When individuals want to work for social welfare, environmental protection, charitable causes, educating children, empowering women or other noble purposes, they generally have three popular entity options to choose from: (i) Society, (ii) Trust and (iii) Section 8 Company. While all three serve non-profit purposes, a Section 8 Company is often the most preferred choice due to its reputation, structured corporate governance and suitability for receiving institutional as well as foreign funding.

Registered under Companies Act, 2013, a Section 8 Company provides a statutory mechanism for carrying out charitable and social welfare activities. In this blog, we shall discuss all that you need to know about section 8 company registration, including its features, process and benefits.

What is a Section 8 Company?

A section 8 company is a type of business entity that is registered with the aim of promoting non-profit activities. This includes, but is not limited to, eradication of poverty, women empowerment, child welfare, elderly care, healthcare and medical relief, defending human rights and environmental protection. 

This business entity is perhaps the only entity under the Companies Act, 2013, that is registered for non-profit purposes rather than for profit-making purposes. The intention behind registering such a company is not to benefit oneself but to serve and benefit others at large.

What is Section 8 Company Registration?

Now that you know what a Sec 8 company is, it will be easier for you to understand what Section 8 company registration means. It is the process of registering a non-profit organisation u/s 8 of the Companies Act, 2013, with the Registrar of Companies (ROC), under the Ministry of Corporate Affairs (MCA). 

The entire process is conducted online through the MCA portal. It eliminates the need for physical visits to government offices. Any profit or income generated by a Section 8 Company must be used solely towards achieving its stated objectives and no dividend can be paid to its members. 

Main Features Of Section 8 Company Registration 

Here are the main features of sec 8 company registration:

S. No. Section 8 Company Registration – Salient Features
1. A Sec 8 company may be established to promote one or more of the following purposes: Commerce, Art, Science, Sports, Education, Research, Social Welfare, Religion, Charity, Protection of the Environment or any other beneficial public purpose.
2. Such a company is prohibited from distributing any profits or dividends to its members. Its income and profits must be applied towards promoting the company’s objectives.
3. In a Sec 8 company incorporated with limited liability, the liability of its members is limited in accordance with provisions of Companies Act, 2013 and the company’s constitutional documents. 
4. The sec 8 companies do not have a minimum capital pre-requisite. 
5. Such companies are to abide by all the mandatory financial obligations such as maintaining correct books of accounts, conducting periodic audits and filing annual returns  with the RoC.
6. In order to encourage and make it feasible for the company to carry out its charitable activities, they are eligible for certain tax exemptions under the Income Tax Act.
7. In case of dissolution, all remaining assets, after settling the company’s liabilities and debts, may be transferred to another Section 8 Company with similar objectives, subject to conditions imposed by NCLT, or may be sold and the proceeds credited to the Insolvency and Bankruptcy Fund. This is known as the asset lock principle u/s 8(9) of Companies Act, 2013. 

 

Steps Involved in Section 8 Company Registration Process 

The following are the essential steps involved registration of a Section 8 Company:  

Step 1: Prior to initiating the registration process with MCA, promoters are required to discuss and decide on the objectives, proposed activities, structure and other relevant financial and operational aspects of the Sec 8 Company.

Step 2: The proposed directors and subscribers who are required to digitally sign the incorporation documents must obtain a Digital Signature Certificate (DSC) and complete the required registration and DSC association on the MCA portal.

Step 3: The proposed name of the Sec 8 Company must be decided after checking its availability through the Ministry of Corporate Affairs (MCA) portal. The proposed name should reflect the company’s objectives and comply with the applicable naming guidelines to avoid duplication or rejection.

Step 4: Drafting the Memorandum of Association (MOA) and Articles of Association (AOA) is the next step to ensure that they appropriately reflect the proposed objects of the company and comply with the requirements defined u/s 8 of the Companies Act, 2013 and applicable rules.

Step 5: The incorporation application is then prepared and submitted through the MCA’s SPICe+ system along with the prescribed documents and declarations. The application generally includes the MOA, AOA, identity and address proofs of the subscribers/proposed directors and registered office-related documents among other documents. The prescribed professional declarations and estimated income and expenditure for proposed company are also submitted as required.

Step 6: As part of the SPICe+ incorporation process, the application for a Section 8 licence is also made through the applicable MCA forms. The Registrar of Companies examines the application and may seek clarification, resubmission or additional documents, if required. Upon satisfaction with application and compliance requirements, the incorporation of the company and issuance of the Section 8 licence are processed by the MCA.

Benefits Of Section 8 Company Registration 

Some of the major benefits of Section 8 Company are stated below: 

S. No. Section 8 Company Registration – Benefits
1. Section 8 co registration provides legal recognition and lending credibility to the non-profit organization.
2. It establishes a distinct corporate identity and enhances trust among stakeholders.
3. Income tax and several other tax exemptions are extended to eligible sec 8 companies meeting certain requirements. Due to this, such a company can function with ease in realizing its core objectives as it gets better leverage due to the availability of more finances.
4. Unlike traditional nonprofit organizations, sec 8 companies can function with a corporate set-up and its functioning.
5. Due to the concessions extended to section 8 co towards autonomy in functioning and functioning in line with a corporate industry, many Non-Governmental Organizations (NGOs) and trusts are looking for this recognition to have better fundraising opportunities and enhanced administrative mechanisms.
6. Institutions that promote educational research, science and development can function in a better manner through section 8 registration as it provides a structured corporate framework as well as legal recognition for carrying out activities in these fields.

 

You May Also Read: Types of Company Registration  

The Wrap-Up

Section 8 Company Registration in India has strong legal support and helps non-profit organizations work for society through welfare, education and charity. Benefits like tax exemptions and protection of members’ personal assets certainly make this registration a great choice. Today, more and more organizations are choosing Section 8 registration to bring social change with a professional structure. In areas like education, research and philanthropy, these companies play an indispensable role. 

Need assistance in Sec 8 company registration? Get in touch with Registrationkraft. 

Frequently Asked Questions (FAQs) 

Q1. Which Act governs Section 8 companies in India? 

The Companies Act, 2013 governs Section 8 companies in India. 

Q2. Can I set up a Section 8 company for profit making? 

No. You cannot start a sec 8 company for the purpose of earning profit for personal benefits of members. Such a company is set up for undertaking non-profit activities for the welfare of the society. Any profit earned by such a company must be used purely for its social purpose. 

Q3. Can a Sec 8 company receive foreign funding? 

Yes, it can receive foreign funding but it must first get FCRA registration or prior permission, as the case may be. The company must also follow the prevailing rules for foreign funding.

Q4. Can a Sec 8 co promote more than one charitable cause?

Yes. A Sec 8 co can promote multiple charitable causes.

Q5. Do Sec 8 companies need to convene board meetings?

Yes. Like all companies registered under the Companies Act, 2013, Section 8 companies are also required to convene Board Meetings. However, the requirements are slightly relaxed. Instead of convening four meetings a year, the Sec 8 companies are required to convene at least one Board Meeting in each half of calendar year.

Q6. How many directors can a sec 8 co have?

A company u/s 8 of Companies Act, 2013, must have a minimum of 2 directors if incorporated as a pvt ltd company or 3 directors if incorporated as a public ltd company. There is no restriction on the maximum number of directors in such a company.