Section 8 Company

The most common type of NGO registration in India is through a Section 8 company. Although there are alternative ways to register as an NGO, such as creating a trust or a society, section 8 companies are the most recommended option. The Companies Act of 2013 states that Section 8 companies are created expressly to further non-profit goals, such as cultural, sports, social welfare, education, and environmental preservation. 

In this post, Lawgical Adda will explain the essential procedures and benefits of setting up a Section 8 company, enabling you to realize your full potential and make a lasting social impact.

The Section 8 Company's goal

Section 8 corporate operations aim to promote commerce, science, art, sports, education, research, social welfare, religion, charity, environmental protection, and any other comparable nonprofitable goal for the general welfare of the populace.

Even though a Section 8 company can make money through commercial endeavours, any profit made in these circumstances is disclosed separately. The profit made by the Section 8 firm must serve the purpose for which the NGO was established.

Eligibility for Section 8 Company Registration

1. In India, an Individual or HUF may establish a Section 8 corporation.
2. At least two individuals who will serve as directors or shareholders must meet all the Act's Section 8 company incorporation requirements and regulations.
3. The Section 8 corporation must have at least one director who is an Indian resident. 
4. The objective must include one or more of the following categories: education, financial aid to lower-income groups, scientific and artistic advancement, social welfare, sports promotion, and science.
5. The company's founders, directors, and members are not eligible to receive any kind of payment or compensation in kind or cash.
6. The company's directors and members shouldn't get any profits, either directly or indirectly.

Steps for Section 8 Company Registration

Acquire a Certificate of Digital Signature (DSC)

Obtaining the DSC of the Directors and Subscribers to MOA is the primary stage in the registration process of a firm. After attaching the DSC of the Authorized Signatory for Company Incorporation, any e-form is submitted to the Ministry. It is also necessary for the directors' DIN application.

The Name Approval Procedure

1. The Section 8 Company may apply for name approval with the MCA concurrently with processing its digital signature application.
2. A Section 8 Company's name must include the terms "foundation," "forum," "association," "federation," "chambers," "confederation," "council," "electoral trust," etc. at the end.
3. Apply for a company name by filing Form Spice Part -A with the ROC.

License Application

Once authorized, submit Form INC-12 to the ROC to request a license for the Section 8 business. The documents that go with INC-12 are:

1. Draft Association Memorandum (MOA) in accordance with INC-13 Form
2. Declaration in accordance with Form INC-15 (Declaration from each applicant)
3. Projection of Revenue and Outlays for the Next Three Years.
4. Utility bills no more than two months old serve as proof of office address.
5. No Objection Certificate (NOC) if the property is co-owned.
6. If the promoter is a company established outside of India, attach the company's certificate of incorporation and the resolution that was passed to become a promoter.
7. A resolution to become a promoter must be added if any promoter is a company.
8. The signature of each director indicating their consent to serve as a director in DIR-2 is required.
9. Signatures on specimens from each director for EPF and ESIC.
10. A list of every potential director and promoter, signed by each individual.
11. A three-year projected revenue and spending statement is provided and signed by each proposed director.
12. recommended work statement, signed by each of the recommended directors.
13. A statement with the signatures of each recommended director supporting the application is sent.
14. Evidence of identity and proof of residence as specified above for directors and promoters without DIN.

Form INC-16 will issue a license under section 8 after the Central Government approves the Form. 

Incorporation Certificate

Once the license has been obtained, submit SPICE Form 32 and the associated attachments to the ROC for incorporation.

1. Affidavit on Form INC 9 KYC, signed by Every Director and Subscriber
2. All directors' consent letter
3. Form DIR 2 and its appendices
4. Utility Bill (documentation of place of business dwelling) Declaration of Deposits Interest in Other Companies of Directors
5. Draft AOA and MOA NOC if the property is rented or leased
6. ROC will issue the Certificate of Incorporation along with the Company Identification Number (CIN), PAN, and TAN data if they are satisfied with the paperwork filed.

Advantages of Registering a Company under Section 8

A Section 8 company's registration has many benefits. Here are a few of the main advantages:

Tax Exemption: Since Section 8 enterprises use their income for charitable causes, they are 100% exempt from taxes. Thanks to this enormous tax benefit, they can allocate more funds for social projects.

Minimum Capital Requirement: Sect 8 companies are free to modify their capital structure in accordance with their needs for finance and growth. In contrast to other business forms, they can have a more flexible financial structure because they are not restricted by a minimum capital requirement.

No Stamp Duty: Section 8 companies are not required to pay stamp duty during the company registration process. Because of this exemption, organizations can devote funds more effectively toward their charitable objectives by lowering their overall establishment costs.

Different Legal Entity: Section 8 companies have a unique legal identity unlike their founders and members. This quality gives them more legitimacy and independence when running their businesses and signing contracts.

Enhanced Credibility: Section 8 enterprises have greater credibility and dependability with government agencies, donors, and stakeholders since they follow stringent legal compliance standards. This legitimacy may be key in drawing people to their social projects.

No Title Needed: Unlike previous rules, Section 8 companies are exempt from including "Section 8" in their name. This allows them to select a name most accurately captures their goals and principles.

Annual Section 8 Company Compliances

Section 8 corporations' yearly compliances are the same as other businesses.

1. Organize two board meetings or more each year.
2. Upkeep of Accounting Records
3. Creating financial statements
4. Required audit report
5. filing of income tax returns
6. financial statements submitted using form AOC-4
7. An annual return and other electronic filing forms, such as MGT-7, must be filed each year. 
8. Additional requirements, such as 12AA and 80G, to complete the registration

Pro tip: If the corporation does not follow the Act's legal requirements, the Central Government will cancel its Section 8 license. The license may be cancelled if the company's goals are illegally pursued or diverge from the original purposes for which it was formed.

A company may be fined up to Rs. 1 crore and at least Rs. 10 lakh for failing to comply with the Act's provisions. If the company's directors and officials violate the Act's provisions, they risk a fine of at least Rs. 25,000, up to Rs. 25 lakh, or both.