Overview of Section 8 Company
NGO (Non-Government Organisation) is an organization that works for non-profit/ charitable purposes. An NGO established as Section 8 company under the Companies Act, 2013 (Act) is governed by the Ministry of Corporate Affairs (MCA) whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government.
Section 8 company registration has more benefits in comparison to trust and society. This type of company has more credibility among government departments, donors, and other stakeholders. In this article, we will explain how to register as an NGO in the form of Section 8 Company, under the Companies Act, 2013.
Eligibility criteria for Section 8 Company in India
- An Individual, HUF is eligible to start a Section 8 company in India.
- Two or more persons who will act as Directors or shareholders should fulfil all the compliances and requirements of the Section 8 company incorporation under the Act.
- There must be at least one director who should be a resident of India in the Section 8 company.
- The objective must be one or more of the following – promotion of sports, social welfare, the advancement of science and art, education and financial assistance to lower-income groups.
- Founders, directors, members directors of the company cannot draw any remuneration in any form of cash or kind.
- No profit should be distributed among the members and directors of the company directly or indirectly.
Purpose of NGO – Section 8 Company Meaning
The main purpose of establishing a company as a Section 8 company is to promote non-profit objectives such as the following:
- Commerce
- Art
- Science
- Sports
- Education
- Research
- Social welfare
- Religion
- Charity
- Protection of environment
- Any such other object related to the above objects
When the Central Government is satisfied that a person or association of persons propose to establish a limited company having the above-mentioned objectives, it shall grant a license to register as a Section 8 company under the Companies Act, 2013 (Act).
The profits/incomes of the Section 8 company, if any, are applied towards promoting the objectives of the company and are not distributed as dividends to its shareholders.
Section 8 Company Benefits
There are many advantages of registering an NGO under Section 8 of the Companies Act, 2013, which are as follows:
- No minimum capital: There is no minimum capital requirement for a Section 8 company incorporation and the capital structure of Section 8 can be altered at any time as per the growth requirement of the company. Thus, the funds required for carrying the business operations can be brought in later, through donations and subscriptions from members and the general public.
- Tax Benefits: The Company Auditor’s Report Order (CARO) does not apply to the Section 8 company. A Section 8 company enjoys tax benefits under 80G of the Income Tax Act, 1961.
- No Stamp Duty: There is no stamp duty imposed for Section 8 company incorporation in India. The Section 8 company need not pay the stamp duty imposed on the Memorandum of Association (MOA) or Articles of Association (AOA) of a private or public limited company.
- Separate Legal Identity: Section 8 Company registration acquires a distinct legal identity from its members. A registered partnership firm can also become a member in its individual capacity and obtain Directorship of Section 8 company. It has perpetual existence and thus, the entry or exit of any member will not affect the operation of the Section 8 company.
- Limited liability: The members of the Section 8 company have limited liability as per their share subscribed. They are not personally liable for the losses of the company.
- Credibility: Section 8 companies are more credible and reliable than any other form of a charitable organisation. It is regulated under the provisions of the Act thus they need to have mandatory audits every year and the Memorandum of Association cannot be altered relating to the non – profits objectives of the company.
- Exemption to the donors: The tax exemption is granted to the donations received by the section 8 company under Section 12A and 80G of the Income Tax Act, 1961.
Documents required to obtain an Section 8 Company
- Copy of PAN Card
- Identity Proof (Voter Card, Passport, Driving Licence)
- Address Proof (Bank Statement, Mobile bill, Telephone bill, Electricity Bill)
- Passport Size Photo
| Name of the form | Purpose of the Form |
| SPICE+ | Application for Incorporation of Company |
| INC 12 | Application for License |
| INC 13 | Memorandum of Association |
| INC 14 | Declaration from a practising Chartered Accountant |
| INC 15 | Declaration from each person making the application |
| INC 16 | License to incorporate as Section 8 company |
| INC 22 | Situation of Registered Office |
| DIR 2 | Consent of Directors |
| DIR 3 | Application to ROC to get DIN |
| DIR 12 | Appointment of Directors |
Purpose of the Section 8 Company Forms
Form INC-12 – is filed for the grant of the license to operate as a Section 8 company. Along with this form, applicants are required to attach a draft copy of the Memorandum of Association (MOA) and Articles of Association (AOA). There is a prescribed format for Memorandum of Association of a Section 8 company in Form INC 13. The subscription pages of the MOA and AOA shall be signe by each subscriber along with their name, address, description, and occupation, in the presence of at least one witness.
Form INC 12 is to be submitte along with the following attachments :
- INC-13 – Memorandum of Association
- Draft Articles of Association
- INC-15 for the declaration by each subscriber to MOA that the draft memorandum. Articles of association have been draw up in conformity with the provisions of Section 8
- Estimated statement of Income & Expenditure for the next three years
- List of proposed Promoters and Directors of the Company
The following forms are require to be file after the issuance of the license to the company
Form SPICe+ – The SPICe+ form is the application for the incorporation of the company. The company can be reserve in the first part of the SPICe+ plus form. However, only one name can be declare for approval in this form. Thus, it is recommende that applicants access the free name search facility of existing companies available on the MCA portal before choosing the name. The system will provide a list of closely resembling names of the existing companies based on the search criteria. This will help you avoid choosing a name similar to that of an existing company.
The following documents must be attache along with SPICe+ Form:
- Memorandum and articles of the company duly signed by all the subscribers
- Declaration from each of the subscribers and first directors that they are not guilty of any offence or misfeasance
- Declaration in Form INC 14 and Form INC 15 from a Chartered Accountant and each person making the application respectively
- Address of correspondence till the registered office is official
- Address and Identity proofs of all the subscribers to MOA and first directors of the company
- Passport size photograph of all the directors and shareholders
Copy of the rental agreement, in case the company registered office, is on a rented property
Form INC 22 – Form INC 22 is file for providing notice of the address of the company’s registered office. It needs to be file within 30 days of the incorporation of the company.
Form DIR 12 – Form DIR 12 is file for the appointment of the directors of the company. It must be file within 30 days from the date of the appointment of the directors.
FAQs About Section 8 Company?
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