Non-profit organisations in India can either be established and registered under the Societies Registration Act as societies, under the Indian Trusts Act as trusts, or under the Companies Act as section 8 companies. Among these, section 8 companies and societies are formed with the same objective, of promoting art, religion, charity, and social welfare. Trusts, on the other hand, are formed as an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another owner. The purpose of this article is to give a complete overview of the eligibility, procedures, and cost involved in registering a Section 8 company in India.
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.
Table of Contents
What is a Section 8 of Companies Act 2013?
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.
A section 8 company must be registered as a “Limited Company”, fixing the liability of its owners at a certain ratio. Hence, the types of legal statuses that a Section 8 Company can have includes either a Private Limited Company or a Public Limited Company. To get registered as “private limited”, the company must have a minimum of 2 owners, extended to the maximum limit of 20 owners. On the other hand, to get registered as “public limited”, the company must have a minimum of 7 owners, with no prescribed maximum limit for the same. Additionally, no minimum and maximum capital limit is required to set up a section 8 company.
What is Process of Registering a Section 8 Company?
The process of registering a Section 8 company is exactly the same as that of registering a “limited company”. The application used for the process for registering a section 8 company in India is called the online SPICe+ form, available on the official website of the Ministry of Corporate Affairs. SPICe+ application is divided into two parts- PART A and PART B. While PART A contains the application for reserving the name of the company, PART B contains the application for its registration, along with 10 other additional services which includes DIN, PAN, TAN, EPF registration, ESI registration, Professional Tax registration, GST registration, Shops and Establishment registration, and opening a bank account.
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:
- PAN card of all directors and shareholders.
- Proof of Identity of all directors and shareholders (Aadhar/ Driving License/ Passport/ Voter ID). If the director or shareholder is a non-resident, he must provide his passport as a proof of identity.
- Proof of registered address of all shareholders and directors (Telephone bill, electricity bill, water bill, gas bill, or a bank statement not older than two months)
- DIN of all directors
- MoA and AoA of the company
- Proof of registered address of the office premises or the principal place of business
- No Objection Certificate from the owner of the premises
- A copy of the Rent Agreement (stamped and notarised) or the property documents
- INC 9 declaration by first directors that the documents furnished are authentic.
- INC 14 declaration by independently practicing Chartered Accountant, Company Secretary, or high court advocate are authentic.
- The online SPICe+ application must be signed using a Class III DSC.
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.
- MoA and AoA of the company in Form INC 13
- Independently practicing Chartered Accountant, Company Secretary, or a High Court Lawyer shall declare that the MoA and the ApA have been drawn up in conformity with the provisions of Section 8 of the Companies Act 2013. Additionally, they also declare that the company has been registered in absolute compliance with Section 8 of the act as well. Such a declaration if filed in form INC 14.
- An estimate of the future annual expenditure and income of the company for the successive three years, along with specifications of the sources of income, and the objects of expenditure.
- All subscribers of the company must file the declaration form INC 15, declaring that the MoA and the ApA have been drawn up in conformity with the provisions of Section 8 of the Companies Act 2013 and that the company has been registered in absolute compliance with Section 8 of the Companies Act 2013.
What is the cost of registering a Section 8 Company?
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.