Regulations for Company Registered under Section 8 of Companies Act 2013

Narendra Kumar

14 Dec, 2020

Section 8 can be defined as those companies whose main objective of incorporation is promoting art, science, sports, education, research, social welfare, religion, charity as well as protection of the environment or any other such object. The profit earned by these companies can be utilized only for the purpose of promoting the object of the company for which it is incorporated.

These types of companies do not have the right to pay a dividend to its members. These type of companies have improved legal recognition and a separate legal standing. Section 8 company’s work in a similar way as a Public Limited Company does, but it cannot use the word limited or Section 8 in its name.

These Companies are registered under the Central Government Regulations.

Basics About the Section 8 Companies

• Capital Requirement for Section 8 Companies:

As per the requirement of the Companies Act, there is no minimum capital that is required to start the company. After the incorporation also the capital can be increased accordingly.

• Criteria to Become Director of Section 8 Company:

Any person who is wishing to become the director should fulfill the following criteria:

• He should be 18 years or above.
• He must be a natural person.
• The person who is to be appointed as a director should be a person resident in India or even he can be a foreign resident.

• Number of Directors Required for the Incorporation of Section-8 Company:

Section-8 Companies can be incorporated as a Public Limited Company or a Private Limited Company. If the Section 8 Company is incorporated as a Public Limited Company then in that case minimum 3 directors are required and if it is incorporated as a Public Limited Company then minimum 2 number of directors is required.

• The Main Objective of Incorporation:

Such companies are incorporated with the motive of non-profit and the profit earned from running these companies are utilized for the purpose of promoting the objective of the company the profit cannot be used for any other purpose. In simple words, the company is formed only for the charitable purpose.

• Advantages of Forming a Section 8 Company:

  • The process of forming a Section 8 company is an easy process.
  • Stamp duty registration is exempt.
  • Any registered partnership firm can also become a member of Section 8 Company.
  • No minimum capital is required.
  • All those who have donated to the company will get a deduction of 80G as well as 12AA under the Income Tax Act.

• Estimated Time-Limit for Incorporating a Section 8 Company:

Normally it takes around 35-45 working days for incorporating this Company. This time limit can also be reduced accordingly if the Regional Director approves the application early.

Procedure for Incorporating Section 8 Company

• Arrange all the necessary documents required for incorporating a Section 8 Company.
• Apply for the DSC of the proposed Directors of the proposed companies, as DSC is required for filing the necessary forms electronically with MCA. DSC can be obtained from the certifying authorities.
• Next step is to apply for the DIN of the Directors. DIN application can be made to MCA with required prescribed fees. DIN is allotted to a Director for the whole life of the director which is a unique identification number. For every director, it is necessary to hold a DIN. A single DIN is sufficient regarding of the Directorship an individual hold.
• This is the most important step in company formation as it is the foundation of the company formation. In this, the individual shall apply for the name availability i.e. for the name of the company. INC-1 will be filed with the MCA. Generally, the name is approved within 2-3 days. The important point that shall be kept in mind is that the name of the company should not be resembling with the name of another company which is already existing and registered with
• After the name of the company is approved by the Registrar the next step is to draft the Memorandum and the Articles of the Company. The Memorandum shall contain the basic object for which the company is formed.
• Any individual desirous of incorporating such Company with limited liability shall make an application in INC-12 to the Registrar.
• An individual incorporating Section-8 has to file after getting the license following forms INC-7, INC-22 and DIR-12 with the prescribed fees.
• If the Registrar of Companies is satisfied in that case he will issue a certificate of registration.

Documents Required for Registering Section-8 Company

• Copy of PAN Card.
• Copy of any Identity Proof i.e. Voter ID, Aadhar Card, Driving License.
• Copy of Address Proof i.e. either Aadhar Card, latest bank account, telephone bill or electricity bill, but that document should not be older than 2 months.
• Director’s Passport size photograph.
• Registered office address owner’s NOC.
• If the registered office is on rented premises then rent agreement on the premises.

Note: In case of NRI all the documents should be notarized and passport of the applicant is compulsory.

Read our article:Section-8 Company Registration Procedure Online