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WHO CAN APPLY FOR REGISTRATION OF A SECTION 8 COMANY?

WHO CAN APPLY FOR REGISTRATION OF A SECTION 8 COMPANY?

Introduction

YOU NEED TO KNOW WHO CAN APPLY FOR REGISTRATION OF A SECTION 8 COMPANY?

Any individual, group, or association intending to promote charitable, scientific, educational, religious, or social welfare causes can apply for Section 8 Company registration in India. This includes individuals, associations of persons, existing companies, trusts, and societies. The primary requirement is a commitment to non-profit activities, benefiting the public without profit distribution among members. Conversion from existing trusts, societies, or companies is possible, subject to compliance with the Companies Act, 2013. The application is submitted to the Registrar of Companies, accompanied by essential documents outlining the company’s objectives and adherence to non-profit principles, fostering community welfare. Visitofficialwebsite 

KEY FEATURES OF CHARACTRISTICS OF A SECTION 8 COMPANY

  1. Non-profit Purpose: The primary objective of a Section 8 company is to promote activities for social welfare, charity, or any other non-profit purpose. It is not established for making a profit.

  2. Limited Liability: Just like other companies, Section 8 companies have the benefit of limited liability. The personal assets of the members and directors are not usually at risk in the event of the company’s financial obligations.

  3. Name: The name of a Section 8 company must include the words “Section 8” or “Limited” at the end, as prescribed by the Companies Act.

  4. Members and Directors: A Section 8 company must have a minimum of two members and two directors. The same person can serve as a member and a director.

  5. No Dividends: Unlike for-profit companies, Section 8 companies are prohibited from distributing profits or dividends to their members. Any surplus or income generated must be reinvested in furthering the company’s objectives.

  6. Government Approval: The registration of a Section 8 company requires approval from the Central Government, specifically the Registrar of Companies.

  7. Regulatory Compliance: These companies must comply with various regulatory requirements, including maintaining proper accounts, filing annual returns, and adhering to the provisions of the Companies Act, 2013.

  8. Conversion: Existing trusts, societies, or Section 25 companies can convert themselves into Section 8 companies, provided they meet the required criteria.

PROCESS TO REGISTER SECTION 8 COMPANY

  1. Step 1: Obtain Digital Signature Certificate (DSC)

    • The first step in the registration process is to obtain Digital Signature Certificates (DSC) for the proposed directors and subscribers of the Section 8 company. DSCs are required for online filing and signing of documents.
     

    Step 2: Obtain Director Identification Number (DIN)

    • Directors of the proposed company need to apply for Director Identification Numbers (DIN). This is done by filing Form DIR-3 online with the Ministry of Corporate Affairs.
     

    Step 3: Name Approval

     

    Step 4: Draft Memorandum and Articles of Association

    • Draft the Memorandum of Association and Articles of Association for the Section 8 company. These documents should include the objectives of the company and other necessary clauses as per the Companies Act.
     

    Step 5: Application to Central Government

    • Prepare and file Form INC-12 (Application for a license under Section 8) with the Registrar of Companies (RoC) to obtain a license for a Section 8 company. This form should be accompanied by the following documents:
      • Memorandum and Articles of Association
      • A declaration confirming compliance with Section 8 requirements
      • A statement of the assets and liabilities of the company
      • A statement of estimated future annual income and expenditure
     

    Step 6: ROC Incorporation Process

    • Once the Central Government approves the license application, the RoC will issue a license. After obtaining the license, apply for incorporation by filing Form INC-7 (for incorporation) and Form INC-22 (for address proof) with the RoC. These forms should be filed within 60 days from the date of obtaining the license.
     

    Step 7: Certificate of Incorporation

    • If the Registrar is satisfied with the documents and information provided, they will issue a Certificate of Incorporation. This certificate signifies the official registration of the Section 8 company.
     

    Step 8: Post-Incorporation Compliance

    • After incorporation, the Section 8 company must ensure compliance with various statutory requirements, such as maintaining proper accounts, conducting annual general meetings, filing annual returns, and adhering to the provisions of the Companies Act, 2013.
     

    Step 9: Commence Operations

    • Once the company is registered, it can start its charitable or non-profit activities in line with the objectives stated in its Memorandum of Association.

ADVANTAGES OF REGISTER SECTION 8 COMPANY

  1. Legal Recognition: A Section 8 company is a legally recognized entity, which provides a formal structure for organizations to carry out charitable or non-profit activities.

  2. Limited Liability: Members and directors of a Section 8 company enjoy limited liability, meaning their personal assets are generally protected from the company’s financial liabilities.

  3. Tax Benefits: Section 8 companies are eligible for tax benefits, such as exemptions from income tax on surplus income, provided the income is utilized for charitable purposes.

  4. Credibility: Registration as a Section 8 company lends credibility to the organization, making it easier to attract donors, grants, and volunteers.

  5. Ease of Transfer: It’s relatively easy to transfer ownership or management in Section 8 companies, as compared to other forms of non-profit entities like trusts or societies.

  6. Perpetual Succession: A Section 8 company has perpetual succession, meaning it continues to exist even if members or directors change.

Who is eligible for Section 8 company

Eligibility for establishing a Section 8 company in India is based on the organization’s objectives and its commitment to non-profit activities. Here are the key eligibility criteria:

  1. Non-Profit Objectives: The primary purpose of the organization must be to promote charitable, educational, scientific, religious, cultural, or social welfare activities. The company’s profits and income should be applied towards these objectives.

  2. Prohibition of Profit Distribution: The Memorandum of Association and Articles of Association must include clauses prohibiting the distribution of profits among its members. Any income generated should be used for the organization’s objectives.

  3. License from Registrar of Companies (RoC): To establish a Section 8 company, individuals or entities need to obtain a license from the Registrar of Companies (RoC). The RoC evaluates the proposed company’s objectives to ensure they align with Section 8 requirements.

  4. Minimum Three Directors: A private Section 8 company must have a minimum of three directors, and a public company must have at least seven directors.

  5. Name of the Company: The name should reflect the non-profit nature of the organization and typically ends with words like Foundation, Association, Society, Council, Club, Charities, Institute, Academy, Organization, or Federation.

  6. Application for Exemption: To avail income tax exemptions, the Section 8 company needs to apply for recognition under Section 12AA of the Income Tax Act. This is important for tax benefits.

It’s essential to note that the eligibility criteria and regulations might be subject to updates, and individuals or entities interested in forming a Section 8 company should refer to the latest provisions of the Companies Act, 2013. Consulting with legal professionals can also provide accurate and current information.

How can I register my Section 8 company in India

To register a Section 8 Company in India, you need to follow the prescribed procedures outlined in the Companies Act, 2013. Here is a step-by-step guide:

  1. Ensure Eligibility:

    • Confirm that your organization’s objectives align with the non-profit criteria specified in Section 8 of the Companies Act.
  2. Obtain Digital Signature Certificate (DSC):

    • Directors and subscribers must obtain a DSC, necessary for filing electronic documents.
  3. Director Identification Number (DIN):

    • Directors must obtain a DIN by filing Form DIR-3 online.
  4. Name Approval:

  5. Drafting of Memorandum and Articles:

    • Draft the Memorandum of Association (MOA) and Articles of Association (AOA) outlining the company’s objectives and rules.
  6. License Application:

    • File Form INC-12 (application for a license under Section 8) with the Registrar of Companies (RoC).
  7. Document Submission:

    • Submit the required documents, including the MOA, AOA, declaration, and other supporting documents, to the RoC.
  8. License Issuance:

    • Upon approval, the RoC will issue the license in Form INC-16.
  9. Incorporation Application:

    • File the incorporation documents (Form INC-7, Form INC-22, and Form INC-20A) within 60 days of receiving the license.
  10. Certificate of Incorporation:

    • Once the RoC verifies the documents, they will issue a Certificate of Incorporation.
  11. Apply for PAN and TAN:

    • Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the Section 8 company.
  12. Apply for 12AA Registration:

    • To avail income tax exemptions, apply for recognition under Section 12AA of the Income Tax Act.
  13. Maintain Compliance:

    • Fulfill annual compliance requirements, including filing financial statements and annual returns.
  14. Bank Account:

    • Open a bank account in the name of the Section 8 company.

Ensure that you stay updated with any amendments to the Companies Act or related regulations. It’s advisable to seek professional guidance or consult with a legal expert for accurate and current information throughout the registration process.

WHO CAN APPLY FOR REGISTRATION OF A SECTION 8 COMPANY

6 benefits of section 8 company

A Section 8 Company in India, formed under Section 8 of the Companies Act, 2013, is designed for non-profit purposes. Here are six benefits associated with Section 8 companies:

  1. Non-Profit Focus:

    • The primary advantage is the ability to operate for charitable, religious, educational, or social welfare purposes, ensuring that the company’s income is applied towards these objectives.
  2. Tax Exemptions:

    • Section 8 companies may be eligible for exemptions under Section 11 of the Income Tax Act, providing relief on income derived from property held for charitable or religious purposes or applied for such purposes.
  3. Limited Liability:

    • Members enjoy limited liability, meaning their personal assets are protected, and the company’s debts do not automatically extend to their personal finances.
  4. Credibility and Recognition:

    • Being a registered entity, a Section 8 Company often garners credibility and recognition, which can be beneficial for attracting donations, grants, and partnerships.
  5. Perpetual Succession:

    • The company enjoys perpetual succession, meaning its existence is not affected by changes in its membership or the death of its members. It continues to exist until it is legally dissolved.
  6. Ease of Funding:

    • Section 8 companies can raise funds through donations, subscriptions, and grants. The non-profit status and the ability to offer tax benefits to donors can make it easier to attract financial support.

It’s important to note that while Section 8 companies enjoy various benefits, they are also subject to compliance requirements and must adhere to the regulations outlined in the Companies Act to maintain their non-profit status and associated advantages.

Do Section 8 companies need GST registration

The requirement for Goods and Services Tax (GST) registration in India is generally based on the turnover of a business. Section 8 companies, being non-profit organizations, may still need to register for GST if their aggregate turnover exceeds the prescribed threshold limits.

As per the GST law, entities engaged in the supply of goods or services with an aggregate turnover exceeding the specified threshold are required to register for GST. However, certain categories of entities, including those providing charitable or religious activities, may have a higher threshold for GST registration.

It’s essential to check the latest GST regulations and thresholds as they may be subject to updates. Additionally, the specific nature of activities and transactions undertaken by a Section 8 company will influence its GST registration obligations. Consulting with a tax professional or checking with the Goods and Services Tax Network (GSTN) for the most recent information is advisable to ensure compliance.

CONCLUSION OF REGISTER SECTION 8 COMPANY

In conclusion, the registration of a Section 8 company in India is a significant step toward establishing a non-profit organization with a clear commitment to charitable, social, or non-profit objectives. It provides a legal structure that offers both advantages and disadvantages. Here are some key takeaways:

HOW AURIGA ACCOUNTING HELP YOU TO REGISTER SECTION 8 COMPANY

  1. Understanding Your Objectives: Auriga Accounting will begin by understanding your charitable or non-profit objectives and helping you structure your organization accordingly.

  2. Legal Guidance: Auriga Accounting can provide legal guidance on the requirements and procedures for registering a Section 8 company, including obtaining the necessary licenses and approvals.

  3. Documentation: Assistance in preparing and organizing the required documentation, including the Memorandum and Articles of Association, financial statements, and other necessary paperwork.

  4. Name Approval: Assistance in selecting a suitable and compliant name for the Section 8 company and submitting it for approval to the Registrar of Companies.

  5. Liaison with Authorities: Handling communication with government authorities, including the Ministry of Corporate Affairs and the Registrar of Companies, for approvals and licenses.

  6. Compliance and Reporting: Ongoing support in complying with regulatory and legal requirements post-registration, including filing annual returns and maintaining proper accounts.

  7. Tax and Financial Advisory: Offering advice on financial management, tax planning, and compliance with taxation rules applicable to Section 8 companies.

  8. Strategic Planning: Providing guidance on strategic planning and fundraising to support your organization’s charitable activities.

  9. Audit Services: Conducting financial audits as required for Section 8 companies.

February 21, 2024

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