. NOC if there is any change in the name of promoters after name approval;
10. Board Resolution authorizing to subscribe to MOA;
11. Any other attachments, if any.

• Registered Office

Form INC 22 is to be filed for the situation of the registered office of the company along with the following attachments:

1. Rent Agreement/ Lease Deed;
2. Electricity Bill of not older than 2 months;
3. NOC on the letterhead of the promoter for using the premises.

• Appointment of Directors

For the purpose of appointment of directors form DIR 2 is required to be filed with the following attachment:

1. Consent to act as a director in form DIR 2.

• Certificate of incorporation

After satisfying the forms filed with the ROC, the registrar shall issue the certificate of incorporation along with the unique Company Identification Number.

Benefits of Section 8 Company Registration

The following benefits can be enjoyed:

• Separate legal entity

A section 8 company has a separate legal entity and is different from its members.

• Exemption of stamp duty

A Section 8 Company is exempted from paying stamp duty for registration.

• Membership

A registered partnership firm may be a member in its own capacity.

• Tax benefits

Many tax benefits are granted to Section 8 Company in India.

• Exemption to the donors

Donors to a section 8 company are eligible for tax exemptions under section 12A and 80G of the Income Tax Act.

Penalty Provisions

In case company makes any default in complying with the provisions of this section, the company shall be punishable with the fine which shall not be less than ten lakh rupees, which can be extended to rupees one crore and the directors and officer in default shall be punishable with imprisonment for a term which may extend up to three years or fine which shall not be less than twenty-five thousand rupees and which can be extended to twenty-five lakh rupees or both.

Comparison Chart

Conclusion

Incorporation of Section 8 Company is similar to that of a limited company. With better laws, section 8 companies have the most reliable and strongest organizational structure. If you have any query related to incorporation of section 8 company, contact Enterslice. 

Read our article: The relevance of Annual Compliance for Section 8 Company