INCORPORATION OF SECTION 8 COMPANY
Section 8 company means a company formed for the purpose of promotion of commerce, art, science, education and research, sports, welfare, religion, protection of environment or any other social object.
Section 8 companies are not liable to use the word limited or private limited after their name. A section 8 company may be registered by obtaining a license from central government without the addition of the word “limited” or “Private Limited”
Benefits of Section 8 Company Registration
There are many advantages of registering an NGO under Section 8 of the Companies Act, 2013, which are as follows:
a. No minimum capital: There is no minimum capital requirement for a Section 8 company incorporation and the capital structure of Section 8 can be altered at any time as per the growth requirement of the company. Thus, the funds required for carrying the business operations can be brought in later, through donations and subscriptions from members and the general public.
b. Tax Benefits: The Company Auditor’s Report Order (CARO) does not apply to the Section 8 company. A Section 8 company enjoys tax benefits under 80G of the Income Tax Act, of 1961.
c. No Stamp Duty: There is no stamp duty imposed for Section 8 company incorporation in India. The Section 8 company need not pay the stamp duty imposed on the Memorandum of Association (MOA) or Articles of Association (AOA) of a private or public limited company.
d. Separate Legal Identity: Section 8 Company registration acquires a distinct legal identity from its members. A registered partnership firm can also become a member in its individual capacity and obtain Directorship of Section 8 company. It has perpetual existence and thus, the entry or exit of any member will not affect the operation of the Section 8 company.
Documents to be submitted for incorporation of section 8 company:
1. Passport-size colored photo.
2. For proof of premises electricity bill/telephone bill/water bill as registered office address.
3. NOC from owner of premises.
4. For address proof of director’s electricity bill, mobile bill, telephone bill or bank statement.
5. For identity proof voter id, driving license or passport of the directors.
6. Aadhar and PAN of directors.
1. Section 8 company is required to adhere to the following statutory compliances:-
2. FORM-20A-Declaration for commencement of business is required to be filed by section 8 companies within 180 days of incorporation.
3. Director KYC –Every individual director who holds a valid DIN are required to file director KYC form on or before 30th September from end of the financial year.
4. Appointment of auditor-As per section 139 of companies act, 2013 every company is required to appoint the auditor for the audit of section 8 company.
5. Income Tax filing- Section 8 company is required to file income tax return before or on 30 September of the next financial year
6. Annual General Meeting-is to be done once in a year within a period of 6 months.
7. Filing of financial statements-Every Section 8 company are required to file the financial statement within a period of 30 days from the date of AGM.
8. Filing of Annual Returns-The annual return is required to be filed in form-MGT-7 every year by section 8 companies.
9. MBP-1-In the first board meeting of the financial year director should disclose the interest or whenever there is a change in disclosures already made.
Form INC-12 is filed for the grant of the license to operate as a Section 8 company. Along with this form, applicants are required to attach a draft copy of the Memorandum of Association (MOA) and Articles of Association (AOA).
There is a prescribed format for Memorandum of Association of a Section 8 company in Form INC 13. The subscription pages of the MOA and AOA shall be signed by each subscriber along with their name, address, description, and occupation, in the presence of at least one witness.
Form INC 12 is to be submitted along with the following attachments :
- INC-13 – Memorandum of Association
- Draft Articles of Association
- INC-15 for the declaration by each subscriber to MOA that the draft memorandum and articles of association have been drawn up in conformity with the provisions of Section 8
- Estimated statement of Income & Expenditure for the next three years
- List of proposed Promoters and Directors of the Company
The following forms are required to be filed after the issuance of the license to the company
The SPICe+ form is the application for the incorporation of the company. The company can be reserved in the first part of the SPICe+ plus form. However, only one name can be declared for approval in this form. Thus, it is recommended that applicants access the free name search facility of existing companies available on the MCA Portal before choosing the name. The system will provide a list of closely resembling names of the existing companies based on the search criteria. This will help you avoid choosing a name similar to that of an existing company.
The following documents must be attached along with SPICe+ Form:
- Memorandum and articles of the company duly signed by all the subscribers
- Declaration from each of the subscribers and first directors that they are not guilty of any offense or misfeasance
- Declaration in Form INC 14 and Form INC 15 from a Chartered Accountant and each person making the application respectively
- Address of correspondence till the registered office is official
- Address and Identity proofs of all the subscribers to MOA and first directors of the company
- Passport size photograph of all the directors and shareholders
- Copy of the rental agreement, in case the company registered office, is on a rented property
Form INC 22
Form INC 22 is filed for providing notice of the address of the company’s registered office. It needs to be filed within 30 days of the incorporation of the company.
Form DIR 12
Form DIR 12 is filed for the appointment of the directors of the company. It must be filed within 30 days from the date of the appointment of the directors.
Procedure for incorporation of a Section 8 company
Step 1 – Obtain a DSC of the proposed Directors of the Section 8 Company. Once a DSC is received, file Form DIR-3 with the ROC for getting a DIN. The Proof of Identity and Address Proof needs to be attached for obtaining DSC.
Step 2 – Once the DIR-3 is approved, the ROC will allot a DIN to the proposed directors.
Step 3 – File Form INC-12 with the ROC to apply for a licence for the Section 8 company along with the attachment of the required documents as mentioned above.
Step 4 – Once the form is approved, a license under section 8 will be issued in Form INC-16.
Step 5 – After obtaining the license, file the SPICe+ Form with the ROC for incorporation along with the required attachments as mentioned above.
If the ROC is satisfied with the forms submitted, he issues a Certificate of Incorporation along with a unique Company Identification Number (CIN).
Penalty for Non-Compliance under the Companies Act
The Central Government will revoke the Section 8 company license if it fails to comply with the legal provisions of the Act. If the objectives of the company are conducted fraudulently or in violation of the objectives for which it is established, the license can be revoked.
If a company defaults in complying with the provisions of the Act, the company will be punishable with a fine not less than Rs.10 lakh and may extend to Rs.1 crore. The Directors and the officers of the company in default of the provisions of the Act will be punishable with a fine not less than Rs.25,000