Section-8 Company is those companies which are established with the objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and protection of the environment or such other object.
The profit of such companies is utilized only for the purpose of promoting the object of the company for which it is incorporated. In such type of companies, the company does not pay a dividend to its member. These type of companies have improved recognition and better legal standing. This type of company just work in a similar way as to a public limited company but the difference is that these companies cannot use the word Section 8 or limited in its name.
Section-8 Company is just similar to a trust or society but the basic difference between a trust and a society is that the Section 8 companies are registered under the Central Government Ministry whereas trust and the societies are registered under the State Government regulations.
Basics about the Section 8 Companies:
Capital required for the formation of Section 8 companies:
As per the Companies Act, there is no minimum capital requirement to start a Section 8 company. As the business will grow the capital can be increased accordingly.
Who all can be director of a Section 8 company:
The Director of a Section 8 company should be above 18 years of age, he must be a natural person. It is not necessary that the person who is to be appointed as a director should be a person resident in India even a foreign resident can become director of a Section 8 company.
Minimum and maximum number of Directors required for the formation of Section 8 Company:
Section 8 companies can be incorporated as Private Limited Company or Public Limited Company. If Section 8 is incorporated as a Private Company then the minimum number of Directors should be 2 and for Public Limited Company there should be 3 minimum number of directors. And the maximum number of members can be for Private Limited Company is 200 and for Public Limited Company there is no maximum limit.
The basic objective of the section 8 companies:
Section 8 company should be formed only for the purpose of non-profit motive and the profit earned from running such companies should only be used for promoting the objective of the company for which it is formed. The profit cannot be used for any other purpose. In other words, the company should be formed only for the charitable purpose.
Benefits of forming the Section-8 Company:
- The formation of forming a section 8 company is an easy process.
- No stamp duty is paid on the registration of the company as it is exempted.
- Any registered partnership firm can also become the member of Section 8 Company.
- There is no minimum capital requirement.
- The donors who have donated to the company will get tax deduction under Section 80G and under section 12AA of the Income Tax Act.
Estimated time-limit for incorporating a Section 8 Company:
Normally it takes around 35-45 working days for incorporating a Section 8 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 a required prescribed fees. DIN is a unique identification number allotted to a Director which remains valid for the whole life of the Director. It is necessary for every director to hold a DIN. Single DIN is sufficient regarding of the Directorship an individual is holding.
- This is the most important step in the 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 other company which is already existing and registered with MCA.
- 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 a Section 8 Company with limited liability shall make an application in INC-12 to the Registrar.
- An individual incorporating Section-8 company has to file after getting the license following forms INC-7, INC-22 and DIR-12 with the prescribed fees.
- If the Registrar is satisfied with the form filed for the incorporation he will issue a certificate of registration.
Documents Required for Registering Section-8 Company:
Following documents required for Section-8 Company Registration–
- Copy of PAN.
- Copy of Identity Proof i.e. Voter ID, Aadhar Card, Driving License( Any One)
- Copy of Address Proof- Aadhar Card, latest bank account, telephone bill or electricity bill (but not older than 2 months).
- Passport size photograph of the Director.
- NOC of the owner of the premises.
- If the registered office is on rented premises then rent agreement of the premises.
Note: In case of NRI all the documents should be notarized and passport of the applicant is compulsory.
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