MEANING
A Section 8 Company is an organization which is similar to a Trust registered under the Central Government’s Ministry of Corporate Affairs as a Non-Profit Organization (NPO). The objective of the company is to promote ‘arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, religion’ and it plans to apply its profits, if any, or any other income in promoting its objectives. It functions just like a limited company which includes all the rights and regulations that come with such a company. However, it differs from a company in one critical aspect, i.e. it cannot use the words “Limited” or “Section 8” in its name.
Section 8 companies have improved business credibility among donors, other stakeholders and also Government departments. It has many benefits when compared to a Trust like better legal standing and greater recognition.
The profit/income of the Company must be only used to promote charitable objectives and welfare goals, and also Section 8 Companies are prohibited from paying any dividend to its members. The incorporation certificate is given to all such companies after registration. Certain rules and regulations for section 8 companies are drafted by the Central Government and if they don’t abide by them, they may be ordered to wind up the company. If fraud objectives of the Company are proved, the Central Government will take legal action against the members of the Company.
REASONS TO OPT FOR A SECTION 8 COMPANY
DOCUMENTS REQUIRED
- DSC (Digital signature) and DPIN (Director’s Pin) if already available.
- MOA and AOA.
- Copy Of PAN OR Passport (For NRIs)
- Copy Of Voter’s ID OR Passport OR Driver’s License
- Copy Of Latest Bank Statement OR Electricity Bill OR Telephone Bill
- Passport sized photographs
- Specimen Signatures.
REGISTRATION PROCESS OF SECTION 8 COMPANY
- Application of DSC & DPIN: The partners have to apply for Digital signature and DPIN. Digital signature is online signature and DPIN refers to Directors PIN number issued by MCA. If the directors already have DSC and DPIN, then this step can be ignored.
- Name approval: Three different name options must be given to MCA of which one will be approved. Names provided should ideally be unique and meaningful and suggestive of the company business not violating any laws.
- Approval of other authorities: The ROC requires the applicant to furnish the approval or concurrence of any regulatory body, appropriate authority, or Ministry of the Central or State Government(s) in relation to the work to be done.
- Obtaining Section 8 Company License: The Company has to apply for a license from the MCA after the company’s name is approved. The Registrar will wait for 30 days for objections, if any, of any person pursuant to the notice published. The Registrar may consult any other necessary regulatory authorities.
Thereafter the Registrar of Companies will grant the license to the company with or without certain conditions. - Submission of MOA & AOA: The Company needs to draft Memorandum of association and Articles of Association after obtaining the license. Both MOA and AOA are filed with the MCA.
- Get Section 8 Company incorporation certificate: It generally takes 15- 25 days to form a Section 8 company and get the incorporation certificate. The Certificate of Incorporation is proof that the company exists which includes CIN (Company Incorporation Number).
- Apply for PAN, TAN and Bank account: Application for PAN and TAN is mandatory. PAN and TAN are received in 7 working days.
ONLINE FILING
The Ministry of Corporate Affairs (MCA) issued an integrated incorporation form INC-32. A company can now be incorporated online by filling the Simplified Proforma for Incorporating Company Electronically (SPICe) form in Form INC-32 (using Digital Signature Certificate of the Director) along with (eMoA) in Form INC-33 and (eAoA) in Form INC-34.