Overview

A Section 8 Company, named after Section 8 of the Companies Act, 2013 in India, is a unique entity structured specifically for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other objective. These companies operate on a non-profit basis and their profits, if any, are reinvested towards their main objectives. The goal is not to pay dividends to the members but to take a philanthropic approach towards business activities.

Section 8 Company

Benefits of Section 8 Company

1. Limited Liability Protection: Members of a Section 8 Company enjoy limited liability, which means their personal assets are protected in the event the company faces loss or closure. Members are only liable for the unpaid amount on the shares they hold.

2. Separate Legal Entity: Like any other company, a Section 8 Company is recognized as a separate legal entity from its members. This allows the company to operate under its own name, open bank accounts, hire employees, and enter into contracts.

3. Exemption from Stamp Duty: Section 8 Companies are exempted from paying stamp duty on the Memorandum of Association and Articles of Association, which is typically required for other types of companies.

4. Tax Benefits: These companies are often eligible for several tax benefits, including exemptions under various income tax laws. This can be significantly advantageous in managing the overall financial expenditure.

Eligibility Criteria for Section 8 Company

1. Intent of Non-profit: The primary criterion is that the company must intend to work for charitable purposes without intending to profit from its operations.

2. Income Utilization: The income and profits of the company must be used solely for promoting its objects and not for paying any dividends to its members.

3. No Minimum Capital Requirement: There is no minimum capital requirement for starting a Section 8 Company, which makes it accessible for many non-profit initiatives.

Step-by-Step Process to Register a Section 8 Company

1. Obtaining Digital Signature Certificate (DSC): The first step is to obtain a DSC for the directors of the company, which is necessary for filing the forms electronically.

2. Acquiring Director Identification Number (DIN): All proposed directors of the company need to have a DIN, which is a unique identification number.

3. Name Approval: The name of the Section 8 Company must be unique and should ideally reflect the non-profit nature of the entity. The name can be reserved through the MCA’s RUN service or directly via the SPICe+ form.

4. License under Section 8: The company must obtain a special license from the Ministry of Corporate Affairs, which requires a detailed application explaining the proposed activities, sources of income, and a declaration confirming that the company will not pay any dividends.

5. Incorporation: File the SPICe+ form along with the necessary attachments like MOA, AOA, declarations, and other supporting documents to the Registrar of Companies.

6. Commence Business: Once the company is registered, it can start its operations according to its charitable objectives.

Section 8 Company

Documents Required for Registration

  • ID proofs and address proofs of the directors
  • Digital photographs of the directors
  • Memorandum of Association (MOA)
  • Articles of Association (AOA)
  • Declaration by the directors and subscribers
  • Proof of registered office (rent agreement or lease deed)
  • No-objection certificate from the owner of the property

Tax Obligations and Benefits

Section 8 Companies enjoy several tax benefits including exemptions under the Income Tax Act, 1961, provided they maintain their non-profit objectives and comply with the regulatory requirements. These companies must file annual returns and comply with other statutory filings to maintain their active status and enjoy tax benefits.

Why Choose Finbizz for Section 8 Company Registration?

Finbizz provides comprehensive services for registering a Section 8 Company. Our expert team navigates the complex process of obtaining a license under Section 8 and ensures compliance with all statutory requirements. We provide end-to-end assistance from drafting the MOA and AOA to filing the final incorporation form, making the registration process smooth and hassle-free for our clients.

Section 8 Company

Conclusion

Section 8 Companies are ideal for entrepreneurs and organizations that wish to make a positive impact on society without the intention of personal gain. With the expert assistance from Finbizz, embarking on the journey of starting and running a Section 8 Company can be made straightforward and effective, ensuring that your efforts are directed towards achieving societal benefits rather than navigating bureaucratic hurdles.

FAQs

1. Can a Section 8 Company distribute profits or assets?

Ans. No, a Section 8 Company cannot distribute its profits or assets among its members. All profits must be reinvested towards its charitable objectives.

2. What happens if a Section 8 Company fails to fulfill its objectives?

Ans. The company may face penalties, and in severe cases, its license can be revoked by the authorities. It’s crucial to adhere strictly to the stated objectives and operational guidelines.

3. Can a Section 8 Company be converted into any other type of company?

Ans. Yes, a Section 8 Company can be converted into another type of company, provided it complies with the necessary regulatory requirements and alters its MOA and AOA accordingly.