WHAT IS SECTION-8 COMPANY ?
In India, a non-profit organisation can be created by registering a Society under the Societies Registration Acts or registering a Trust or incorporating a Section 8 company with a not for profit motive. Section 8 under the Companies Act, 2013 corresponds to the old Section 25 under the Companies Act, 1956, which was popularly known as “Section 25 Company”, hence the name “Section 8 Company”.
CONCERNS RELATED TO SECTION 8 COMPANY
- Profit or income of the Section 8 Company cannot be used for any object other than those mentioned in its MOA.
- Distribution of profits or declaration of dividend to its members is prohibited.
- No member can be appointed as an office of the company with any remuneration.
- Its income is taxed at the same rates as other companies.
- A Section 8 Company cannot alter the provisions of its MOA and AOA except with the previous approval of the Central Government.
ADVANTAGES OF SECTION 8 COMPANY REGISTRATION
- No Minimum Share Capital Requirement
- Easy Transfer of Ownership
- Tax Benefits
- No need to use “Section 8” or “Limited” title
- No Stamp Duty
- Clear Objectives for easy donations and loans
- Easy to Manage
- Exemptions and Privileges under Companies Act, 2013
- Relaxation in Compliances
STEPS TO INCORPORATE SECTION 8 COMPANY REGISTRATION
1. Application of DSC & DPIN: First of all, the partners have to apply for Digital signature and DPIN. Digital signature is an online signature used of filing and DPIN refer to Directors PIN number issued by MCA. If the directors already have DSC and DPIN, then this step can be skipped.
2. Name approval: You to provides 3 different name options to MCA of which one will be selected. Names provided should ideally be unique and suggestive of company business
3. Approval of other authorities: The Registrar of Companies may require the applicant to furnish the approval or concurrence of any department,regulatory body, appropriate authority, or Ministry of the Central or State Government(s) in relation to the work to be done.
4. Obtaining Section 8 Company Licence: After the company’s name is approved, one needs to apply for a Section 8 Company licence from the MCA.The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers.The Registrar might also consult any other regulatory bodiesandnecessary authorities.
Thereafter, the Registrar of Companies may,at its discretion, grant the licence with or without certain conditions. The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such licencing conditions as may be specified by the Registrar in this behalf.
5. MOA & AOA submission: Once the licence is obtained, one needs to draft Memorandum of association and Articles of Associate. But the object of the company must always be a charitable object. Both MOA and AOA are filed with the MCA with the subscription statement.
6. Get Section 8 Company incorporation certificate: It typically takes 15- 25 days to form a Section 8 company and get the incorporation certificate. The Certificate of Incorporation is proof that a company exists. It also includes your CIN (Company Incorporation Number).The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers.The Registrar might also consult any other regulatory bodies and necessary authorities. Thereafter, the Registrar of Companies at its discretion, may grant the licence. And such licence may contain conditions as deemed necessary by the Registrar.
7. Apply for PAN, TAN and Bank account: Then you need to apply for PAN and TAN. PAN and TAN are received in 7 working days. Post this, you can submit the Incorporation certificate, MOA, AOA and PAN with bank to open your bank account.
The Ministry of Corporate Affairs (MCA) has issued an integrated incorporation form INC-32. So now, an OPC can be incorporated online by filling the Simplified Proforma for Incorporating Company Electronically (SPICe) form in Form INC-32 (using Digital Signature Certificate of the Director)along with (eMoA) in Form INC-33 and (eAoA) in Form INC-34.
FACTORS TO CONSIDER IN SECTION 8 COMPANY NAME SELECTION
The name of your Section 8 Company is very important. Your Section 8 Company’s name is the first impression to your buyers, suppliers and stakeholders. It should therefore be attractive, relevant and suggestive. There are several factors that you should keep in mind while choosing a name for your company.
Short & Simple
The name should be concise and not be too long. People should be able to recall and pronounce your company’s name easily the first time they hear or read it.
The name of your Section 8 Company should be relevant to your business. It should fit the company’s branding strategy. For example, Infosys refers to information systems or IT technologies.
Name of your Section 8 Company should not be exactly the same or identical to an existing LLP or company or trademark or for which a trademark has been applied for. You can go to search.legalraasta.com to check if your company name matches any others. Ideally, you should avoid plural version e.g, “Snapdeals” or merely changing the letter Case or punctuation marks or spacing in an existing LLP, Company and Trademark name
Section 8 Companies are not required to end their name with “Section 8” or “Limited”
Should not be illegal / offensive
The name of your LLP should not be against law. It should not be abusive or against the customs and beliefs of any religion and should not use words or phrases which are used as a slur and are offensive to a particular group of people. Further, names cannot include foul words or phrases
Should not violate any laws
Your Section 8 Company’s name should not be given under and violate the Emblems and Names (Prevention of Improper use) Act, 1950. Click here to check the names. (See the Schedule)
Should not use the words “British India”.