Section 8 Company: Privileges, Registration and Compliance

Of all the distinct companies out there in India, few companies work for the well-being of the society. Such companies do not make any profit out of the business. Those companies rely on the motto of charity/non-profit. Such entities are brought under Section 8 of Companies Act, 2013.

What is Section 8 company in India?

A company which promotes fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection are deemed to be a Section 8 company.

Section 8 company rules and regulations:

• Section 8 companies are intended to apply its profits and income in promoting its primary objective.
• Section 8 companies are prevented by law to distribute a dividend to its members.

Section 8 Company-Advantages and Disadvantages:

 Companies registered under Section 8, Company Act 2013 has their privileges in the account of their non-profit mode of operations. Certain disadvantages as well. They are listed below. 

Advantages:

• Section 8 Companies do not require a minimum paid-up share capital like other companies.
• Members of the company are only allotted a limited liability. Protection of personal assets in case of any discrepancy by the law is an advantage.
• Numerous Tax exemptions are applicable.
• Central Government’s license offers greater credibility than NGOs, trusts and societies.
• It is optional for the company to use suffixes such as Pvt.Ltd or Ltd.
• No stamp duty during registration.
• Rather than individuals, a Firm can also be a member of the company

Disadvantages:

• Members are not allowed to take/share profits.
• Amendments to the memorandum and articles shall not be done without permission from the government
• Income tax rates are the same as the other companies.
• Cancellation of the license is possible at several grounds.

Section 8 companies incorporation:

   The following steps have to be followed to for incorporation of aSection 8 company.

1. APPLICATION FOR NAME:

    Two names have to be submitted along with the business activity of the company in Part-A of the SPICe plus (SPICe+) form. In the event of rejection by the CRC(Central Registration Centre), another form can be submitted with two different names after 15 days of the date of rejection.

2. APPLICATION FOR DIGITAL SIGNATURE CERTIFICATE(DSC):

Every member of the company is mandated to apply for the Digital Signature Certificate(DSC) as the whole incorporation process is online. It can be used to digitally sign the documents.

3. APPLICATION FOR INCORPORATION:

SPICe+ form has to be filled within 20 days of approval of the name by CRC. All necessary documents have to be uploaded duly. SPICe+ form combines 8 forms-in-one.Filling up the SPICe+ form will take care of.

• Name reservation
• Incorporation
• Apply for DIN
• TAN application
• PAN application
• EPFO registration
• ESIC registration
• GSTIN registration

Next step is to fill the PART-B of SPICe+ form. Memorandum of Association(MOA) and Article of Association(AOA) of the proposed company has to be uploaded for EPFO and ESIC registration.AGILE form has to be filled for obtaining GSTIN. Upload all these details on MCA(Ministry of Corporate Affairs) Website.

Additional documents to be uploaded:

• A physical copy of MOA draft signed by members and witnesses
• A physical copy of AOA draft signed by members and witnesses
• Declaration in form INC-14 by any practising professional

4. CERTIFICATE FOR COMMENCEMENT OF BUSINESS:

Certificate of Incorporation of the company will be issued by Registrar of Companies(ROC) after approval of the above. The company should file for seeking permission to commence the business within 180 days of the date of incorporation.

1. Documents required for Incorporating Private Limited Company are as follow:

• PAN card
• Aadhar card
• Photograph of the proposed director

2. ID proof of proposed Directors &members (anyone):

• Passport
• Voter’s ID
• Driving License

3. Address proof of proposed members and directors (anyone):

• Telephone bill
• Mobile Bill
• Bank statement
• Electricity bill

4. Address proof for the place of business of the proposed company (anyone)

• Utility bill like telephone bill, electricity bill, gas bill, water bill
• Rent agreement with rent slip
• Proof of ownership

Section 8 company Compliances:

Immediate compliance after incorporation

Appointment of Auditor Within 30 Days:

 An auditor has to be appointed to take care of the annual filings of the company within 30 days of incorporation.

Convene Meeting For The Board Of Directors Within 30 Days:

The first meeting of the Board of Directors should take place within 30 days from the date of incorporation. Subsequent meetings can be held at a frequency of 1 in six months.

Annual General Meeting:

A Section 8 company must conduct the Annual General Meeting(AGM) within 9 months after the first financial year.

Checklist for Annual Compliance:

Appointment of Auditor:Under Section 139 of the Companies Act 2013, companies must appoint an auditor. Annual returns and Book of Accounts should be maintained.

Maintenance of Register:The company must maintain a statutory register which includes loans obtained, charges created, its members, etc as mentioned under Section 8 of the companies act 2013.

Conducting Meetings:Annual general body meeting and other statutory meetings have to be conducted.

Report by Directors:Directors of the company should file an annual report consisting of financial data and CSR.

Financial Statement of The Company:The balance sheet, profit and loss A/C, cash flow statement and other financial statements to be filed by the company for the previous financial year.

Tax Returns:Tax returns are to be filed after the end of a financial year before September 30.

Filing of Financial Statements:The financial statement shall be filed in the appropriate form ( E-FORM AOC-4), within 30 days from the last general body meeting,

Filing Returns: Limited companies need to file the Form MGT-7 with Registrar of Companies (RoC), for filing returns within 60 days of the annual general meeting.

FAQ:

Q 1.  Can a one-person company register/converted as Section 8 Company?

Ans. No, one person company cannot be a Section 8 company.

Q 2. Can a Section 8 company convert into any other company?

Ans. Yes, Section 8 company can be converted into any other type of company.

Q 3. Can a trust/society convert into a Section 8 company?

Ans. Yes, the conversion is possible.

Q 4. Can a Section8 company take loans?

Ans. Section 8 company can take loans from its members and pay interest to them.

Q 5. Can a Section 8  company receive donations?

Ans. Yes, donations can be received