I am sharing this particular article during the amid of COVID-19 Pandemic, where we are witnessing the second wave of the coronavirus. The cases are increasing day by day but on the other hand, the recovery is increasing and people are coming forward to cooperate in their own way.
It’s not mandatory to get yourself registered for helping and assisting the society but it’s very prudent to give a shape to our idea or our work in a legal way as it provides various benefits and legal recognition to our good doing, we as a working professional have also received the various number of queries from our clients and friends for suggestion and registration of their good doing, and as per my point of view the incorporation of NGO under Section 8 of the Companies Act, 2013 is the best way of registration.”
In this article, my effort is to highlight all the relevant aspects and process of incorporation of Section 8 Company and documents required thereof, through this article I would like to show the road map of the end to end procedural aspect of the incorporation along with the benefit of registration.
Basics of Section 8 Company:
A Non-profit Company or Section 8 Company is a Company which:
Benefits of Section 8 Company Registration:
1. Exemption from Stamp Duty.
2. Income Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
3. Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members, and the general public.
4.Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name.
As we all know Section 8 company incorporation is governed by the Companies Act, 2013 read with the Companies Incorporation Rules, 2014, to register a Section 8 company minimum number of two shareholders along with two directors (they can be the same person) are required, w.e.f February 23, 2020, Ministry of Corporate Affairs (MCA) has recently launched integrated forms SPICE+ and AGILE-PRO (Incorporation Forms) to turn down the procedure, time and cost for new company incorporation and now we have to apply our company through these web-based integrated forms.
This is the first step toward incorporation, before incorporation we should have a name in our mind which should not be similar to the name of any existing company registered with MCA or having a similar registered trademark, we can apply two names simultaneously for a company through incorporation form i.e. SPICE+ (part A) and the filing fee for the same is Rs. 1000.00 only in case our applied name is rejected then only one resubmission is allowed for the name approval with the same fee of Rs. 1000.00.
It should be taken care of that the name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, and the like, etc.
“Filing of the main object is in parallel with name reservation.”
Preparation of the main object is quite the brainstorming task, as we have to take care of all the proposed project, ideas, and the work which is to be done by the proposed company, it should be specific and shows all the proposed activity of the proposed NGO and we have to upload a .pdf copy of main object clause at the time of name reservation.
As we are living in the 21st century and we are incorporating companies in INDIA where all the filing of the company is in electronic form hence, we have to sign the form in digital mode only, for signing the prescribed form we should have Class-3 digital signature which is required for signing the e-forms of company incorporation.
Memorandum of Association, Articles of Association
MOA is the charter of the company and defines the scope of its activities and an AOA is a document that regulates the internal management of the company, MOA & AOA of the company shall be signed by each subscriber who shall mention his name, address, description, and occupation in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description, and occupation.
Point to be noted: Filing of MOA and AOA is quite different in the registration process of Section 8 Company Vis-a-vis normal private limited company as in the private limited we have to file e-MOA and e-AOA along with other incorporation forms but in section 8 company we have to draft them manually and get them signed with the above-mentioned signatory and have to file them as an attachment in the main form i.e. SPICE+(Part B)
Capital Structure of the company
Let us discuss some legal terms used in the Companies Act, 2013 regarding share capital:
Authorized share capital
It is the maximum amount of the capital for which shares can be issued by the Company to shareholders and It is mentioned in the Memorandum of Association of the Company under the head “Capital Clause”, it is prudent to plan the necessary amount of Authorised Capital at the time of incorporation for our company although, we can increase it any time in future by filing the requisite form.
Paid-up share capital
It is an amount of money for which shares of the Company were issued to the shareholders and payment has already been paid by the shareholders and paid-up capital shall be less than or equal to authorized share capital but it cannot be more than authorized share capital of the Company.
Point to be noted: Section 8 Companies can be formed with or without having a share capital, in case they are formed without capital, the necessary funds for carrying the activity of the NGO are brought in form of donations, subscriptions from members, or the general public.
A certain place is required where the company can keep its books of account and from where the company can operate its activities and we have to mention the address of the Registered office at the time of filing of SPICE+ (Part B) or a company can be established its place of registered office after incorporation and shall also intimate such address of registered office within 30 days of the incorporation via e-form INC-22.
If the Company establishes its registered office after incorporation, then the correspondence address of the proposed company is mentioned in the SPICE+ form at the time of incorporation and ensure that correspondence address should be of the same state where the company is willing to have its registered office.
Director Identification Number (DIN)
“DIN allotment is carried out by the Ministry for the Individual for acting as Director in a company, DIN is a unique number like PAN Card for any person and which is applied and allotted once in the lifetime.”
In case a director do not have DIN at the time of incorporation then he can apply DIN as well at the time of filing of form SPICE+
Point to be noted: Only 3 Directors not having DIN can apply for DIN in SPICE+ Part B.
Application for Registration
Once the name is reserved for the proposed company, one shall proceed for making an application of Incorporation through the filing of SPICE+ Part B form which is a web-based form and it should be accompanied with AGILE- PRO and INC-9, where we have to file all the required information.
The application is submitted by paying the requisite fee, as applicable and we have to fill in the other required details for the application of PAN and TAN of the company which shall be duly submitted after affixing the DSC of directors and professional with the MCA portal.
After uploading all the required forms, the application for the incorporation is successfully submitted, and after processing of the application by the department the certificate of incorporation is issued by the authority.
Checklist of documents required for the company incorporation:
1. Proof of Address of Registered office: Ownership proof along with Lease Deed/ Rent agreement/Non Objection Certificate (in case ownership of the property is in blood relation)
2. Identity and residential proof of all the subscribers and Directors: PAN Card and Aadhar Card. (PAN Card is mandatory in case of person is resident of India)
3. If any of the proposed Directors does not have a DIN at the time of applying residential proof (Bank, Electricity Bill, Telephone Bill, or Mobile bill) is required.
4. Consent from Directors in form DIR-2 is required.
5. Declaration in Form INC-14 is also required that the draft MOA & AOA have been drawn up in conformity with the provisions of Section 8 and rules made thereunder from practicing professional certifying that all the requirements of the Act and the Rules made thereunder relating to registration of the company under Section 8 and matters incidental or supplemental thereto have complied.
6. Declaration under Form INC-15 from all the proposed directors and subscribers.
7. An estimate of the future annual income and expenditure of the company for the next three years;
8. Passport size photograph of proposed directors (only in .jpg format and max. size is 100kb)
9. Proof of appointment of Authorized Signatory for GSTN (letter of Authorisation, copy of resolution passed by Managing Committee or acceptance letter)
10. Specimen Signature of Authorized Signatory
The author has tried her level best to cover all the relevant aspects related to the topic and In case of any suggestion or improvement, the author can be reached through Whatsapp or mail which is available on the cover page.
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DISCLAIMER: This article is based on the relevant provisions and to the best of my knowledge at the time of preparation of this article and in no event, the author shall be liable for any direct and indirect result from this article and this is only a knowledge sharing initiative provided solely for information, this article is not a piece of professional advice or recommendation.