Section 8 companies, often referred to as non-profit organizations, are instrumental in driving social, educational, and charitable causes in India. These entities governed under the Companies Act 2013 and enjoy special privileges such as tax exemptions and no minimum capital requirement. This guide explains everything about Section 8 company registration, its benefits, process, documents, compliance, and comparison with other forms of company registration like private limited company registration and OPC registration.
What is a Section 8 Company?
A Section 8 company is a legal entity established with the primary objective of promoting charitable, social, or environmental causes rather than earning profits. The earnings are reinvested in the company’s objectives instead of being distributed among shareholders.
Key Features of a Section 8 Company
1. No Profit Motive: Focused on promoting social welfare, education, or research.
2. No Minimum Capital Requirement: Unlike private limited companies, there is no minimum capital limit.
3. Tax Exemptions: Eligible for various tax benefits under the Income Tax Act.
4. Limited Liability: Members enjoy limited liability like other company structures.
Benefits of Registering a Section 8 Company
1. Legal Recognition: Gives your non-profit a legitimate identity and credibility.
2.. Tax Benefits: Both the company and donors may avail themselves of tax exemptions under sections like 12A and 80G of the Income Tax Act.
3. Limited Liability Protection: Members’ personal assets are protected from liabilities.
4. Trust and Credibility: Section 8 companies are widely trusted by donors, government agencies, and NGOs.
5. No Stamp Duty: Exempt from stamp duty during incorporation.
6. Ease of Funding: Eligible to receive donations, grants, and contributions from domestic and international sources.
Comparison: Section 8 Company, Private Limited Company, and OPC Registration
| Feature | Section 8 Company | Private Limited Company | OPC Registration |
| Purpose | Non-profit, social welfare | Profit-oriented business | Solo entrepreneurship with limited liability |
| Minimum Members | 2 directors, 2 shareholders | 2 directors, 2 shareholders | 1 director, 1 shareholder |
| Profit Distribution | Not allowed | Allowed among shareholders | Allowed to the owner |
| Tax Benefits | Eligible | Not eligible | Not eligible |
| Compliance | High | Moderate | Low |
Eligibility Criteria for Section 8 Company Registration
Before Section 8 Company Registration is registering, ensure the company meets the following conditions:
1. Objective: The purpose must be charitable, promoting fields like:
-Education.
-Art and culture.
-Environmental protection.
-Social welfare or healthcare.
2. Income Utilization: Profits must be used solely to further the company’s objectives.
3. Directors:
-Minimum of two directors for a private limited setup.
-Directors must have valid Director Identification Numbers (DIN).
4. Name Restrictions: The name should not imply profit-oriented objectives.
Step-by-Step Guide to Section 8 Company Registration
Step 1: Obtain Digital Signature Certificate (DSC): All directors must obtain a Class 3 DSC to sign electronic documents during the registration process.
Step 2: Apply for Director Identification Number (DIN): Directors must apply for a DIN via the MCA portal using Form DIR-3. Documents required include:
-PAN card.
-Aadhaar card.
-Passport-size photograph.
Step 3: Name Approval: Use the RUN (Reserve Unique Name) service on the MCA portal to propose a name for your Section 8 company. The name must reflect the company’s charitable nature and comply with MCA guidelines.
Step 4: Prepare MOA and AOA: Draft the following incorporation documents:
-Memorandum of Association (MOA): States the objectives and purpose of the company.
-Articles of Association (AOA): Outlines the operational rules and internal management.
Step 5: File Form SPICe+: The SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form is used to register Section 8 companies.
(i) Information Required:
-Company name and objectives.
-Director details.
-Registered office address.
(ii) Integrated Services:
-Name approval.
-DIN allocation.
-PAN and TAN issuance.
Step 6: Apply for Section 8 License: File Form INC-12 with the Registrar of Companies (RoC) to obtain a license under Section 8 of the Companies Act, 2013.
(i) Attachments:
-MOA and AOA.
-Declaration by directors (Form INC-14).
-Estimated income and expenditure for the next three years.
Step 7: Issuance of Certificate of Incorporation: Upon approval of Form SPICe+ and Form INC-12, the RoC issues the Certificate of Incorporation, confirming the company’s legal status.
Documents Required for Section 8 Company Registration
1. For Directors:
-PAN card.
-Aadhaar card or passport (for identity proof).
-Utility bill or bank statement (for address proof).
2. For Registered Office:
-Rent agreement and NOC from owner (if rented).
-Property deed or sale agreement (if owned).
3. Other Documents:
-Declaration in Form INC-15.
-Statement of assets and liabilities.
Compliance Requirements After Registration
Section 8 companies must adhere to strict compliance norms:
1. Annual Filings: Submit annual returns (Form MGT-7) and financial statements (Form AOC-4) with the RoC.
2. Income Tax Compliance: File income tax returns annually.
3. Statutory Meetings: Conduct at least one board meeting every quarter.
4. Maintain Records: Properly maintain books of accounts and minutes of meetings.
Common Challenges in Section 8 Company Registration
1. Name Rejections: Names that do not reflect charitable objectives are often rejected.
2. Document Errors: Missing or incorrect documentation leads to delays.
3. Regulatory Scrutiny: Section 8 companies face stringent checks to ensure compliance with non-profit objectives.
Comparison with Trusts and Societies
| Feature | Section 8 Company | Trust | Society |
| Legal Identity | Separate legal entity | No separate identity | No separate identity |
| Governed By | Companies Act, 2013 | Trust Act | Societies Registration Act, 1860 |
| Tax Exemptions | Eligible | Eligible | Eligible |
| Governance | Directors and shareholders | Trustees | Governing body |
| Credibility | High | Moderate | Moderate |
Conclusion
Section 8 company registration is a vital step for those looking to make a positive impact on society through organized efforts. By following the outlined process, the requirements, and ensuring compliance, you can establish a legal entity that not only drives social change but also enjoys credibility and benefits. Whether you’re comparing it with private limited company registration or One Person Company Registration, a Section 8 company registration process remains an unmatched choice for non-profit endeavors.
FAQs on Section 8 Company Registration
1. Can Section 8 companies make profits?
Ans. Yes, but profits must be reinvested into the company’s objectives and cannot be distributed among members.
2. Is there a minimum requirement for Section 8 companies?
Ans. No, Section 8 companies have no minimum capital requirement.
3. Can foreign nationals register a Section 8 company in India?
Ans. Yes, foreign nationals can register a Section 8 company, provided at least one director is an Indian resident.
4. Are tax exemptions automatic for Section 8 companies?
Ans. No, the company must apply separately for exemptions under sections like 12A and 80G of the Income Tax Act.
5. How long does it take to register a Section 8 company?
Ans. The process usually takes 15–20 days, depending on document verification and approvals.
6. Can a Section 8 company be converted into a private limited company?
Ans. Yes, but it requires approval from the RoC and compliance with additional regulations.