1. In India, there are 3 different types of non-profit organization exists as per type of registration with authorities which are 1. Trust 2. Societies and 3. Non-Profit Company (Section 8)
2. Any person or association of person including a partnership firm or an existing company can form section 8 company.
3. Section 8 companies’ form of non-profit organization is the credible form of organization as compared to trust and society.
4. Relevant Section- Section 8 of the Companies Act, 2013
5. Relevant Rules – Rule 8(7), 19, 20, 21, 22 and 23 of the Companies (Incorporation) Rules, 2014
6. The main object of section 8 company should ensure the promotion of Commerce, Art, Science, Religious, Sports, Charity, Education, etc. Section 8(1)(a)
7. Utilizing its profit in promoting its main object. Section 8(1)(b)
8. Section 8 company can’t pay any dividend to its members. Section 8(1)(c)
The author will discuss the whole process to incorporate section 8 companies as per the Companies Act, 2013.
1. Obtain Digital Signature (Min 2)
2. Application for Name Availability in from RUN – This approved name will be reserved only for 20 days from the date of approval. Application fees will be Rs. 1000/-. An applicant may propose 2 names at a time and 1 resubmission will be allowed. Here it is advisable to attach the main object of the proposed section 8 company. It is also advisable that the proposed name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral trust and the like etc.
3. Preparation of MOA, AOA and other documents – The Memorandum of Association defines the main object and scope of activities to be carried on once section 8 company will be incorporated. The MOA will be prepared as per Form No. INC-13. The declaration from Professional. An estimate of the future annual income and expenditure for next 3 years specifying the source of income and object of expenditure. The declaration in form No. 15 by all the subscribers.
4. Application to ROC in the Form No. INC-12 – Documents to be prepared as per the above point no. 3 shall be attached in the form no. INC-12 with the fees of Rs. 2000/-. Once this form will be approved, license will be issued in the Form INC-16 which required to be attached while filing form SPICe.
5. Filing of form SPICe – Following documents to be attached while filing the form SPICe.
i. MOA & AOA (eMOA and eAOA can’t be used here)
ii. Consent and Declaration by the first directors in the form DIR-2
iii. Affidavit by the first subscriber in form INC-9
iv. PAN Card and Aadhar Card of all subscribers and first directors.
v. Proof of Registered Office (Sale deed / Rent deed, etc.)
vi. Utility Bill (Not older than 2 months)
vii. NOC from the owners if registered office taken on rent
viii. License issued in the form INC-16.
ix. As soon as the form SPICe approved, Certificate of Incorporation (COI) will be issued to the applicant.
Advantages to Section 8 Companies
(1) Tax Exemption:-
- U/S 12AA of the Income Tax Act, 1961
- U/S 80G of the Income Tax Act, 1961
(2) No Minimum Share Capital Requirement
(3) No need to use “Section 8” or “Private Limited” or “Limited”
(4) Easy transfer of Ownership
(5) No Stamp Duty
(6) Clear Objectives for easy donations and loans
(7) Easy to Manage
(8) Exemption and Privileges under the Companies Act, 2013
(9) Relaxation in Compliances
(10) PAN India
(11) Separate Legal Entity
(12) More Credible as compared to trust or society
(13) Donations – Domestic as well as Foreign (FCRA Registration)
(14) Micro Finance Section 8 Company