Section 8 Company
Corporate structure for Non-profit Organization
What is a Section 8 Company?
A company formed with Charitable objects such as the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. The profit earned by such Companies is not distributed among the members but it is used within the company for the promotion of its object. Earlier the Section 8 Company was known as Section 25 Company under the old Companies Act, 1956.
This type of Company can be registered as a Private Limited Company or a Limited Company. But it is not mandatory to use the word “Private Limited” or “Limited” in the name of the company. The name must contain any of the words such as Foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust, etc. Section 8 Company will enjoy all the privileges and will subject to all the obligations of a Limited Company. The government grants a special license for running such a company at the time of registration of Section 8 Company. The government may also revoke the license if it is taken fraudulently or the company violates any of the conditions.
For Section 8 Company Registration, minimum of 2 directors and 2 subscribers are required. Both directors and subscribers can be the same person. And if it is registered as a public company there must be a minimum of 3 directors and 7 subscribers.
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Plans of Section 8 Company
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- 2 DIN (Director Identification Number)
- 2 DSC (Digital Signature)
- Drafting of MOA, AOA and other incorporation documents
- Incorporation of Company via Spice+
- Section 8 License
- Stamp duty inclusive up to Authorized capital of Rs.1 Lakh
- PAN & TAN
- EPFO
- ESIC
- Professional Tax (Maharashtra & Karnataka only)
- Bank Account
Pro
- 2 DIN (Director Identification Number)
- 2 DSC (Digital Signature)
- Drafting of MOA, AOA and other incorporation documents
- Incorporation of Company via Spice+
- Section 8 License
- Stamp duty inclusive up to Authorized capital of Rs.1 Lakh
- PAN & TAN
- EPFO
- ESIC
- Professional Tax (Maharashtra & Karnataka only)
- Bank Account
- INC-20A
- GST Registration
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Simple solutions for Section 8 Company
Benefits of Section 8 Company
Separate Legal Entity
By Section 8 company registration, a separate legal entity will be incorporated with a separate PAN. A corporate entity attracts more funds from donors.
Limited Liability
The liability of the members will be limited up to the subscribed share capital of the company.
No Stamp Duty on MOA & AOA
Basically, the government charges the stamp duty on MOA & AOA at the time of incorporation of the company. But the government does not charge the stamp duty on MOA & AOA for the incorporation of Section 8 Company.
Exemptions for Directors
A Section 8 company can appoint more than 15 directors even without taking approval from shareholders. The appointment for independent director shall not apply to a section 8 company.
Tax Benefits
The section 8 companies get tax exemptions in the Income Tax. Furthermore, the donors can also claim the tax exemptions by donating funds to the section 8 company.
Appointment of Company Secretary
It is a privilege for the section 8 companies that even if it falls under the criteria for the mandatory appointment of Company Secretary, the company can appoint any other qualified person as a Company Secretary even though he/she is not a member of ICSI.
Required Documents for Section 8 Company
The documents required for company registration are categorized as under
| For Directors and Subscribers | For Registered office |
| Permanent Account Number (PAN) | Business address proof(Electricity bill/Telephone bill/Gas bill/Mobile bill- not older than 2 months) |
| Photo Identity proof (Adhar card/Driving License/Election card/Passport) | No objection certificate from the owner |
| Residential address proof (Bank statement/Electricity bill/Telephone bill/Gas bill/Mobile bill- not older than 2 months) | Rent agreement (if rented) |
| Passport size photograph | |
| An estimate of the future annual income and expenditure of the company for the next three years |
Procedure Of Section 8 Company Registration
- Obtaining Digital Signature (DSC)
- Checking the Name availability
- Drafting of company registration documents
- Filing of incorporation forms with MCA
Immediate Post Incorporation Compliance
- Conducting first board meeting within 30 days of incorporation for the appointment of Auditor
- Opening of bank account
- Deposit the amount of subscribed share capital in the current account of the company
- Filing form for the commencement of business
- Voluntary registration for 80G and 12A under the Income Tax Act
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Section 8 Company
An entityformed with a charitable object and incorporated under the Companies Act is known as a Section 8 Company.
There is no minimum capital requirement for the incorporation of a Section 8 Company. It can be started with any amount of capital.
A Section 8 company can be formed as Private Limited Company or as a Public Limited Company. Hence, minimum 2 or 3 directors are required respectively.
If Section 8 Company is formed as a Private Limited Company a minimum of 2 subscribers are required or else 7 subscribers if it is formed as a Public Limited Company.
Yes, as per the Companies Act, it is mandatory to use such words in the name of the company. It indicates that the Company is formed as Section 8 Company.
As per the new procedure provided by MCA, the license is issued within the form of incorporation. As a result, there is no need to apply it separately.
The license of Section 8 Company is valid for a lifetime unless the government revokes the license due to non-compliance.
No, as a Section 8 Company is formed as a non-profit organization and for the welfare of the people, it cannot provide the dividend to its members.
For providing the benefit of income tax deduction under section 80G, a separate registration is needed after the incorporation of the Section 8 Company.
The 80G registration under Income Tax is a separate independent registration so it is not included within the incorporation process provided by Wisefilings.
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