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Section 8 Company Registration

A Section 8 Company is a non-profit organization that aims to promote charitable activities, art, science, education, and sports. The profits of such companies are utilized for promoting these objectives and are not distributed among the Company’s members.

At FinHub Advisors Pvt Ltd, we provide end-to-end services for registering Section 8 companies in India. Our team of experts offers hassle-free and professional services to help you establish a Section 8 company quickly and efficiently. Contact us today to avail of our professional services for registering your Section 8 Company in India.

Key Features of Section 8 Company

• Non- profit Objective: The primary purpose is to promote charitable activities rather than generating profits for its members.
• Use of Profits: Any profits or income generated by the company must be utilized for promoting its objectives, and there are restrictions on the distribution of dividends to members.
• Limited Liability: Members of the Section 8 Company enjoy limited liability, similar to other types of companies.
• Incorporation Process: The registration process involves obtaining a license from the Central Government, and the company must meet specific criteria outlined in the Companies Act.
• Restrictions on Alteration of Memorandum and Articles: There are restrictions on altering the memorandum and articles of association to ensure that the company remains committed to its nonprofit objectives.
• No Minimum Capital Requirement: Unlike other types of companies, Section 8 Companies do not have a minimum capital requirement.
• Government Oversight: The Central Government has the authority to scrutinize the operations of Section 8 Companies to ensure compliance with their charitable objectives.

Benefits of Opening Section 8 Company

Incorporating a Section 8 company in India offers numerous advantages:

• Tax Exemption – Section 8 companies registered under section 12AA of the Income Tax Act are eligible for a 100% tax exemption, as they utilize their profits for charitable purposes. This is a significant benefit as the profits generated by such entities are non-taxable.
• No Minimum Capital Requirement – Unlike public limited companies, Section 8 entities do not have a minimum capital requirement. They can adjust their capital structure according to their growth, giving them more flexibility.
• Separate Legal Entity – Section 8 companies have a separate legal identity and perpetual existence, just like other registered companies. This increases their credibility and provides them with more autonomy and legal standing.
• Increased Credibility – Section 8 companies are subject to strict legal compliance frameworks, enhancing their credibility regarding legal standing. Unlike NGOs and trusts, Section 8 entities follow stringent compliances post-registration, making them more trustworthy.
• No Title Required – Section 8 companies are free to choose a name that suits their liking during the registration process. Unlike other registered structures, they are not required to affix the term “Section 8” after their name.

A Section 8 company in India offers numerous benefits, including tax exemption, no minimum capital requirement, no need to pay stamp duty, separate legal identity, increased credibility, and no title required. These advantages make Section 8 companies attractive for entrepreneurs looking to start a business with a charitable or social cause.

Eligibility Criteria for Incorporation of the Section 8 Company

Specific eligibility criteria must be met to establish a Section 8 company in India.

• An Indian national or Hindu Undivided Family (HUF) can incorporate a Section 8 Company.
• The entity must have at least one director.
• The primary object of the Section 8 Company should be related to promoting art and science, sports, charitable activities, education, or providing financial assistance to individuals from lower-income groups.

These eligibility criteria ensure that the Section 8 Company operates to promote social welfare and contribute to the greater good of society.

Mandatory legal requirements for Section 8 Company

Before applying for the incorporation process of a Section 8 company in India, specific legal requisites must be fulfilled. These requirements are as follows:

• Number of Directors – A minimum of two directors is required if the Section 8 entity intends to operate as a private limited company. However, a minimum of three directors are required if the entity aims to operate as a public limited company.
• Number of Members – If the Section 8 Company aims to function as a private limited company, the number of members is capped at 200 by the Ministry of Corporate Affairs (MCA). However, there is no such limit for Section 8 entities with a business structure like a public limited company.
• Capital Requirement and Name – According to the Companies Act 2013, Section 8 entities are not required to maintain a minimum paid-up capital. Moreover, NGOs operating as Section 8 entities are not obligated to affix terms like private limited or limited in their name.
• Company Objects – Only entities with non-profit objectives are eligible for Section 8 registration. The Memorandum of Association and Articles of Association must clearly state such goals for which the Company is established. Any profits the Section 8 entity generates must be utilized for charitable purposes or reinvested in the entity. The profit of Section 8 entities is not available to its members in any form. These legal requisites ensure that Section 8 companies operate with transparency and the intended purpose of promoting social welfare.

Section 8 Company Incorporation Process

The process of incorporating Section 8 companies in India involves the following steps:

Step 1: Obtain a Digital Signature Certificate (DSC)

The first step is to obtain a Digital Signature Certificate (DSC) for the proposed directors of the Section 8 Company. This certificate is required for the online filing of documents with the Ministry of Corporate Affairs (MCA). Form DIR-3 is used for obtaining the DIN and should be filed along with the DSC of the proposed directors.

Step 2: Obtain Director Identification Number (DIN)

After obtaining the DSC, the next step is to apply for a Director Identification Number (DIN) for the proposed directors. The DIN number is a unique identification number issued by the MCA to individuals who wish to be directors of a company in India.

Step 3: Reserve the Company Name

The next step is to reserve the name of the proposed Company with the MCA. The Section 8 company name should be unique and not be similar to any existing company name. Form INC-1 is used for reserving the company name.

Step 4: File the Application for Incorporation

After the company name is approved, the next step is to apply for Section 8 Company incorporation. The application for incorporation is filed in Form INC-32 along with the Company’s Memorandum of Association (MOA) and Articles of Association (AOA).

Step 5: Obtain a License for Section 8 Company

Once the application for incorporation is approved, the next step is to obtain a license for the Section 8 Company. Form INC-12 is used for obtaining the license. It should be filed along with the necessary documents.

Step 6: Obtain a Certificate of Incorporation

After obtaining the license, the MCA issues a Certificate of Incorporation in Form INC-16. This certificate confirms the incorporation of the Section 8 Company.

Donations/Funding of Section 8 Company

A Section 8 Company cannot collect capital through deposits but can accept donations from the public. Several methods are available to raise funds, such as foreign donations, equity funding, and domestic donations.

• Foreign contributions are permissible only if FCRA registration is obtained, which can be applied for three years after registration.
• If immediate foreign contributions are required, prior permission from the commissioner can be requested.
• Equity funding can be achieved by releasing new equity shares at a premium price. Domestic subsidies have no restrictions, but it is vital to establish a comprehensive system to prevent money laundering.

Section 8 Company Registration with FinHub Advisors Pvt Ltd

Entrust your Section 8 Company registration to FinHub Advisors Pvt Ltd for a seamless and purpose-driven process. Our expert team navigates the intricacies, ensuring compliance with the Companies Act, 2013. From charitable objectives to tax exemptions, FinHub Advisors Pvt Ltd streamlines the registration journey, providing guidance and efficiency. Benefit from limited liability, government recognition, and the ability to contribute meaningfully to society.

Choose FinHub Advisors Pvt Ltd for a reliable partner committed to transforming your philanthropic vision into a legally recognized and impactful Section 8 Company.

Documents Required for Section 8 Company Incorporation

The following documents are required to complete the incorporation process for a Section 8 company in India:

• Articles of Association (AOA) and Memorandum of Association (MOA)
• Declaration by the first director(s) and subscriber(s) (an affidavit is not required)
• Proof of office address, such as a copy of utility bills like electricity, water, or gas bill
• Copy of the certificate of incorporation (COI) of an overseas corporate body (if any)
• A resolution passed by the promoter company
• Consent of Nominee (INC-3)
• Residential and identity proof of nominees and subscribers
• Applicant’s identity and residential proof
• Digital Signature Certificate (DSC)
• Declaration of unregistered companies