Online Section 8 Company Registration in India

Section 8 Company Registration

A Section 8 company registration under the Companies Act, 2013 (formerly Section 25 under the Companies Act, 1956) refers to an organization established with the objective of promoting fields such as fine arts, science, literature, or for charitable purposes including knowledge sharing. These companies are governed by the provisions of the Companies Act, 2013, and are granted a special license by the government under Section 8. This designation comes with specific conditions to ensure the company operates for the public good:

• The company must be registered with the objective of furthering charitable causes.
• Any income or profits earned by the company must be reinvested in the pursuit of these objectives.
• The company is prohibited from distributing dividends to its members, ensuring that all profits support its charitable activities.

Benefit of Section 8 Company

Registering a Section 8 company offers several advantages if you're aiming to set up a non-profit organization. Here are some of the key benefits:

Tax Exemptions

Section 8 companies are exempt from paying income tax, allowing them to allocate more funds towards their social causes. Donations made to these companies by individuals or corporates can also be tax-deductible for the donor.

Minimal Capital Requirement

Unlike other company structures, there's no minimum capital requirement for registering a Section 8 company. This makes it easier to get started even if you don't have a significant initial investment.

No Stamp Duty

You don't have to pay stamp duty on the registration documents for a Section 8 company, reducing the upfront costs involved in setting it up.

Separate Legal Entity

A Section 8 company has a separate legal identity from its members and directors. This offers limited liability protection, meaning the personal assets of members aren't at risk if the company faces financial difficulties.

Increased Credibility

The structured format of a Section 8 company can enhance its credibility compared to other types of non-profit organizations. This can make it more attractive to potential donors and stakeholders.

Eligibility for Grants

Section 8 companies are eligible to apply for grants from various government and private institutions that support social causes aligned with the company's objectives.

Focus on Social Impact

The core function of a Section 8 company is to promote social welfare, environmental protection, or other charitable objectives. This structure allows you to prioritize making a positive impact over generating profits.

Eligibility of Section 8 Company Registration

To register as a Section 8 company under the Companies Act, 2013, specific eligibility criteria must be met:

• Minimum Directors or Shareholders: The registration requires at least two directors or shareholders who comply with the Companies Act, 2013.
• Eligible Applicants: A company, individual, or Hindu Undivided Family (HUF) can apply for Section 8 company registration.
• Resident Director: At least one director must reside in India.
• Purpose of the Entity: The entity's objectives should include the advancement of business, arts, science, sports, education, research, social welfare, religion, charity, environmental protection, or similar goals.
• Use of Profits: Any income or profits must be reinvested into the company’s objectives and cannot be distributed as dividends to its members.
• Three-Year Plan: The entity must present a detailed plan outlining how it intends to achieve its objectives over the next three years.

Document Required for Section 8 Company Registration

To initiate the registration process for a Section 8 Company, it's crucial to understand the essential documents required. These include:

• Directors and Shareholders PAN Card
• Directors and Shareholders Aadhar Card
• Bank Statement
• Utility Bills
• Identification Proof (Driving License/Passport/Voter ID)
• Photographs of Directors and Shareholders
• Rent Agreement of the Registered Office
• Director Identification Number (DIN)
• Digital Signature Certificate (DSC) of Directors
• Memorandum of Association & Articles of Association

Donation for Section 8 Company

Section 8 companies are allowed to accept public donations but are not permitted to raise capital through deposits. Here are some of the methods they can use to raise funds:

Foreign Donations

These are permitted only after the company registers under the Foreign Contribution Regulation Act (FCRA) of 1976. FCRA license applications can be submitted only three years after the company's registration date. However, in cases of urgent international donations, a prior clearance can be requested from the commissioner.

Funding through Equity

A Section 8 company may be able to raise funds by issuing new equity shares at a premium, though this method is less common due to the non-profit nature of the organization.

Domestic Donations

There are no restrictions on domestic donations. However, it is crucial to establish a proper mechanism to prevent money laundering.