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Section 8 Company Registration

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SECTION-8 COMPANY REGISTRATION (DETAILED)

1. Overview/Background

To run an NGO in India, a non-profit organisation can be registered under any of the three options as given below:
  1. Trust Registration by executing a Trust deed or
  2. Society Registration under the Registrar of Societies, or
  3. Section 8 Company under the Companies Act, 2013.

There is no difference between a Section 8 Company and Section 25 Company Under the new Companies Act 2013, Section 25 Company (as per the old Act) has now become Section 8 Company due to change in Companies Act from 1956 to 2013.

Well, you can register an NGO/NPO as Section 8 Company in the fields of promotion of arts, commerce, charity, education, protection of environment, science, social welfare, sports, research and religion with the support of our experienced team.

The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.

Section 8 Company has become the most preferred form of Non-Profit Organization (NPO) or Non-Governmental organizations (NGO) in India due to its easy registration process, online secured data with www.mca.gov.in and many Features & Benefits because it functions exactly like a limited company (including all the rights and obligations that come with such a company). It has the authority to work anywhere in India.

Section 8 Company works as the Non-Profit Organizations. When we say not for profit, it does not mean that Section 8 Company cannot earn profits. In fact, such NGO/NPO can generate profits but the income of the Section 8 Company must be used to promote only charitable objects and it cannot pay any dividend to the members of the company.

This company is similar to trust and society, an exception to this is that Trust and Societies get registered under State Govt. Regulation whereas a Section 8 Company is registered online under aegis of Ministry of Corporate Affairs, Government of India.

2. Documents Required for Section 8 Company Registration

To register an NGO as Section 8 Company, we require certain fixed documents whose quick checklist has been given below for your easy understanding:

  1. Photograph of all the Directors.

  2. PAN Card of all the Directors.

  3. ID Proof of all the Directo (Driving License/Passport/Voter ID).

  4. Residence Proof (Bank Statement/Mobile Bill/Telephone Bill/Utility Bill).

  5. Electricity Bill or any other utility bill for the address proof of the Registered Office (along with Rent Agreement and NOC on case to case basis).

  6. We draft registration documents and send the same to you for signing.

3. Features & Benefits

  1. Tax benefits:
    Section 8 Company being a non-profit organization, they leverage the exemption from the provision of income tax under section 12A and the donors also get tax deductions under section 80G of the Income Tax Act, 1961 respectively.
  2. Zero Stamp Duty:
    A Section 8 company do not have to pay stamp duty on the AOA and MOA on its incorporation, which is compulsorily applicable on other forms of companies.
  3. The ease at transferring ownership/title:
    The limited liability companies do not have the advantage to transfer their title or ownership, but the Income tax Act, 1961 does not confide Section 8 companies to transfer their ownership or title thereby, enabling the transfer of both movable and immovable interest without any hurdles or restrictions.
  4. Exempted from “Limited” name:
    In contrast to other limited companies who are under obligation to use their company’s name as ‘limited company’, section 8 companies get exemption from the use of any such title. They use the word like Foundation, Association, Chamber, Confederation etc.
  5. Separate legal entity:
    Section 8 company has a distinct legal entity which means the company’s existence is different from its members. The company has a perpetual existence along with greater flexibility.
  6. Uniform Registration:
    Section 8 Company gets nationwide uniform registration unlike the other forms of NGOs, like Trust and Society. Further, their names are secured under CRC-MCA.
  7. CARO Not Applicable:
    Requirements of Companies Auditor’s Report Order or CARO do not apply to Section 8 Company.
  8. Credibility in the eyes of public:
    Section 8 Companies are more reliable than Trust and Societies. They are regulated like any other limited company strictly and have to follow the rules and regulations under Companies Act, 2013. This gives a trust and credibility in the eyes of public at large.
  9. CSR Registration
    Section-8 Company can register themselves for CSR-funding by filing form CSR-1.

4. Annual Compliances for Section 8 Company

Section 8 companies are required to comply with several legal obligations and file various annual compliances.

we will discuss the different types of annual compliances filed by section 8 companies.

  1. Appointment of Auditor: Section 139 of the Companies Act, 2013 mandates that every section 8 company appoints an auditor to handle its yearly financial reports. Form ADT-1 must be submitted to the Ministry of Corporate Affairs (MCA) to inform them about the appointment of the auditor and their details. The auditor will be hired for a maximum of five financial years and will audit the company’s financial statements annually. The auditor must be appointed within 15 days of the Annual General Meeting (AGM). If the company fails to submit the Form ADT-1 within the deadline, it will incur penalties.
  2. Maintaining Statutory Register: Under Section 8 of the Companies Act, 2013, the companies are obliged to maintain a register containing details of loans taken by the company, director details, changes in directors, charges created, and investments made.
  3. Conduct Meetings: Section 8 companies are required to conduct an annual general meeting twice a year and other statutory meetings.
  4. Report by Board of Directors: Directors of the company must prepare a report that contains information about the company compliance, corporate social responsibilities, accounting, and other annexures, known as the Director’s Report. The report must be filed with the AOC-4 Form.
  5. Preparation of Financial Statements: The company must prepare financial statements, including a balance sheet, profit and loss statement, cash flow statement, and other financial documents that must be filed with the Registrar of Companies (ROC) and audited by the auditor.
  6. Filing of Financial Statements: The AOC-4 Form must be filed within 30 days from the AGM date, failing which the company will incur a penalty.
  7. Filing of Annual Returns: The MGT-7 Form must be filed within 60 days from the AGM date, failing which the company will incur a penalty.
  8. Filing of Income Tax Return: Section 8 companies must file their income tax return by September 30th of every year to provide a summary of the company’s total income.
  9. Dematerialization of Shares:- As per Rule 9B , the shares must be dematerialized of every section 8 company.

Non-compliance Penalties for Section 8 Companies Section 8 Companies must comply with certain rules and regulations, like all registered companies. If they fail to comply with these regulations, they can face penalties. Here are the penalties that a Section 8 Company can face for non-compliance:

  1. If the Central Government determines that the company is operating dishonestly or against its stated goals, it may terminate the license.
  2. The fines imposed against the company must not be less than Rs. 10 lakh and can be extended to Rs. 1 crore.
  3. The directors & every officer of the company who is in default are subject to both imprisonment and monetary fines up to Rs. 25 lakhs.
  4. If it is discovered that the company’s operation is carried on fraudulently, then every officer in default will be liable for their actions under section 447 of the Companies Act, 2013. Therefore, it is important for Section 8 Companies to comply with all the regulations to avoid facing penalties. By doing so, they can maintain their legal status and continue to serve their respective purposes. Conclusion In conclusion, Section 8 companies are non-profit or non-governmental organizations that utilize their profits to promote various social causes. These companies can reap numerous benefits by adhering to their annual compliance requirements, while avoiding the harsh penalties that non-compliance may bring. Therefore, it is recommended to incorporate your business as a Section 8 company instead of a trust or society.

Get expert assistance to simplify your Section-8 Company registration process and ensure compliance with all legal requirements. Start your business journey today with confidence!