Rules and Regulations for Section 8 Company

Section 8 company is a company which is licensed under section 8 of companies act, 2013. It is a non-profit organization (NPO) which is formed with the objective to promote commerce, arts, science, sports, education, research etc. The profit of such types of companies are applied towards the furtherance of their cause and no dividend is paid to any of their members. These companies are registered for social welfare, charity and meeting objectives of the organization towards the society at large. Incorporation certificates of such companies are obtained by the central government and are liable to adhere to the rules of the Central Government.

As per the rules, if NPO fails to comply with the responsibilities stated by the Central Government, it may lead to winding up of the company on order of the Central Government. Moreover, strict legal actions will be taken against all the members of the company.

Objective of NPO/Section 8 Company

Primary objective of section 8 company is to work for the welfare of the society in the fields of science, art, sports, education, research, environment protection etc.

Section 8 company Registration: Rules and Regulations

• First step is to fill a form online which is available on the MCA portal.
• Obtaining Digital signatures certificates or DSCs are mandatory. Also, Director’s identification number should be applied through the MCA site.
• Getting name approved for the section 8 company from Ministry of Corporate Affairs
• Further apply section 8 company incense from the Director of Ministry of Corporate Affairs
• After the section 8 license issues Spice+ form is to be filed online for final incorporation with registrar of companies.
• PAN and TAN is mandatory for the company. After Incorporation, one can obtain the same online.
• Bank account should be opened within 30 working days by the applicant.
• Section 8 companies get exemption from income tax under section 80G and section 12A. It needs to be registered by the applicant.

Mandatory Last name to be added to Section 8 company:

Rule 8(7) of companies act describe the words which should be included in section 8 company:

1. Forums It is for social knowledge or social discussion etc

2. Foundations: Mostly suitable for microfinance company, social welfare organization

3. Federation: It is mostly used for schools, clubs, university etc

4. Association: Labour association, Trade association etc

5. Chambers: For promotion of science, arts and trade

6. Confederation: welfare work.

Documents required for Section 8 Company registration: –

1. Passport size photo

2. ID proof of all members of the company

3. List of directors and promoters

4. Address proof of all directors and promoters

5. Rent Agreement (If rented premises)

6. No objection certificate (NOC) from landlord

7. Electricity bill or water bill with property papers (if self-owned property)

 Eligibility Criteria for registering Section 8 Company

• To get registered the main objective should be to promote social welfare, arts, education, science, commerce, and financial assistance to the lower-income groups etc.
• The entire profit of the company which is generated must be used towards the furtherance of their cause and meeting the objectives
• No dividend should be paid to any of their members or directors of the company either directly or indirectly.
• Directors or promoters of the company cannot withdraw any remuneration in any form.
• There should be a clear vision and project plan of the company for the next 3 years

Statutory Obligation of Section 8 Company

• The revenue and surplus generated by the company from its business operations should be used only for achieving the objectives of the company
• Appointing a Company secretary is not mandatory for section 8 companies
• Incentives and commission are not allowed in Section 8 company.
• Section 8 company can conduct annual general meetings (AGM) at a short period notice.
• Without prior permission of the Central Government of India the objective of the section 8 company cannot be altered.
• The income of section 8 company is completely tax free if the company has obtained 80G and 12A registration.
• Directors of the company can obtain positions in more than 20 companies.
• There is no minimum share capital requirement in section 8 company incorporation.

Conclusion

Certain rules and regulations of section 8 company are discussed in the article. Section 8 company is a non-profit organization which is formed for social welfare of the society and for charitable purposes. It is formed with only one aim to provide benefits to the poverty-stricken section of the society. Therefore, there is no sharing of the profits among the directors which is earned by section 8 company by its business operations. It only can be utilized to meet the objective of the section 8 company.