Widely known as Section-8 companies, these organizations are registered under the Section-8 of Companies Act 2013. These companies intend to promote art, commerce, sports, safety, science, research, healthcare, social welfare, religion, protection of the environment, etc. The main object of these companies ensure the promotion of above-mentioned fields, provided the profit is used for promoting only objects of the company (Sec 8(1)(b)). Sec 8 (1) (c) states the prohibition of payment of any dividend to its members. Ministry of Corporate Affairs (MCA), administers and maintains the rules and regulations through ROC in all of the states of India.
The income of the Company must be used to promote only charitable objects and cannot pay any dividend to the members of the company. The central government provides an incorporation certificate to all such companies and also informs them about some restrictions and conditions. In case they don't fulfil them, the central government may also order them to wind up the company. In case fraud objectives of the Company are proved, legal action will be taken against all officers of the Company.
Minimum Requirements for Section 8 Company Registration
1. Minimum 2 Shareholders (for Private Limited NGO) and 7 Shareholders (for Public Limited NGO)
2. Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
3. The directors and shareholders can be same person
4. DIN (Director Identification Number) for all the Directors
5. DSC (Digital Signature Certificate) for all of the Directors
6. Address proof for proposed office address
The idea of incorporating a non-profit making company in India is not a new term as it has been in the business community since ages. In Companies Act 2013, it is mentioned in the section 8 and this is why it is popularly known as the Section 8 Company. The primary objective of incorporating such company is to encourage science, sports, art, education, research, social welfare, religion and environment protection etc. where profit doesn't play any vital role.
As far its structure is concerned, it is much alike a trust or society as it is registered under the Central Government's Ministry of Corporate Affairs. A Section 8 Company enjoys many privileges and exemptions under Company Law.
A Non-profit Organization is a Company which
- Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
- Intends to apply its profits, if any, or other income in promoting its objects; and
- Intends to prohibit the payment of any dividend to its members
We, at Makemyregistration, make it easy for our clients to incorporate a Section 8 company by providing all necessary legal and professional support in respect to incorporation and business management. Our highly talented legal professionals are experts in lending you full support to help you realize your business dream.
WHY SECTION 8 COMPANY REGISTRATION
EASE OF FORMATION
A Section 8 company can be formed by two persons only, by complying with the prescribed formalities of the Companies Act. Many privileges and exemptions under Company Law. Registered partnership firm can be a member in its own capacity.
SEPARATE LEGAL ENTITY
This is the most prominent quality of a Section 8 Company. It refers to the statement that company and its members are completely distinctive. The biggest advantage of a section 8 company is that its identity is distinct from that of its members. A company is a separate person having its own rights & Obligations.
Death, insolvency and insanity etc of any of the member does not affect the continuity of the company. Thus the life of the company does not depend upon the life of its members.In case of death of the owner or transfer of shares, your business won't get affected. There will be no effect on firm's continuance.
The greatest benefit of Section 8 Company is limited liability. If any liability arises then its member is not personally affected; members are only liable for unpaid shares held by them and not more than that. Being the biggest advantage with this type of company, it means that the owners are not personally responsible for business debts and obligations of the incorporation.
A Section 8 company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law.
A Section 8 company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets.
ELIGIBILITY FOR SECTION 8 COMPANY REGISTRATION
1. Object must be Charitable or to promote arts, science, commerce etc
2. Intends to apply all its profit in promoting the objectives
3. Assures the prohibiting of the payment of dividends to any of its members
CONCERNS RELATED TO SECTION 8 COMPANY
- Profit or income of the Section 8 Company cannot be used for any object other than those mentioned in its MOA.
- Distribution of profits or declaration of dividend to its members is prohibited.
- No member can be appointed as an office of the company with any remuneration.
- Its income is taxed at the same rates as other companies.
- A Section 8 Company cannot alter the provisions of its MOA and AOA except with the previous approval of the Central Government.
ADVANTAGES OF SECTION 8 COMPANY REGISTRATION
- No Minimum Share Capital Requirement
- Easy Transfer of Ownership
- Tax Benefits
- No need to use "Section 8" or "Limited" title
- No Stamp Duty
- Clear Objectives for easy donations and loans
- Easy to Manage
- Exemptions and Privileges under Companies Act, 2013
- Relaxation in Compliances