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A Company Under Section 8: A Simple Guide

  • Managing a not-for-profit organisation is becoming a trend today. While there are many different countries in the world that enable people to start such organisations, here we shall specifically discuss India and section 8 companies. The best part about section 8 companies is that they do not require capitalisation. Here we will talk about everything you ought to know about Indian Section 8 Companies and the Section 8 Companies Act 2013.

 

What is a Section 8 Company?

  • The aim of Section 8 companies is similar to a 501 (c) organisation in the United States or a trust formed in India. The aim of Section 8 Companies is to promote activities such as;

    Education

    Art and culture

    Science

    Sports

    Social welfare

    Environmental protection

 # As mentioned before, unlike regular companies, Section 8 companies do not aim to make profits; however, all of the income earned is put into achieving their goals.

Key Features of a Section 8 Company.

Motive Of Non-Profit: As all these ideas are charitable, companies formed under Section 8 are non-profit centres with no profit-making.

  • No Minimum Capital Liability: You can set up a company under Section 8 without a minimum capitalisation requirement.
  • Benefits In Taxation: Companies that are classified as Section 8 companies should be allowed certain tax exemptions defined in the Income Tax Act.
  • Limited Liability: A company under Section 8 protects personal or private assets, maintaining the liability of its members within the business.
  • No Share Distribution: Under Section 8 companies no profit shall be shared among the shareholders or the members of the company.

    The Process of Registering a Section 8 Company in India .

    To form a Section 8 business in India, you must first:

    • Apply for DSC and DIN: Get DSCs and DINs for all directors of the firm.
    • Reserve your Company Name: Through the MCA portal, reserve a distinctive name for your business.
    • Filing for Incorporation Forms: Issuance of Incorporation Certificate which together with MOA, AOA, and proof of address is the initiating step to registering a company in India.
    • License Application: A license is granted after the ROC reviews all the relevant documentation.
    • Commence the operations: The license is then retained by the company’s Secretary allowing it to conduct operations.

      Pros of Incorporating a Section 8 Company .

      • Better Credibility: Registration under Section 8 increases the level of credibility of your organisation.
      • Secured Donations: It provides easier access to funding or receiving donations and government support.
      • Even if the company incorporates the majority of the shareholders and significantly alters the business, the company will continue to exist.

      What Do I Need to Register?

      • Directors’ identity and address verification documents (PAN, Aadhaar, Passport, etc.)
      • Proof of registered office address.
      • MOA and AOA.
      • Income and Expenditure Statement.

      Required Compliance

      • While Section 8 businesses are legally permitted to operate as non-profits, they also have to follow a few rules:
      • Annual return filers with the ROC.
      • Keeping correct financial records. Holding frequent board meetings and making sure all AGMs (Annual General Meetings) are conducted.

        Note = A Section 8 company is an ideal choice for individuals or groups dedicated to social causes. With its credibility, tax benefits, and access to funding, it offers a robust structure to achieve your philanthropic goals. By understanding the registration process and compliance requirements, you can lay a strong foundation for your organization.
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