Key Features of a Section 8 Company

• Non-Profit Objective: The primary objective of a Section 8 Company is to promote social welfare and not to earn profits. Any income generated must be reinvested in the company’s objectives.
• Limited Liability: Members have limited liability, meaning their personal assets are protected from the company’s debts.
• No Minimum Capital Requirement: Unlike other types of companies, there is no minimum capital requirement for forming a Section 8 Company.
• Tax Benefits: Section 8 Companies may be eligible for tax exemptions and benefits under various sections of the Income Tax Act, subject to certain conditions.
• Separate Legal Entity: The company is a separate legal entity from its members, capable of owning property, entering into contracts, and suing or being sued in its own name.

3. Merits of Forming a Section 8 Company

• Legal Recognition: Section 8 Companies are recognized by law, providing them with credibility and trust among donors, government agencies, and the public.
• Limited Liability Protection: Members are protected from personal liability, safeguarding their personal assets.
• Tax Exemptions: These companies may qualify for tax exemptions under sections like 12AA and 80G of the Income Tax Act, making them attractive to donors seeking tax benefits.
• No Profit Distribution: The focus on reinvesting profits into the company’s objectives ensures the alignment with its charitable mission.
• Perpetual Succession: The company’s existence is not affected by changes in membership or the death of members.

 No Minimum Capital Requirement: Entities covered by Section 8 are free to modify their financial structure in accordance with their growth, eliminating the need for a minimum financial requirement. 

  No Stamp Duty: Section 8 companies are exempt from paying stamp duty during the registration process, reducing the cost of establishment. 

  Separate Legal Entity: Section 8 companies have a separate legal identity and perpetual existence, enhancing credibility and providing autonomy. 

  Increased Credibility: Strict legal compliance frameworks ensure that Section 8 companies have a higher level of credibility and trustworthiness compared to NGOs and trusts. 

  No Title Required: Section 8 companies have the freedom to choose a name without the requirement to add the term ‘Section 8’ to their name, allowing for greater naming flexibility.

4. Disadvantages of a Section 8 Company

• Strict Regulatory Compliance: Section 8 Companies are subject to stringent regulatory requirements, including annual filings, audits, and adherence to the objectives stated in their MOA.
• No Profit Distribution: Members cannot receive any profits or dividends, which might limit the ability to attract investors.
• Complex Formation Process: The registration process is more complex compared to other types of non-profit organizations like trusts or societies.

Minimum Specifications for Section 8 Companies

1. A minimum of two shareholders is needed;
2. A minimum of two directors is required (directors and shareholders may be the same individual);
3. A minimum of one director must be an Indian resident.
4. There is no minimum capital requirement.
5. For Indian nationals, it is necessary to have an income-tax PAN;
6.  It is necessary to provide identification, such as a voter ID, Aadhar card, driver’s license, or passport; however, in the case of foreign nationals, identification verification requires a passport.; 
7. Any proof of residence, such as an electricity bill, phone bill, mobile bill, or bank statement;
8. The proof of the Registered Office address, which is the lease agreement accompanied by the most recent rent receipt, a copy of the landlord’s utility bill, and, in the event that the premises are rented, a no objection certificate from the owner;
9. If the Director or the Promoters own the premises, any ownership documentation (sale deed, house tax receipt, etc.) should be submitted with the no objection certificate.

Documents required Section 8 Company Registration in India

Below is the list of all necessary documents required for section 8 Company registration in India

• Identity and Address proof of directors
• Aadhar Card
• Driving License
• PAN card/DIN
• Email address and Mobile Number
• Utility bills
• Latest Bank Statements
• Address proof of Registered office
• Latest Utility bill (Electricity/broadband/mobile bill)
• Rent Agreement
• Obtain No objection certificate (NOC)

Forms required for registration

• SPICe + Part A – Name Reservation
• SPICe + Part B (INC-32) – Incorporation Application
• INC-13 – E-Memorandum of Association
• INC-31- E-Article of Association
• INC-35 – Agile Pro
• INC-9 – Declaration by Directors/Subscribers

Note: INC-12 – Application for License for Section 8 Company has been merged in Form SPICe+Part B itself

5. Steps to Form a Section 8 Company

• Step 1: Choose a Unique Name for Your Company
  • Name Guidelines: The name should be unique and should not resemble the name of any existing company or trademark. It must reflect the company’s charitable or not-for-profit nature.
  • Name Availability Check: Check the availability of the name with the Registrar of Companies (ROC).
• Step 2: Obtain Digital Signature Certificates (DSC)
  • Obtain DSCs for the directors for the electronic submission of documents during the registration process.
• Step 3: Apply for Director Identification Numbers (DIN)
  • Apply for DINs for the proposed directors if they do not already have them.
• Step 4: Draft Memorandum of Association (MOA) and Articles of Association (AOA)
  • MOA: Clearly state the company’s objectives, emphasizing the promotion of a particular social cause and the non-profit nature of the company.
  • AOA: Outline the rules and regulations governing the company’s operations, including the duties and responsibilities of directors and members.
• Step 5: File Incorporation Documents with the ROC
  • Incorporation Form: Submit the incorporation form (SPICe+ in India) along with the MOA, AOA, identity proof, address proof, and other necessary documents to the ROC.
  • Application for License: Apply for a license under Section 8 using Form INC-12, which includes submitting the MOA, AOA, and details about the company’s objectives.
  • Obtain License: Once approved, the ROC will issue a license under Section 8, allowing the company to operate as a non-profit organization.
• Step 6: Obtain Certificate of Incorporation
  • After the ROC reviews and approves the application, a Certificate of Incorporation is issued, officially recognizing the Section 8 Company.
• Step 7: Apply for PAN and TAN
  • Apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
• Step 8: Open a Bank Account
  • Open a dedicated bank account in the company’s name for managing donations, grants, and other financial transactions.
• Step 9: Register for Applicable Tax Exemptions
  • Tax Exemptions: Apply for tax exemptions under sections like 12AA and 80G of the Income Tax Act to provide tax benefits to donors and to the company itself.