Section 8 Company

Company in Lines

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When a company registers as a Non-Profit Organization (NPO), it has the aim of supporting arts, commerce, education, charity, environmental health, sports, science, study, social welfare, and religion, and it aims to use its profits or other income to achieve these goals.

What is Section 8 Company?
According to the Companies Act 2013, it is defined under Section 8 that “Company has its objective of 
(a) promotion of commerce, art, science, sports, education, research, welfare, religion, charity, protection of environment or any such other object; 
(b) Intends to use its profits, if any, or other income in promoting its objects; and
(c) intends to stop the payment of any dividend to its members, the Central Government may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, may allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.”
What are the features of Section 8 company?
  • No Profit Motive
The companies registered under section 8, cannot distribute profits or assets to its members.
  • Voting Rights
The voting rights to the members of section 8 companies are on the basis of the number of shares, almost like that of other companies.
  • No Minimum Capital
There is no minimum level of capital prescribed; hence a section 8 company is often incorporated with the capital as required by it.
  • One Resident Director
It is necessary that at least one director of the company must be resident in India. A person is known to be a resident when he stays in India for at least 182 days in the FY.
What are the advantages of a Section 8 company?

Tax benefits
Separate legal entity
Ease in transferring of ownership /title
Zero stamp duty
Minimal share capital
Exemption from names

What are the disadvantages of a Section 8 company?

No profit distribution
Zero benefits or perks
Limited objectives
Various rules and regulations to be followed
One person in this company cannot make his own decision without the consent of others.

What is the registration process of Section 8 Company?
DIGITAL SIGNATURE OF DIRECTOR
As the application for Company Incorporation is filed online, the method starts with the issuance of Digital Signatures of class two.
NAME APPROVAL OF COMPANY
The Company name should not be similar to an existing company and it must be unique.
LICENSE FOR SECTION 8 COMPANY
Before the central government, an application must be filed for grant of license to register a company without Limited in their name.
INCORPORATION, PAN AND TAN
An application is made to the ROC office for incorporation of section 8 company, and allotment of PAN and TAN.


Required Documents

Acceptable DocumentDocument TypeAdditional Details
Two Scanned Photographs of Promoters ..
Address Proof of Promoter ( (Bank Statement / Electricity, Mobile, Telephone Bill) not older than 2 months)..
PAN Card and Adhaar Card of Each Promoter ..
Proof of Registered Office..
Signed Declaration (s) from Promoter..
Identity Proof of each Promoter and Director (Voter ID / Driving License/ Passport)..
NOC from the owner of the premises of Registered Office..

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packageType

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FAQs

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A person or an association of persons planning to register a limited liability company for objects specified below can opt to apply for registration of Section 8 Company. The following have to be proved to the satisfaction of the Central Government that according to the Companies Act: (a) “its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object; (b) the company after incorporation intends to apply its profits, if any, or other income in promoting such objects only; and (c) the company intends to prohibit the payment of any dividend to its members”.
No. Rule 20(1) of the Companies (Incorporation) Rules, 2014 on Section 8 Companies provides that only a limited company registered under this Act or under any previous company law can file an application to the Registrar for issuing license. Hence, a company having unlimited liabilities cannot be registered under Section 8 Company.
Yes, according to the provisions of Companies Act, 2013, a Partnership firm or an LLP can become the member of Section 8 Company. The provisions of respective Acts need to be complied with by the partnership firm or LLP as the case may be.
Stamp duty on memorandum & articles of Company or on any increase in share capital is governed by Indian Stamp Act, 1899 as adopted by respective state or stamp act of respective state, as the case may be. Also privileged rates for stamp duty on MOA/ AOA of Section 8 Companies or on increase in authorized share capital has been provided by some states. Summary of rate of stamp duty in various states is placed at Annexure – E.
There are some special conditions to be complied under the Foreign Contribution and Regulation Act, 2010 to receive any contributions or donations from overseas/outside India from non-residents under Section 8 Company.
Yes, “Rule 20 of Companies (Incorporation) Rules, 2014 provides for the procedure for conversion of an entity into a Section 8 Company. Sub-rule (3) of rule 20 of Companies (Incorporation) Rules, 2014 provides that any entity which is desirous of being registered as section 8 Company, it, interalia, shall be required to publish a notice in Form No. INC- 26 within a week from the date of making the application to the Registrar in at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated or is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district. A copy of the notice, as published, shall be sent forthwith to the Registrar and also to be placed on the websites as may be notified by the Central Government.”

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