Section 8 Company Registration

A Section 8 Company is a Non-Profit Organization (NPO) registered under the Companies Act, 2013. Its primary objective is to promote charitable activities such as commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection.
Unlike typical companies, its profits cannot be distributed as dividends to members and must be reinvested into its objectives. While they can have share capital, it doesn't function in the traditional profit-making sense..
A minimum of two individuals with a non-profit goal can obtain a Section 8 company registration. This creates a trusted legal structure, allowing the organization to manage its funds, sign contracts, and handle all legal matters in its name.
Features of a Section 8 Company

These companies have unique characteristics that separate them from standard for-profit businesses, focusing entirely on their social mission. Here are the features:

• Focus on a Cause: These companies are created solely to promote non-profit goals like education, arts, social welfare, or environmental work.
• Profits are reinvested: Any money earned must be put back into the organization's mission and cannot be paid out as dividends to members.
• Distinct Legal Identity: The company is legally separate from its members, allowing it to own property, sign contracts, and manage legal matters in its name.
• Limited Liability for Members: The personal assets of the members are safe. Their financial responsibility is limited, typically to the amount they promised to contribute (in a company limited by guarantee) or the value of their shares (if any).
• Official Government License: They operate under a license from the Ministry of Corporate Affairs (MCA), which adds to their credibility and requires them to follow specific rules.
• No "Ltd." or "Pvt. Ltd." in Name: Unlike other companies, they are exempt from adding "Limited" or "Private Limited" to their name, highlighting their non-profit nature.
• Eligible for Tax Exemptions: After registration, they can apply for tax benefits under sections 12AB and 80G of the Income Tax Act. (Note: The former Section 12A registration is now governed under the new Section 12AB).

Purpose of Incorporating a Section 8 Company

Founders choose to register a Section 8 Company for several key reasons, such as:

• Build a Formal Organization: This step provides an official legal structure to carry out a non-profit mission, transforming an informal idea into a recognized entity.
• Gain Public Trust: Being regulated by the government makes the organization more transparent and trustworthy in the eyes of donors, partners, and the public.
• Improve Access to Funding: This registration is often required to receive CSR (Corporate Social Responsibility) funds, government grants, and large-scale national or international donations.
• Ensure Long-Term Existence: The company is a perpetual entity, meaning it continues to exist even if its founding members change. This ensures the mission can outlive its founders.
• Legally Manage Funds and Assets: It creates a legal way to open a dedicated bank account, own property, and manage all finances under the organization's name, keeping them separate from personal funds.

Legal Framework and Authorities Governing Section 8 Company Registration
To register your non-profit, you need to understand the laws that govern its formation and operation. These laws ensure your company gains legal standing and can access benefits.

Section 8 Company Registration in India is primarily governed by:

• The Companies Act, 2013: Specifically, Section 8 of the Companies Act provides the legal framework for establishing and regulating non-profit companies.
• Ministry of Corporate Affairs (MCA): This is the central government ministry responsible for administering the Companies Act, 2013. The entire registration process is managed through the Section 8 company registration MCA portal.
• Registrar of Companies (ROC): The ROC in each state is the main authority responsible for the incorporation of a Section 8 company. It grants the license and the Certificate of Incorporation.
• Income Tax Department: For availing tax exemptions on donations (80G) and income (12AB), companies must register with the Income Tax Department after incorporation.

Documents Required for Section 8 Company Registration
Here's a checklist for the incorporation of a Section 8 company via the MCA portal (mca.gov.in):

From Directors/Members:
PAN Card (mandatory for Indian nationals).
Identity Proof (Aadhaar Card, Voter ID, Passport, or Driving License).
Address Proof (Recent bank statement, utility bill).
Passport-size photographs.

For the Registered Office:
Address Proof (Recent utility bill, like electricity or telephone bill).
No Objection Certificate (NOC) from the property owner.
Rent Agreement (if the premises are rented).

Other Documents:
Digital Signature Certificate (DSC) for at least one director.
Drafted Memorandum of Association (MOA) in Form INC-13.
Drafted Articles of Association (AOA).

Failure to adhere to the regulations can result in severe consequences: 

• Company Fines: A fine of not less than ₹10 lakh, which may extend to ₹1 crore.
• Director/Officer Fines: Directors and officers in default are punishable with a fine of not less than ₹25,000, which may extend to ₹25 lakh.
• Revocation of License: The Central Government may revoke the company's license if its affairs are found to be conducted fraudulently or in violation of its non-profit objectives.
• Fraud Liability: Officers found conducting affairs fraudulently may face action under Section 447 of the Companies Act, which deals with fraud. 

• Governing Section: Section 8 companies are registered under Section 8 of the Companies Act, 2013.
• Certificate: Upon successful incorporation, the Registrar of Companies (ROC) issues a Certificate of Incorporation and a unique Company Identification Number (CIN). A specific license (Form INC-16) is also issued by the Central Registration Centre (CRC) allowing the entity to operate as a non-profit without using the words "Limited" or "Private Limited". 

 

Feature                             Section 8 Company                                      Trust                                                    Society
  
Governing Law               Companies Act, 2013                    Indian Trusts Act, 1882 or State Acts                    Societies Registration Act, 1860

Legal Status                     Separate legal entity                    Not a separate legal entity                                  Not a separate legal entity

Credibility                       High (due to MCA oversight)             Lower transparency                                          Moderate/Community-driven

Operations                           Nationwide scope                       Typically state/area limited                            State-specific (unless registered nationally)

Liability                           Limited liability for members          Trustees can have personal liability                     Members generally not personally liable

Funding                 Preferred by large donors/CSR funds             Limited avenues                                           More flexibility through member dues

Compliance                      High requirements                                 Low to moderate                                         Moderate requirements

Tax Benefits             Eligible for 12A & 80G registration         Eligible for 12A & 80G registration                 Eligible for 12A & 80G registration

To be eligible for registration, a Section 8 company must satisfy the following criteria: 

• Its primary objective must be to promote commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, or similar causes.
• It must intend to apply all profits, if any, or other income solely towards promoting its objectives.
• It must be prohibited from paying any dividend to its members/shareholders.
• A minimum of two directors and two members are required for a private Section 8 company.

At least one director must be a resident of India (stayed for at least 182 days in the previous calendar year). 

Registration involves filing integrated web forms on the Ministry of Corporate Affairs (MCA) portal: 

• SPICe+ Part A: For name reservation.
• SPICe+ Part B, e-MOA (INC-13), e-AOA (INC-31), AGILE-PRO: The integrated forms for incorporation, DIN/PAN/TAN allotment, bank account opening, and other registrations.
• Form INC-14: Declaration by a practising professional (CA, CS, etc.) confirming compliance with all legal requirements.
• Form INC-15: Declaration from each person making the application.
• Form INC-9: Auto-generated declaration by subscribers/first directors.
• Form DIR-2: Consent of directors to act in that capacity.