Section 8 Company Formation
Section 8 Company is Company formed with the objective of promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. It is established majorly for charitable or not-for-profit purposes.
Advantages
Process of Registration
GST Registration is an online process. Following steps need to be followed for the purpose of GST Registration:
1. Reservation of Name
2. Procuring DSC
3. Drafting of MOA & AOA
4. Application for Licence
5. Filing of SPICe 32 Form
1. Reservation of Name
- Application for reservation of name has to be made in form RUN (Reserve Unique Name) facility.
- The name of Section 8 Company shall include words such as Foundation, Federation, Association, Forum, Chambers, Confederation, Council, Electoral Trust etc.
- Maximum 2 names can be proposed at a time and the fees payable is INR 1,000.
2. Procuring DSC
Digital Signature Certificate are required to file various eForms on MCA portal, digitally sign documents for the incorporation of the company and other applications.
3. Drafting of MOA & AOA
- MOA acts as a charter document which defines the purposes/objectives of a company.
- AOA is a document which lays down the rules and regulations for internal management of the company.
- MOA and AOA have to be signed by each subscriber who shall mention his name, address, description and occupation in the presence of a witness who shall attest the signature and add his name, address, description and occupation.
4. Application for Licence
After name approval, application is required to be made in Form INC-12 to the Registrar for a licence under Section 8(1) of Companies Act, 2013. Fees for INC-12 is INR 2,000.
5. Filing of SPICe 32 Form
On approval of Form INC-12 and getting licence in Form INC-16, application for incorporation in Form SPICe 32 is required to be filed.
Documents required for Section 8 Company Registration
Registered Office Proof
- Utility bill (should not be older than two months)
- No objection certificate from the owner of premises for the Registered Office address of the company
- Rental Agreement with the owner of registered office and rent receipts (if premises is rented)
- Registry Proof or House Tax Receipt (in case of owned property)
ID Proof
Self-attested PAN Card of the first shareholder(s) and director(s)
Photo
Passport size photograph of the director(s)
Address Proof
Bank Statement/Utility bill in name of director (not older than two months)
PAN of the deductor
PAN of the deductee.
Amount of taxes paid to the government.
Photo
Passport size photograph of the director(s)
- Who and Why should you get this registered?
If anyone wishes to do something for the society at large without having any self-interest, this is the best form to go for it. It enjoys several privileges which are not generally available to the trusts or societies registered under their respective acts. The credibility factor is also increased due to the licence obtained from the Central Government.
How StartUp Movers can help you?
HOW STARTUP MOVERS CAN HELP YOU?
- Name Approval Letter
- License
- Drafting of MOA/AOA
- Procuring DSC
- DIN Approval Letter
- PAN Card of the Company
- TAN No of the Company
- Incorporation kit to help you open a bank account
- Filing of INC 20A for Commencement of Business
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Frequently asked questions
There is no restriction in the provisions of the Companies Act, 2013 for a registered Trust to become a member of Section 8 Company. In case of unregistered trusts, provisions of section 89 would be applicable.
Section 8 Company, if covered under limits as prescribed under Rule 3 of Companies (Appointment of Directors) Rules, 2014 is required to appoint women director under second proviso to Section 149(1). Also, every existing section 8 company falling under the prescribed criteria should have complied with this provision within one year from the commencement of this provision i.e. by March 31, 2015.
Also, if section 8 company is incorporated under Companies Act, 2013 and falls under second proviso to Section 149(1), then, it should comply with the requirement of appointing women director within six months of the incorporation of the company.
Whether a Section 8 Company can pay bonus to its employees and what if an employee is also a member?
Clause 5(ii) of the Form INC 13 provided under rule 19(2) of the Companies (Incorporation) Rules, 2014 provides that – “No portion of the profits, other income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons who, at any time are, or have been, members of the company or to any one or more of them or to any persons claiming through any one or more of them.” In view of the above there is no restriction in payment of bonus to employees, however bonus cannot be paid to a member, even in his capacity as an employee.
A section 8 company can take loan from its members and pay interest thereupon, subject to the provisions of Chapter V of the Act read with rules made thereunder.
The activities which may be passed by the Board of section 8 companies through circulation instead of at a meeting, as given under section 179(3) are:
- To borrow monies
- To invest the funds of the company
- To grant loans or give guarantee or provide security in respect of loans.
There are special requirements to be complied with under the Foreign Contribution and Regulation Act, 2010 before a Section 8 Company can receive any contributions or donations from overseas/outside India from non-residents. The provisions of this act are in addition to the provisions under the Companies Act.
A Section 8 Company is prohibited from issue of bonus shares because:
- As per section 8(1)(b) of the Act, Section 8 Company shall intend to apply its profits, if any, or other income in promoting its objects;
- As per section 8(1)(c) of the Act, Section 8 Company should intend to prohibit the payment of any dividend to its members; and
Further, Rule 22 (4) of the Companies (Incorporation) Rules, 2014 requires a declaration from Board of directors that no portion of the income or property of the company has been or shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise to persons who are or have been members of the company or to any one or more of them or to any persons claiming through any one or more of them.
There is no restriction in payment of remuneration to an employee/director. In case the employee is also a member, no remuneration or other benefit in money or money’s worth can be given to him except payment of out of pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company.
As per exemption notification dated 05th June, 2015, the definition of Company Secretary in section 2(24) of the Companies Act, 2013 is not applicable on Section 8 Companies.
