Meaning of Section 8 Company Registration
A Section 8 Company in India is a Company which:
- Is incorporated for the promotion of art, commerce, science, education, research, sports, charity, religion, social welfare, protection of the environment or any such other similar object.
- It also intends to apply all its profits, income, or any other earnings, in promoting these objects.
- Pays no kind of dividend or income to the members.
These are limited companies that are registered under the Companies Act of India, and will be treated as limited companies without the usage of the phrase "limited" added to their name. They may have been registered as the private limited or public limited companies.
Section 25 Company of the earlier Companies Act, 1956 is a prior version of Section 8 Companies in India. Section 8 Companies in India are a legal form for Non-Profit Organizations or NPOs and Non-Governmental organizations or NGOs. A Section 8 Company has the full authority to work anywhere in the whole country.
An NGO in India can be listed as a Section 8 company following the Companies Act 2013 or as a trust that supports the Trust Act 1882 or as a society under the Societies Act 1860. Section 8 Company Registration in India is the method of incorporation of anNon-Governmental Organizations under the Companies Act 2013. Any company under Section 8 of the Companies Act, 2013 can be registered for promoting 'Science', 'Art', 'Commerce', 'Technology', 'Education', 'Sports', 'Social Research', 'Social Welfare', 'Religion', 'Charity' and 'Protection of Environment' etc.
What is the procedure of Section 8 Company Registration in India?
The process and requirements of a Section 8 Company registration in India are exactly the same as laid down for a limited liability company. A Section 8 Company includes all the rights and obligations that come with such a limited liability company. The only aspect where such companies differ is that a Section 8 Company is not allowed to use the words “Section 8” or “Limited” in its name.
- An additional requirement is there of seeking an approved license from the central government of India under Section 8 of the Companies Act, 2013.
- This license, essentially, permits the applicants to delete Private or Public Limited from the name of the company. With this license, the company also becomes eligible for certain tax exemptions from provisions of the law and has concessions in the prescribed fee.
- If the proposed Section 8 Company in India has been registered as a private limited company then a minimum of 2 promoters are essentially required. But if it is a public limited company Section 8 Company then a minimum of 7 promoters should be there
Documents Required for Section 8 Company Registration
The essential documents required for Section 8 Company Registration in India are as follows:
- PAN Card details of all the Members
- Aadhaar Card details of all the Members
- The latest Bank Statements of all the Members and also of the Company
- The Telephone Bill and Electricity Bill
- Voter Identity Proof of all the members
- Passport of all the members
- Driving license of all the members
- Passport size photographs of all the members
- True Copy of the Rental agreement
Eligibility For Section 8 Company Registration
The eligibility criteria for Section 8 Company Registration in India is as follows:
- Any Person or HUF or limited Company is eligible to start a Section 8 Company Registration inside the territory of India.
- Any two or more persons who will act as a shareholder or director of the Company are required to fulfil all the conditions of the Section 8 Company Registration in India.
- At least one of the directors should be a resident of India.
- The intention should be the advancement of social welfare, sports, the progress of science and art, educational and financial support to low-income societies.
- The surplus created should be used for reaching the principal purpose of the Section 8 Company solely.
- Any of the members of the Company are not allowed to draw any kind of compensation in any form of cash or any other medium.
- No profit is allowed to be shared among all the members and director of the Association either directly or indirectly.
- The Company is required to have a distinct vision and outline plan for the next coming three years.
- There should be proper property management in the Company. The ownership of the property should lie in the name of the Company, and such a property can only be sold as per the rules mentioned under the Companies Act, 2013. For Example, A property can be sold with the consent of the Board of Directors in the form of a resolution passed by them in General Meeting.
- A proper yearly filing of accounts, reports and the returns of the Association with the Registrar of Companies is required to meet the essential compliance required.
- All the Administrators of the company are required to have their valid DIN or Director’s Identification Number and DSC or Digital Signature Certificate.
What are the primary benefits of Section 8 Company Registration in India?
The primary benefits of Section 8 Company Registration in India are as follows:
- Distinct Legal Identity
- Zero Stamp Duty
- No Minimum Capital Requirement
- Exemption to the donors
- Tax Benefit
Distinct Legal Identity
Section 8 Company in India has a separate legal entity that is different from its members. Its legal standing is also different from its members. The Company has its existence till perpetuity. Along with having all organized operations and greater flexibility.
Zero Stamp Duty
A Section 8 Company is exempted from the requirement of paying stamp duty on the Memorandum of Association and Articles of Association of the private or public limited companies. Such a requirement is applicable for registration of all other kinds of company structures.
No Minimum Capital Requirement
No minimum capital limit has been previously mentioned for a Section 8 Company in India. The capital structure of any company may be altered at any stage as per the growth requirements of the day to day business of the company. This also implies that a company can be formed without any kind of share capital. The funds necessary for carrying out the business operations can be brought, later on, in the form of donations and/or certain subscriptions from the members and general public at large.
Exemption to the donors
The people donating to a Section 8 Company are always eligible for certain tax exemptions under Section 12A and 80G of the Income Tax Act of India.
Any registered partnership firm can also become a member in its individual capacity and obtain Directorship of a Section 8 Company in India.
Section 8 Company is not required to suffix the words Limited or Private Limited, next to its registered legal name. It can be registered with certain names that have words like Club, Association, Society, Council, Charities, Foundation, Institute, Academy, Organisation, and Federation.
The basic requirements of the report Order or CARO of the Companies Auditor is not applicable to this type of Section 8 Company.
For a Section 8 Company in India, there are many tax benefits that are granted to them.
Section 8 Companies generally are more reliable than all other forms of the charitable organizations working in India. They are governed by the Companies Act, 2013, and are regulated very strictly. Such as the essential requirement of a mandatory annual audit, or the Memorandum of Association and Articles of Association cannot be altered at any stage or in any kind of situation. The rules on managing the day to day profits and losses of the company make such companies more trustworthy.
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Frequently Asked Questions
While the definition of a 'taxable person under thee GST' includes a trust, society, or Section 8 company, as long as such entities are not engaged in any kind of economic activity including trade and commerce, they cannot be treated as a taxable person under the GST.
The concept of Section 8 Company Registration in India was introduced in the Companies Act 1913 that permitted companies with certain charitable objects etc. to be registered without the usage of the words 'Limited' or 'Private Limited.’