As per the Companies Act, 2013, Section 8 Company Registration (erstwhile Section 25 company under the Companies Act of 1956), is a registered organization under MCA that promotes the fine arts, science, community, literature, knowledge, education, training, health, environment, upliftment of society and others which include sharing for a charitable purpose. These are the Limited Liability Companies formed under the Companies Act, 2013 under the Section 8 of the Companies Act which grants these companies an exclusive license. The following are the three main conditions for granting the license:
The ultimate reason for Forming a Section 8 Company is to encourage non-profit goals such as trade, arts, commerce, education, charity, environmental protection, sports research, social welfare, and so on. At least two directors are required to Register a Section 8 Company. Furthermore, there is no minimum requirement to secure a minimum paid-up capital in order to establish such a National Level NGO (Section 8 Company Incorporation).
The following criteria must be met to register a Section 8 company:
The detailed process of Incorporation for Section 8 Company in India is as follows.
The detailed process of Incorporation for Section 8 Company in India is as follows.
The DSC, or Digital Signature Certificate, is a digital tool used to sign various e-forms and scanned copies of documents. It is primarily used by the company’s authorized signatory, such as the Director, partners, managing directors, and so on. In this case, the proposed directors of the section 8 companies must obtain the DSC before signing key documents.
The next step is to go to the MCA portal and create an account. After that, the applicant is required to select the Spice+ form option from the Service section located on the top menu of the home page. This would direct the applicant to a brief e-form containing the two critical parts, A and B.
Part A assists the applicant in registering the proposed company name, and Part B provides the following services:
Upload the above-mentioned mandatory documents and proceed to the payment section to pay the standard fees. Once finished, click the submit button to complete the application submission process.
The following are some of the key advantages of forming a Section 8 company in India:
Exemption from Tax
Section 8 Companies registered under Section 12AA of the Income Tax Act are eligible for a 100% tax exemption. Profits generated by such entities are not taxable because they are used for charitable purposes.
There is no minimum capital requirement.
Section 8 Company has no underlying limitations regarding minimum capital requirements. However, these entities have the right to change their capital structure as the company grows.
There is no need to pay stamp duty.
Unlike other companies such as public limited companies or private limited companies, a section 8 company is not required to pay stamp duty for registration.
Legal entity distinct from others
A section 8 company, like any other registered company, has its own legal identity and enjoys autonomous legal standing from its members. These entities are consistent with the concept of eternal existence.
Credibility has grown.
In terms of compliance and legal standing, a Section 8 Company Registration is more credible. Such Section 8 Companies typically operate within a strict legal framework devised by the relevant authorities. Unlike other NGOs (Trusts & Societies), these section 8 companies have their financials in the public domain of www.mca.gov.in and adhere to stringent compliance requirements after registration.
There is no title requirement.
Section 8 companies have the ability to select the name of their choice during the registration process. Unlike other registered structures, they are not required to use terms such as “Limited or Pvt Ltd” after their name. A Section 8 Company can use the word like Foundation, Council, Federation, Confederation, Association, Forum etc.
Here are some of the basic differences amongst Trust, Society and Section 8 Company:
| Basis | Trust | Society | Section 8 Company |
| Total number of members | A trust must have at least two members. | A society must have at least seven members from the same state. | To establish a Section 8 company, two persons are needed. |
| The origin document | It is the trust agreement/deed in the case of a trust. | The main documents in this case are the Memorandum of Association (MOA) and the Rules and Regulations. | Memorandum of Association (MOA) and Articles of Association (AOA) for a Section 8 company |
| The goal of creation | For the benefit of society | For the benefit of society | For the benefit of society |
| The administration board | The Board for the Trust is the Trustee | In a society, there is a governing body made up of the committee, council, members, and president etc. | A board of directors governs a Section 8 company and makes major decisions. |
| The cost involved | Cost savings are lower. | Cost savings are moderate. | When compared to the other two, it is bit expensive but have more credibility. |
| Nature of control | Technically, a single man or a founder trustee, along with a board of trustees, governs the trust’s day-to-day operations. | In the case of society, all decisions are made or carried out through voting in the General Meeting. | A Section 8 company’s rules and regulations are governed by a Board of Directors and in a Shareholders’ meeting. |
| Possibility of change | In the case of a Trust, this is accomplished through an additional Trust action. | In the case of a Society, changes must be made to the Memorandum of Association, as well as the rules and restrictions. | Section 8 company amendments must take into account the advice provided under the Companies Act 2013. |
| Jurisdiction | The trustee is registered under the jurisdiction of the relevant area’s deputy registrar/charity commissioner. | Typically, societies are registered with the registrar of societies. The Registrar of Societies also has the authority to register. | The power to register a Section 8 company rests with the concerned state’s Regional Director and Register of Companies (ROC). |
| Borrowing authority | The trust is only permitted to borrow from the author. | The society may borrow only from its members. | A Section 8 company can borrow money from its shareholders, banks, and other members. |
| Foreign Direct Investment (FDI) | Aside from VCF, FDI in trust is prohibited. | Permission is not granted. | Permission is not granted. |
There is no such thing as a maximum limit for number of members. However, if it is a Pvt Ltd company, the limit is capped at 200. Here, Members mean shareholders.
Yes, once you have received the Certificate of Incorporation of Section 8 Company, it is suggested to have some workings of the NGO to create a positioning after which you can always apply for the 80G and 12AA License under the Income Tax Law.
Yes, Government employees or officers may join NGOs as long as the NGO is not anti-government. There are a few rules that these people must follow as well, one of which is that the NGO must not be profitable and that the members must not be paid by the NGO.
When compared to other entities like Trust or Society, Section 8 Company Registration under the Companies Act, 2013 have the better credibility as it is easy to register and can work across India. All Financials are in the public domain and bigger companies who have CSR give to these companies.
The property of the company vests in the name of the company and can be sold in accordance with the rules outlined in the Companies Act (E.g.: With the consent of the Board of Directors in the form of a resolution).
Every Company (including section 8 company) has to do some basic compliance after its successful registration with MCA. Some of them are; First Auditor Appointment within 30 Days of Incorporation, Filing of INC-22 if correspondence address was filed during SPICe Part B, Filing of INC-20A (Commencement of Business); Issuance of Share Certificates, Preparation of Statutory Registers and Maintaining Minutes Book and all other annual compliances as applicable.
www.mylegalbusiness.com has the complete team of professionals like Company Secretaries who are experts in the Section 8 Company Registration. We can register your section 8 Company anywhere in India as the process of Section 8 Company Incorporation is online.
The good news is YES. You can register your section 8 company from the comfort of your home. We have a dedicated team who will guide you on the complete procedure as to how a section 8 company can be registered. For more information, please get in touch with us to get started.
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