Section 8 Company Registration
Section 8 company is a legalized version of charitable societies. Unlike unregistered societies, Section 8 companies sit on a robust structure attracting benefits such as low taxes, perpetual existence, simplified establishment legalities, independent legal identity, etc. If you intend to set up such an entity, you must apply for Section 8 company registration. Let’s explore legalities, norms, benefits, and paperwork concerning Section 8 entities.
Benefits of acquiring Section 8 Company registration
Transforming a charitable entity into a Section 8 company can lend the following benefits:
No minimum capital
Section 8 company attracts minimal norms and zero capital requirements while striving for incorporation. Plus, the members can alter the capital structure as the company grows with time. There is no need to keep operational funds handy before incorporation. Members can arrange the working corpus after registering the entity via subscriptions or donations.
Tax Benefits
Section 8 Companies are eligible for various tax exemptions under section 80G of the Income Tax Act. Since these are non-profit entities and strive for society’s betterment, the government enables them to keep their corpus safe from unnecessary deductions, allowing for seamless operation and growth.
Zero Stamp Duty
Section 8 company registration attracts zero stamp duty imposed on charter documents like AoA and MoA.
Separate Legal Identity
Section 8 Company registration reinforces an independent legal identity for an entity. The members and the entity have a legal distinction that helps foster stability and trust. The Section 8 entity allows a registered partnership firm to act as a member in its capacity and secure a directorship.
Perpetual existence
Section 8 companies can last for years thanks to their robust structure favoring perpetual existence. Its continuity or operation stays intact and unaffected by members’ demise or departure.
Limited liability
Section 8 company saves members from addressing expenses incurred by the company since it adheres to the limited liability concept. The members’ contributions revolve around their shareholding limit, keeping personal assets intact and secure.
Credibility
Section 8 companies have emerged as a stable and secure form of charitable societies. Unlike unregistered counterparts, these entities are well-regulated and undergo periodic financial audits to ensure transparency. This allows peers and donors to have more trust in their operations.
Exemption to the donors
The Section 8 company allows donors to have certain tax exemptions on donations under sections 80G and 12A of the IT Act, 1961.
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Norms around Section 8 Company Registration
When going for section 8 company registration, ensure you have met the following conditions:
- An Individual, HUF can set up a section 8 entity in India.
- At least two individuals must serve as directors and shareholders. These individuals will oversee the operational and compliance affairs.
- At least one director should belong to the Indian residency.
- The company’s objective must be serving philanthropic purposes such as advocating sports, providing education, rendering basic amenities, facilitating fiscal aid to the needy ones, etc.
- Founders, members, and directors cannot use the company’s funds for personal leverage.
- Profit generated should be used to further the company’s goals instead of benefiting the members.
Eligibility criteria for Section 8 Company registration
- At least two directors are required in case a private limited company is chosen as a legal structure for section 8 company incorporation. Similarly, in the case of a public limited company, at least 3 directors are required.
- The private Ltd company can accommodate 200 members, meanwhile, the public limited company sees zero restriction in this context.
- Entities registered as Section 8 establishments are not liable to add words like Limited or Private Limited in their name.
- Section 8 companies must abide by the norms of the Companies Act 2013. Some common norms include filing quarterly returns, documenting meetings, and intimating authority for appointing directors or winding up.
Documents required for the Section 8 company registration
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Form INC-13 (Draft for MOA & AOA)
- Form INC-12 (Application for License)
- Form INC-7 (Application for Incorporation)
- Form DIR-2 (Consent to act as a Director)
- Form INC-22 (Notice of Situation of Registered Office)
- Form INC-9 (Affidavit from each subscriber and first directors)
- Form DIR-12 (Appointment of Directors, Manager, and Secretary)
- Declaration from each director and subscriber in Form INC-15
- Proof of identity and address of all directors and subscribers
- Digital Signature Certificate (DSC) of one of the directors
- Professional certification (if applicable)
- Proof of ownership or rent/lease agreement of the registered office
- Utility bill (not older than 2 months) for the registered office address
How to secure Section 8 company registration: A 5 Steps Guide
Securing a Section 8 company incorporation requires adherence to the following steps:
Step 1 – Secure Digital Signature Certificate
The DSC i.e. Digital Signature certificate helps authenticate the e-documents such as online forms, agreements, charter documents, etc. DSC is categorized into various classes. The Class 3 DSC is the accurate option in this case. The MCA-acknowledged agencies grant such DSCs in India. While applying for DSC, the applicant must submit identity and address proof.
Step 2- Secure DIN for the directors
Upon securing the DSC, the next step is to apply for the DIN i.e. Director Identification Number. It helps reinforce the legal identity of the proposed director serving the company. DIN comes with a unique identification code, assigned to a single director. The ROC (Registrar of Companies) verifies the DIN’s application before issuing the DIN.
Step 3: File Form INC-12
This step involves filing the form INC-12, which helps secure a license for running the Section 8 company. The application INC-12 goes along with the annexures cited above. Upon verifying the paperwork, the authority shall grant the license in Form INC-16.
Step 4: File the SPICe+ form
After securing the license, file the SPICe+ form that helps transform a society into an incorporated entity. The said form entails two parts viz. Part A and Part B. Whereas Part A helps with name reservation, part B ensures registration under GST, EPFO, ESIC, etc.
Step 5: Inspection and Grant of incorporation certificate
The submitted form and annexures shall undergo verification in this step. The authority vets the paperwork for compliance and accuracy. Any loophole or misleading detail shall not be entertained and thus can lead to the application’s revocation. However, if everything pans out well, the grant of incorporation certification would come into play. The certification comes along with a CIN i.e. Company Identification Number that makes the company identifiable among peers, authorities, and donors.
Conclusion
If you wish to run a charitable society in the most organized and legal way, selecting the Section 8 company registration is an ideal choice. Unlike other registered entities, section 8 companies attract minimal compliance when striving for registration. However, these entities have no liberty when dealing with finances. They are liable to stay transparent by following auditing requirements without fail.
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