Section 8 Company Registration (2023)

A Non-Government Organization (NGO) is an organization that works for non-profit/charitable purposes. NGOs established as Section 8 companies under the Companies Act 2013 are subject to the supervision of the Ministry of Corporate Affairs (MCA), whereas NGOs registered as trusts or companies are subject to State Subject to registration. government authority.

Article 8 Incorporation has many advantages over trusts and incorporation. This type of business gets more credibility from government agencies, donors, and other stakeholders. This article explains section 8 company registration.

What Is a Section 8 Company in India

The primary purpose of registering a company as a Section 8 company is to promote beneficent purposes such as trade, commerce, arts, philanthropy, education, religion, environmental protection, social affairs, and sports research.

At least two directors are required to form a Section 8 company. Also, for Section 8 companies, there is no minimum paid-up capital requirement.

In India, a non-profit organization can be registered with the Registrar of Societies or registered as a non-profit corporation under Section 8 of the Companies Act, 2013.

Profits, if any, of this company are used to further the objectives of the company and are not distributed as dividends to shareholders. A Section 8 company is the same as a Section 25 company under the old companies-Act 1956. Section 25 has become Section 8 under the new Companies Act 2013.

How Can I Register My Section 8 Company in India

1. Request a DSC for the proposed Section 8 company directors. Once you have received your DSC, submit Form DIR-3 to the ROC to obtain your DIN. You must attach your ID and proof of address to receive your DSC.
2. Once DIR-3 is approved, the ROC will assign DINs to the proposed directors.
3. Submit Form INC-12 to the ROC and attach the above-required documents to apply for a Section 8 license for your business.
4. Once the form is approved, a license will be issued pursuant to Section 8 of Form INC-16.
5. Once licensed, submit the SPICe+ form along with the required attachments above to the ROC for inclusion.
6. Upon successful submission of the form, the ROC will issue a Certificate of Incorporation with a unique Company Identification Number (CIN).

What Are the Disadvantages of Section 8 Company

Below are the usual drawbacks of Section 8 companies.

Profit sharing is not allowed:

Unlike private corporations, public corporations and his OPC corporations, Section 8 corporations do not have the authority to make profit sharing and allocate their fair share to members. Profits generated by these companies may only be used for charitable purposes.

Profit cannot be the primary goal:

Under no circumstances can a Section 8 company pursue commercial purposes. However, you are free to earn income from legitimate sources or through donations. Needless to say, such profits may only be used to further charitable purposes.

Presence Of Stringent Compliances And Norms:

Section 8 companies must adhere to a variety of long-term compliances and standards in order to continue to operate within the legal environment. All of these standards should be included in a company charter document such as an MOA or AOA. Members of Section 8 Units have access to a wide range of benefits. Likewise, these members also have some unavoidable shortcomings.

Prohibition on appointing a member as a remunerated officer:

Section 8 Companies may not appoint members as paid representatives. This condition is specified by law in force.

What Is the Benefit of Section 8 Company

Registering an NGO under Section 8 of the Companies Act 2013 has many advantages.

No minimum capital:

There are no minimum capital requirements for Section 8 companies and the Section 8 capital structure is subject to change at any time according to the company’s growth requirements. In this way, the funds needed to operate the business can be brought in later through donations and donations from members and the general public.

Tax benefits:

The Auditor’s Reporting Order (CARO) does not apply to Section 8 companies. Section 8 corporations enjoy tax benefits under Section 80G of the Income Tax Act of 1961.

No stamp duty:

No stamp duty is levied when setting up a Section 8 company in India. Section 8 entities are not required to pay stamp duty on the Memorandum of Association (MOA) or Articles of Association (AOA) of a limited liability company or legal entity.

Independent legal entity:

Section 8 The registration of a company acquires an independent legal personality for its members. Even individuals can become members of a registered general partnership and receive management of the company as described in Section 8. As it exists indefinitely, the entry or exit of members does not affect the operation of the Section 8 Entity.

Limited Liability:

Members of the Section 8 Society have limited liability in proportion to the shares. They are not personally responsible for the company’s losses.

Credibility:

Section 8 Corporations are more reliable and credible than any other non-profit organization. As regulated by law, a compulsory examination must be taken each year and the Articles of Incorporation cannot be changed in relation to the charitable purposes of the company.

Donor Exemptions:

Tax exemptions are granted on Section 8 contributions received by corporations under Sections 12A and 80G of the Income Tax Act 1961.

List of section 8 companies registered in India

Frequently Asked Questions (FAQs):

Is 12A registration compulsory for Section 8 company?

It is important note that despite the fact that trusts, corporations, and Section 8 corporations are registered under their respective laws, registration under Section 12A must claim an exemption under the Income Tax Act.

Is NGO and Section 8 company same?

A non-governmental organization or NGO is a non-profit organization that provides social services without government funding. Section 8 company are for-profit organizations that provide housing to low-income individuals and receive government funding.

Can Section 8 register as MSME?

Yes, a Section 8 company can be converted to a limited company if someone wishes in the future. An individual cannot apply for MSME registration.

Does Section 8 company require GST?

Regarding GST registration for Section 8 entities, please note that Section 8 entities subject to the GST Act must be registered for GST.

Difference between section 8 and section 25 company

One of the most common types of non-profit organisations in India, a popular Section 25 company under the pre-1956 Companies Act is equivalent to a Section 8 company. However, Section 25 (as in the previous law) was replaced by Section 8 in the new Companies Law 2013. 

Conclusion

Now you got to know about section 8 company registration. Section 8 company are usually established to serve charitable purposes such as advancing the arts, culture, science, philanthropy, and so on. These companies face minimal legal obstacles in asserting their legal status through registration.

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