The ministry of Corporate affairs vide Companies (Incorporation) 6th Amendment Rules, 2019 has amended the section 8-company Incorporation procedure and power of respective Registrars of Companies has given to Central Reservation Centre to approve license. Vide this amendment-licensing requirement INC-12 for new companies has been done away with. Filling requirement of INC-12 for existing companies who wants to convert itself in section 8 company is still there.
The concept of Section 8 companies was introduced in Companies Act, 2013 that permitted companies with charitable objects etc. to be registered without the words ‘Limited’ or ‘Private Limited’. The restriction was that the Companies were permitted to use the profits only for the purpose for which the company was promoted and there was a prohibition on distribution of dividend.
The Companies Act, 2013 continues with the provision for such companies and provides for a framework for the same under Section 8 of the Companies Act, 2013. Section 8 continues to provide for restriction on application of profits and permits the same only for the purpose for which the company is promoted, prohibits declaration of dividend, continues to permit partnership firms to be a member of section 8 companies etc. 2013
Objects for such companies and specifies objects like sports, education, research, social welfare and protection of environment for which the Companies can be formed under this section.
As per proviso to section 2(85), section 2(85) does not apply to a Section 8 Company and accordingly, a Section 8 Company cannot be treated as a small company
TYPE OF NON PROFIT ORGNISATIONS IN INDIA
IMPORTANT KEY POINTS TO CONSIDER
Name Last Word Inclusion
As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc.
OBJECT incidental and ancillary to the Main object
Memorandum of association of the Section 8 Company shall be in Form No.INC.13. And may inter-alia provide for the doing of all such other lawful things as considered necessary for the furtherance of the objects for which the company has been incorporated.
Payment of Stamp Duty on MOA/AOA, Share Certificate, Share Transfer.
The Indian Stamp Act, 1899, governs stamp duty on memorandum & articles of association of a Company or on any increase in share capital on issue of share certificates n transfer of shares
as adapted by respective state or stamp act of respective state. Some states provide relaxation and some charge as per their respective rate.
Who can become member of Section 8 Company?
Alteration of MOA/AOA
A Section 8 Company can alter the provisions of its Memorandum or articles by passing a special resolution however; such alteration requires the approval of the Registrar of Companies.
If alteration in Memorandum or Articles results in conversion of Section 8 Company to any other kind of company, prior approval of Central Government is required. Such power is delegated to Regional Director
Yes, section 8 company can promote another company and be a holding company of another company.
Eligible entities who can be converted into Section 8 Company.
*One-person company cannot be member in section in section 8 company and same cannot be converted into section 8 company
Yes, subject to compliance of applicable RBI Act, Guidelines and directions, Section 8 Companies can carry out micro finance activities. The micro finance activities should be for the promotion of activities as stated in section 8(1) (a) of the Companies Act, 2013.
Advisory Services, Consulting Services.
As per section 8(1) (a) of the Companies Act, 2013 section 8 company can carry such type of activities.
Eligible persons who can apply for Registration of Section-8 Company
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 definition of “person” is not defined as per companies Act, 2013 however it is describe in the Section 2(41) of the General Clauses Act, 1897.
“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.
1. Application for name availability in form RUN*
For name reservation need to file “Reserve Unique Name” (RUN)facility. The name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, and the like etc. Maximum 2 names at a time with 1 resubmission is allowed in RUN facility.
*Name can be reserved through Spice also
2. Filing of SPICe
Filling requirement of INC-12 of License for incorporation of new Section 8 Company has been done away with one can directly file Spice with below attachments.
3. Filing of AGILE
Application for Goods and services tax Identification number, employees state Insurance corporation registration plus Employees provident fund organisation registration.
AGILE is linked form to be submitted with Spice as linked form
Also, Checkout section 195 of income tax act.