Section 8 companies can be formed only after obtaining a license from the Central Government. As far as the registration of a section 8 company is concerned, the procedure and documentation is almost similar to that of registering a “limited company”. The application for registration is submitted to the Registrar of Companies along with the prescribed application fee. Section 8 companies can either be registered as a limited or an unlimited company, according to the decided liability of the shareholders. However, the shareholders are not entitled to receive any amount of dividend and the entire income or profit earned by it is completely spent on the fulfillment of its only objective mentioned above.
Section 8 of Companies Act 2013 mentions provisions to establish a company as a non-profit organization owned by an individual or an association of persons. Such companies must obtain a prior approval and license from the Central Government, prior to being established as a non-profit entity. The primary objective of Section 8 of companies Act 2013 is to promote arts, commerce, education, sports, science, research, social welfare, religion, charity, environment conservation, and such other objects as prescribed by law. All the income, donations, and grants that are pocketed by a section 8 Company, must be completely spent in the promotion of the objects mentioned above.
The first step in registering a section 8 company in India is selecting a valid name of the Section 8 Company, a detailed set of criteria for it. The criteria for the eligibility of the company’s name are mentioned in
Once the name of the company gets approved and reserved by the ROC, the applicant may move towards PART B of the application for registering a section 8 company in India. The documents that are required to be attached with the application for registration can be categorised into the documents of the applicant director, the documents of the principal place of business, and the documents of the company. The list of documents required for registering a section 8 company in India includes the following:
However, before registration, businesses must apply for a license from the Central Government in order to get established as a Section 8 company in India. The application of the license is filed in form INC 12. The documents required to be submitted along with INC 12 have been listed below.
The government charges in registering a section 8 company begins with the application for DSC. DSC is issued by certifying authorities licensed by the Central Government. The offices of such authorities are located across the country with specific territorial jurisdictions. Accordingly, different authorities charge different amounts as the application fee for issuing DSCs. However, these charges usually fall under the range of Rs. 8,000 to Rs.13,000, depending upon the class of DSC issued, its validity period, and the authority issuing it. After obtaining the DSC, it must be ensured that all the directors of the company have a DIN before applying for its registration. DIN of the current directors can be applied using DIR 3, which has a fixed application fee of Rs. 500. Since a section 8 company can appoint a minimum of 2 directors, the minimum cost of obtaining a DIN shall amount to Rs. 1000.
The name of the company can be reserved using the RUN form or PART A of the SPICe+ application, the application fee of both applications being fixed at Rs.1000 each. The MoA and AoA of the company are also submitted to the RoC, the charges for which are different in different states of India. Additionally, charges like stamp duty, cost of stamp paper, and notary charges, paid during company registration, are levied and collected by the state government.
Registering a Section 8 company in India is beneficial for people wishing to contribute towards the welfare of the society in multiple aspects. For instance, the shareholders have the option of registering the company as a limited liability, thereby reducing the obligations of the shareholders. Moreover, there is no minimum capital requirement for setting up a section 8 company, which results in reducing the cost of formation of a section 8 company. Section 8 companies also receive several exemptions on the payment of taxes and other procedural compliances under the Income Tax Act. Such companies are more credible among other kinds of NGOs, as it operates as an organisation licensed by the Central Government.