Section 8 Company Registration: A Comprehensive Guide to Incorporate NGO

What is Section 8 Company?

• • Arts
  • Commerce
  • Science
  • Research
  • Education
  • Sports
  • Charity
  • Social welfare
  • Religion
  • Environmental safety or similar purposes
• These companies utilize their profits to achieve their objectives and refrain from distributing income to their partners.
• A Section 8 company is alternatively referred to as a Section 25 Company. These companies are classified as limited companies.

Characteristics of a Section 8 Company

• Charitable Objectives: The Company must be registered explicitly to advance philanthropic causes and activities.
• Utilization of Income and Profits: All income and profits generated by the Company should be dedicated to furthering its charitable objectives.
• Prohibition of Dividends: Distributing dividends to the Company's members is strictly prohibited; all funds must be reinvested to pursue its charitable endeavors.

Section 8 Company: An NGO with a Social Impact Focus

Benefits of Section 8 Company Registration

• Tax Exemption: Section 8 companies will get 100% tax exemption since their profits are for charitable purposes. This significant tax advantage enables them to channel more resources toward social initiatives.
• No Minimum Capital Requirement: Sec 8 companies can adjust their capital structure based on growth and funding needs. Unlike other company types, they are not bound by any minimum capital requirement, allowing for a more adaptable financial setup.
• No Stamp Duty: Section 8 companies are exempt from paying stamp duty during the company registration process. This exemption reduces the overall establishment cost, allowing organizations to allocate funds more efficiently toward their philanthropic goals.
• Separate Legal Entity: Section 8 companies possess a distinct legal identity separate from their founders and members. This characteristic enhances their credibility and provides autonomy in conducting operations and entering into contracts.
• Increased Credibility: Section 8 companies adhere to strict legal compliance frameworks, which contributes to their higher level of credibility and trustworthiness among government bodies, donors, and stakeholders. This credibility can be instrumental in attracting support for their social initiatives.
• No Title Required: Unlike earlier regulations, Section 8 companies are not obligated to include "Section 8" in their name. This grants them the freedom to choose a name that best reflects their mission and values.
• Acceptable Naming Options: Section 8 companies can opt for a wide array of acceptable names, including societies, Associations, Charities, clubs, foundations, Councils, Institutes, Academies, Federations, and Organizations.

Section 8 Company Registration Eligibility

• An Individual or Hindu Undivided Family (HUF) can start a Section 8 company.
• Two or more persons can be Directors or shareholders, and they must fulfill all the compliances and requirements for Section 8 company incorporation under the Companies Act.
• There must be at least one director who should be a resident of India
• The objective of the Company must be one or more of the following:
  • Promotion of sports, social welfare, advancement of science and education, art, and financial assistance to lower-income groups.
• The founders, directors, and members of the Section 8 Company are prohibited from receiving any remuneration in cash or any other kind of benefit. Additionally, the Company is not allowed to distribute any profits among its members and directors, either directly or indirectly. These provisions ensure that the focus of the Section 8 Company remains solely on its

Mandatory Requirements

• The applicant must ensure that the chosen name for the entity:
  • It does not resemble the name of any existing company
  • Is not undesirable
  • Does not contain words or expressions requiring prior approval from the Central Government
  • Correlates with the objectives to be undertaken by the Company
• The Company should have one or more objectives for promoting sports, social welfare, science, and arts.
• The Company must refrain from distributing profits to its members and directors directly or indirectly.
• The Company should have a registered office within thirty days of its incorporation and maintain it at all times afterward. The registered office must be able to receive and acknowledge all communications and notices addressed to the Company.
• Each of the subscribers/directors must have a Digital Signature Certificate if the number of subscribers/directors to the Memorandum of Association and Articles of Association is up to twenty.

Documents Required

• Memorandum of Association (MoA)
• Articles of Association (AoA)
• Annual income estimates for the next three years, along with sources of income and objects of expenditures.
• Utility Bill of the registered office (not older than two months)
• Declaration by the first director and subscribers
• Declaration in Form INC 14&15 from a Chartered Accountant
• Identity/ residential proof of all the subscribers
• Rent Agreement duly notarized and NOC from the property owner (in case of rented property).
• E-form DIR 2, which contains the consent from all the Directors to act in such capacity.

Procedure for Section 8 Company Registration

Registration on the MCA Portal

• Click on the 'Sign In/Sign Up' option from the homepage, then click the Register button.
• Select User Category as Business User* and then select the User Role. Fill the required login details and click the 'Create My Account' button.
• An OTP will be generated and sent to the user's mobile number. After entering the OTP, a registration confirmation will be sent to the user's email address.

Complete Part-A of the SPICe+ Form

• Type, class, category, and sub-category of the Company
• Main Division of Industrial Activity of the Section 8 Company and a description of the main division (as per Annexure B).
• Choose up to 3 five-digit NIC codes. If more than one code is selected, designate one as the primary NIC code for identifying the CIN number.
• Propose a maximum of 02 names for the prospective Company. Once all the required information is filled in, the applicant can submit Part-A of the SPICe+ form. This step ensures the reservation of the chosen name for the Company during the registration process.

Fill Part-B of the SPICe+ Form

• Details of the Company's capital structure
• Details of the registered office address
• Details of the first subscribers and directors
• Particulars of Payment of Stamp Duty
• Details about jurisdiction for obtaining Permanent Account Number/Tax Collection Account Number

Filing Other Relevant Forms

• Fill in the details in the e-form SPICE-AOA.
• Fill in the details in the e-form SPICE-MOA.
• Fill in the details in the e-form AGILE-PRO to GSTIN/Employees' Provident Fund Organisation (EPFO)/Employee's State Insurance Corporation (ESIC)/ Profession Tax Registration and Opening of Bank Account (as applicable).

Upload the Documents for Final Submission:

• Convert all the linked e-forms into PDF format.
• Affix Digital Signatures on the PDF forms.
• Upload the digitally signed forms as per the provided sequence.

Get Section 8 Company Incorporation Certificate

Post-Incorporation Compliances

• If the registered address is not provided in SPICe+, e-Form INC-22 must be filed within thirty days of incorporation to inform the concerned authority about the registered office address.
• The Company must maintain and preserve copies of all documents and information initially filed during the incorporation process at its registered office until its dissolution under this Act.
• Every Company conducting online business or otherwise must publish its name, Corporate Identification Number, registered office address, phone/fax number, email, and contact person's name for any queries or grievances.
• Within 180 days of incorporating the Company, a statement (Form INC 20A) must be filed with the Registrar, along with the agreed charges by a director. This statement confirms that each subscriber to the memorandum has consented to take the share value as of the creation date of such an assertion to obtain a certificate of commencement of business.

• Conducting a minimum of two board meetings in a year
• Maintaining Books of Accounts
• Preparation of financial statements
• Obtaining a mandatory audit report
• Filing the Income Tax Return
• Filing of financial statements in Form AOC-4
• Filing an annual return along with other e-filing forms like MGT-7
• Fulfilling additional compliances for registrations like 12AA, 80G, etc

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