Everything on Section 8 Companies - Incorporation, Compliance & Benefit
What is a Section 8 Company?
A Section 8 Company is an Indian non-profit company registered under the Companies Act, 2013. It exists to fulfill charitable objectives such as education, art, commerce, science, religion, or social welfare. Section 8 companies, unlike private limited companies, cannot pay dividends to their shareholders; such companies must reinvest profits in furtherance of their stated objectives.
Who Should Opt for Section 8 Company Registration?
Ideal candidates are:
- NGOs & Charitable Trusts
- Educational institutions
- Social entrepreneurs
- CSR arms of companies
Legal Provisions
Governing Act and Authority-
Such companies are regulated under and constituted by the Companies Act, 2013, and are under the jurisdiction of the Ministry of Corporate Affairs (MCA).
Objectives and Purpose-
It must be non-profit-oriented and income or profit must be used only towards the promotion of these objectives.
Advantages of a Section 8 Company
Tax Exemptions and Concessions-
Section 8 companies can avail exemption under Section 12A and 80G of the Income Tax Act, thus bringing down their tax liability.
Synopsis -
Corporate registration and incorporation under the Companies Act provide transparency and accountability, which, in turn, engender trust in the public and donors.
Exemption from Stamp Duty-
Stamp duty is not levied for MOA & AOA in the case of incorporation of a Section 8 Company.
Pre-Requisites for Registration
Minimum Requirements-
- Two Directors at least must be appointed where it is a private limited structure.
- Two shareholders must be there (can be the same persons as directors).
- At least one director must be a resident of India.
Documents Required-
- Pan and Aadhaar of directors
- Passport-sized photograph
- Utility bill for office address
- NOC from the owner (in case of rent)
Step-by-Step Incorporation Process
Step 1: Name Reservation through RUN
Apply through the RUN service on the MCA portal.
Step 2: DSC and DIN
Apply for Digital Signature Certificates for all directors and Director Identification Number.
Step 3: File SPICe+
Fill up the SPICe+ form with requisite attachments of MOA, AOA, and AGILE form for registering goods and service tax, EPFO, and ESIC.
Step 4: Approval from ROC
The Registrar of Companies will examine the data and issue a Certificate of Incorporation bearing the special Section 8 license.
After Incorporation, Compliance
Annual Filing Requirements
- AOC-4 for Financial Statements
- MGT-7 for Annual Return
Statutory Registers and Records
- Members
- Directors
- Minutes of Meeting
Appointment of Auditor
The Auditor has to be appointed within 30 days of incorporation.
Board Meetings & AGM
- At least two board meetings should be conducted in a year.
- An Annual General Meeting (AGM) is compulsory.
Funding Opportunities
Grants and Donations
It can accept local donations from individuals, corporates, and government bodies.
Foreign Contributions (FCRA)
When registered under FCRA, Section 8 companies may accept donations from abroad.
Funding from CSR
A mandate on corporates for CSR spending (under Companies Act Section 135) has made corporates the favored choice for CSR funding to Section 8 companies.
Limitations and Restrictions
No Profits to Dividends
The dividends cannot be distributed for profits. They are to be reinvested.
A Strict Regulator
The regulator oversees all activities of the company.
Conclusion
If you’re serious about creating long-term social impact, a Section 8 Company offers the best blend of credibility, tax benefits and donor trust.Though more rigorous in the incorporation, the power of acceptance makes the effort worthwhile, largely when the CSR funds or foreign donations are required. Compliance is the key to building a brand name and sustainable not-for-profit.
