Section 8 Company Registration

Introduction

Section 8 allows non-profit organization registration or NGOs Registration under the Companies Act, 2013. It can be a fulfilling endeavor, allowing individuals and groups to contribute positively towards society. A Section 8 company registration offers a structured framework for those aiming to operate for charitable, social, or educational purposes. This legal entity not only allows organizations to focus on their objective but also provides various benefits, such as tax exemptions and simplified compliance. Understanding the registration process, including eligibility criteria and required documentation, is crucial for aspiring nonprofits. This article will provide a detailed guide on Section 8 Company Registration.

What is an NGO and its Various Registration?

Non-profit organization or NGO is a non-profit organization which is formed by a group of persons with the objective to promote non-profit causes such as science, art, society welfare, sports, health, religion, charity, protection of wildlife, protection of environment or any other charitable reason. NGO uses all its receipts in order to fulfill its objectives rather than making any profits.

Various Registration for Non Profit Organization or NGOs:

• Trust Registration: Under Indian Trust Act, 1882, a charitable trust can be registered in which a person assigns ownership of the property towards a trustee who holds and manages property for the benefit of the public at large
• Society Registration: A society is an organization that has seven or more members to operate more social or charitable causes. It is registered under Societies Registration Act, 1860.
• Company Registration: A non-profit company, or section 8 company, is an organization incorporated as a company under the provisions of the Companies Act 2013 aimed at social or charitable purposes and not generating profits.

Section 8 Company Registration for NGO Registration

Section 8 Company Registration is a registration Act for non-profit organization under the Companies Act, 2013. Once a NGO is registered under Section 8 Company Registration it shall not be allowed to keep its earnings or distribute any part of them to its members or promoters. However, for the purposes such as encouraging art and culture, the advancement of faith, or fields such as science, art, commerce, sports, etc., or any other basis for the social or economic growth of society, they can generate funds.

Requirement for Section 8 Company Registration

There are certain requirements essential for section 8 company registration and these requirements are as follow:

1. Directors & Members: For Section 8 Company Registration, there should be minimum 2 directors if the company is registering as a private limited company but if it is registered as a public limited company minimum 3 directors are required. However, there can be 200 maximum members in private limited companies and there is no upper limit for public limited companies.
2. Capital Requirements: In order to register an NGO under section 8 company registration, there is no minimum paid-up capital required. Also NGO dont need to add any suffix behind the name of the NGO such as Limited or Pvt Ltd.
3. MOA & AOA: NGOs are registered for non profit motive under section 8 of companies Act. The specific reason or objective of the NGO should be included in the MOA & AOA.
4. Management: An NGO is managed by its Board of Directors and not like other trusts where trustees manage the whole organization.
5. Digital Signature Certificate: In order to run an NGO, obtain Digital Signature Certificate of the proposed directors. DSC can be obtained by any government recognized certifying agencies.
6. Director Identification Number: Din or Director Identification Number is required of the proposed director and it can be obtained by using Form DIR-3.

Forms Under Section 8 Company Registration

To start an NGO or Section 8 Company Registration there are multiple forms which are required to be filed in the process of registration. These forms are follow:

How to Register Section 8 Company?

For Section 8 Company Registration, one need to follow these steps:

• Step 01: Obtaining DSC & DIN: For section 8 company registration, you need to obtain a DSC of the company's director. After successfully obtaining a DSC of directors, you need to obtain a DIN or Director Identification Number by filing DIR 3 with ROC. Also, documents such as identity proof & address proof are required to be submitted to obtain DIN.
• Step 02: INC 12 Filing: Once you obtain DIN & DSC, file form INC 12 with ROC for obtaining license for section 8 company. Remember this license will be issued in form INC 16.
• Step 03: SPICe+ Form: Once ROC approved a license for section 8 company, file form SPICe+ for the incorporation of Section 8 company.
• Step 04: CIN Allotment: Once the form is filed, ROC will verify all the form and once satisfied with all the details they will issue a CIN or Company Identification Number. But if the ROC will not get satisfied with the details they will ask for other documents or details.

Who is eligible for Section 8 Company Registration?

Section 8 company registration can be done for various purposes and in different fields but the question is who is eligible for Section 8 Company Registration? Here is the eligibility criteria for registering a section 8 company:

• Individual or HUF are eligible to start section 8 company
• To start a section 8 company, there must be at least one director in the company and must be an Indian Resident.
• All the Directors or Shareholders should fulfill all the compliances and requirements of the company.
• NGOs can be registered under section 8 companies if their main objective is related to promotion of sports, social welfare, science and art, education or financial assistance to lower income groups.
• All the profit should be used for reinvestment purposes only and it can’t be distributed among its directors or shareholders directly or indirectly.
• Any remuneration can’t be drawn in any form of cash or kind by founders, directors or members of the company.

Annual Compliances for Section 8 Company

In order to run section 8 companies smoothly, it is essential to do annual compliances. These compliances are as follow:

1. Board Meeting: At least a minimum of two board meetings should be conducted in a year in Section 8 Companies.
2. Books of Accounts: Maintaining of Accounts Books is one of the important annual compliance for section 8 companies.
3. Financial Statement: Financial Statement should be prepared by NGOs registered under section 8 company as it is one of the important compliance.
4. Audit Reports: It is mandatory to prepare audit reports of the company annually.
5. ITR Filings: IncomeTax Return Filing yearly is one another annual compliance under section 8 company.
6. AOC 4: Filing of AOC 4 is one another compliance as it involves the filing of financial statements.
7. Annual Return: An annual return is to be filed every year by companies registered under section 8 of Companies Act. It should be filed with e forms like MGT 7.

Benefits of Section 8 Company Registration

Registering an NGOs under Section 8 can offer multiple advantages such as:

1. No Stamp Duty: One of the advantages of Section 8 Company Incorporation is there is no stamp duty imposed on the MoA or AoA for the company.
2. Limited Liability: Section 8 Company offers limited liability to their members as per their subscribed share.
3. No Minimum Capital: To start a section 8 company, there is no minimum capital is required and it allows later contribution in the form of donations, and subscription.
4. Tax Benefits: A section 8 company enjoys tax benefits under 80G of the income tax. Also, the Company Auditor’s Report Order (CARO) does not apply to the section 8 company.
5. Separate Legal Identity: A section 8 Company is considered as a separate legal entity from its members and a partnership firm can become its member and obtain its directorship as an individual.
6. Credibility: Section 8 Companies are considered more credible than any other form of charitable organization.
7. Exemption to the Donors: Under Section 12A and 80G of the income tax, tax exemption is granted to the donations received by the organization.

Why Bizfoc?

Bizfoc is one the reliable and credible accounting firms and simplifies Section 8 company registration with expert guidance. They offer tailored solutions, and a smooth, efficient Section 8 Company Registration or NGO Registration process. Their experienced Chartered Accountants handle all the documents and compliances by their own which directly help you in letting you focus on your mission. With affordable fees and ongoing support, Bizfoc ensures your organization is built on a strong legal foundation.

Conclusion

Section 8 Company Registration is an ideal option for those looking to establish a nonprofit organization. These organizations can focus on social, charitable, or educational causes including the promotion of sports, science & arts. There are certain annual compliances that are mandatory to do after Section 8 Company Registration. To register an NGO there is an eligibility criteria that should be followed. Also, certain documents and government forms including SPICe+, INC 12 & INC 16. With benefits like tax exemptions, no stamp duty, and no minimum capital requirement, a Section 8 company can create impactful initiatives.

Frequently Asked Questions (FAQs)