Incorporation and Post Incorporation Compliance in Section 8 Company

Section 8 Company

Section 8 Company is a legal entity that promotes commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, and the likes of it. Though similar to Trusts or Societies, a Section 8 Company is registered under the Ministry of Corporate Affairs for charitable / not-for-profit purposes and administered through the Offices of the Registrar of Companies (ROC).

Incorporation of Section 8 Company under Company Law:

Section 8 Companies Incorporation rules according to companies (Incorporation) Rules, 2014,

Rule 9 to 11 – Reservation of Name;

Rule 12– Application for Incorporation of company

Rule 13– Signing of Memorandum of Articles

Rule 14– Declaration by professionals

Rule 15– Affidavit for subscribers and first directors

Rule 17 – Particulars of first Director of the company and their consent to act as such

Rule 18– Certificate of Incorporation

Rule 38-  Simplified Proforma for Incorporating Company 7,9[Electronically Plus (SPICe+)

Step 1:

Apply of name through RUN. We can’t directly go through the spice form for incorporation of section 8 company.

Step 2:

File SPICE+

1. SPICe+ Part A represents the section wherein all details with respect to name reservation for a new company has to be entered.

2. SPICe+ Part B represents the section wherein all remaining details required for incorporation of a company has to be entered

Attachments required:

• Memorandum of Association – INC 13
• Articles of Association
• Copy of PAN Card
• Copy of ID proofs (PAN + Voter ID/Passport /Driving License/Aadhar Card)
• Copy of Address Proofs (Electricity/Telephone/ Mobile Bill/ Bank Statement)
• Consent in DIR-2 along with ID& Address proof
• Utility bill not older than 2 months
• ,Proof of registered office address
• No objection certificate in case registered office is not taken on lease
• Affidavit regarding deposits
• Declaration by Professionals INC-14 (on the stamp paper, duly notarized)
• Declaration by Promoters INC-15(on the stamp paper, duly notarized)
• Estimated Annual Income: An estimate of the future annual income and expenditure of the company for Next Three Years, specifying the sources of the income and the objects of the expenditure
• Brief profile of all the promoters: List of names, descriptions, addresses & occupation of the promoters as well as Board Members of the proposed company and ID Proof, Directorship, Shareholder ship etc

In case subscriber is a Body Corporate: –

Board Resolution for subscribing shares, making investment & Authorizing a person to subscribe & Sign MOA

STEP – 3: Preparation of MOA & AOA (Electronic or Physical):

After proper filing of SPICE+ form applicant has to move on filling of information in MOA and AOA form Dashboard Link. All the information which are common in PART-B and MOA/AOA shall be auto fill in MOA and AOA.MOA and AOA are also web-based forms.

After opening of web-based form fill all the information in the MOA/ AOA as per requirement of of Schedule I. After download PDF affix DSC of all the subscribers and professional on subscriber sheet of the MOA & AOA.

Procedure for drafting MOA of section 8 Company start from:

Clause 1 which contain name of the section 25 or 8 company example XYZ Foundation or XYZ association etc.

Clause 2 state to mention state in which registered office of the proposed section 8 Company will be situated example NCT of Delhi for Delhi or State of Haryana for Haryana etc.

Clause 3 of INC-13 i.e. MOA contains charitable object of section 8 company i.e. to establish industrial training center or college or social service center etc. i.e. only object having charitable purpose and restricted company to support with its fund which will make trade union or other company which are observed by its member.

Clause 4 of moa clearly mention that object of the company extend whole of India except J & K.

Clause 5 of the MOA restricted diversion of section 8 company income or property to any of its member or its related party in any form. It has also been clarified that profit of such company can only be utilized for its charitable object. Prudent Remuneration allowed to its member only when he actually provides services to the company.

Clause 6 provides that Memorandum of Association cannot be altered unless alteration has been previously approved by the registrar of company

Clause 7 state liability of the member is limited

Clause 8 state liability of the member is limited

Clause 9 required to maintain certain record and books for expenditure income assets etc. and once in every year accounts shall be examined by auditor about correctness of balance sheet and income & expenditure.

Clause 10 mentioned about dissolution of Section 8 Company and whereas

Clause 11 states section 8 company can be amalgamated only with section eight company having similar object and

Clause 12 contains detail of subscriber of MOA. Format of AOA of section eight company is same as for Private Limited Company registration.

Step 4: Fill details of GST, EPFO, ESIC, BANK Account in AGILE PRO:

All the information which are common in PART-B and AGILE PRO shall be auto fill in AGILE Pro.

GST:Not Mandatory

EPFO/ ESIC:It is mandatory to apply for ESIC and EPFO.

Bank Account: It is mandatory to open bank account through this form. Bank account branch shall be assigned according to nearest branch to the Registered office of the Company.

Step 5: Fill details of INC-9    

Step 6: Filing of forms with MCA

Key Points in Section 8 Company:

• Objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
  • it mandatory that the name of section 8 Company shall include the words like – Foundation, forum, association, federation, chamber, confederation, Council, electoral trust
• Any person or an association of persons intending to register a limited liability company for objects specified below can opt to apply for registration of Section 8 Company.
  • The term “person” is not defined under the Companies Act,2013.
  • Section 2(41) of the General Clauses Act, 1897 provides that
  • “person” shall include any Company, or association or body of individuals, whether incorporated or not. Therefore, such a person can be natural or a legal person.
  • It is also relevant to note that by virtue of provisions of section 8(3), even a partnership firm can be a member of Section 8 Company.One person company can not become a member of Section 8 Company
• Company with unlimited liabilities can not be registered as  Section 8 Company
• Section 8 Company may be incorporated as a company limited by shares or by Guarantee
• One Person Company (OPC) incorporated or convert into a Section 8 Company
• Section 8 company can promote another company and be a holding company of another company.
• Section 8 Company cannot be amalgamated with a company which is not a Section 8 company.
• Section 8 companies are required to have atleast one meeting within every six calendar months.
• Quorum for board meetings of section 8 companies is directors or 25% of its total strength, whichever is lower. However, the quorum shall not be less than two members.
• Definition of Company Secretary in section 2(24) of the Companies Act, 2013 is not applicable on Section 8 Companies.
• Section 149(1) , Section 178 of Companies Act 2013 shall not apply to Section 8 Company.
• Secretarial Standards are not applicable on a Section 8Company
• A member of a company registered under section 8 shall not be entitled to appoint any other person as his proxy unless such other person is also a member of such company.
• Section 118 does not apply as a whole except that minutes may be recorded within 30 days of the conclusion of the meeting in case of companies where the articles of association provide for confirmation of minutes by circulation.
• Directorship in Section 8 Companies will not be counted for calculating the ceiling with respect to maximum number of directorships as prescribed under Section 165 of the Companies Act 2013.
• Section 8 Company can hold a meeting with minimum 14 day’s notice as against 21 day’s notice otherwise applicable under section 101 (1) of Companies Act.

REGISTRATION UNDER SECTION 80G: If a section 8 company gets itself registered under section 80G then the person or the organization making a donation to the NGO will get a deduction of 50% from his/its taxable income. The Company has to apply in Form10G to the Commissioner of Income Tax for such registration. Normally this approval is granted for 2-3 years but can be granted earlier depending upon the situations.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. In No Event Shall I Shall Be Liable For Any Result Arising Out Of Or In Connection With the Use of the Information.