Section 8 Company Registration

 

SECTION 8 COMPANY – AN OUTLINE

 

Section 8 Company or a Non-Profit association (NPO) is a Company laid out for advancing commerce, art, science, religion, sports, instruction, research exercises, charity, or some other valuable social item. The profit and gifts are applied for advancing just the objects of the company and no profit can be paid to its individuals or proprietors.

The term No Profit doesn’t imply that the Company can’t produce benefit or INCOME, however what it implies is that the Section 8 Company needs to apply the INCOME for advancement of the article and not for disseminating it to the promoters. It implies that the Company can acquire profit however the promoters can’t profit from those profit.

DEFINITIONS

The Companies Act characterizes a Section 8 company as one whose targets is to promote fields of expressions, commerce, science, research, training, sports, charity, social welfare, religion, environment protection, or other comparative goals. These companies likewise apply their profit towards the advancement of their objective and deliver no dividend to their individuals.

E.G.- Famous instances of Section 8 companies incorporate Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industries (CII). The target of these companies is working with the development of growth of trade and commerce and India.

QUALIFICATION

  • Objects of Section 8 Company should be the advancement of Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of Environment or any such other item.
  • The Company should plan to apply its profit (if any) or other income in advancing these objectives.
  • It should expect to disallow the payment of dividend to its members.

CHARACTERSITICS OF A SECTION 8 COMPANY

A Section 8 company includes the accompanying particular highlights that most different sorts of companies don’t have:

  1. Charitable targets: Section 8 companies don’t plan to create profit. Their targets are absolutely charitable in nature. They mean to additional causes like science, culture, research, sports, religion, and so forth.
  1. No base offer capital: Section 8 companies, in contrast to any remaining companies, don’t need a recommended least settled up share capital.
  1. Limited liability: Members of these companies can have limited liabilities. Regardless, their liabilities can’t be Unlimited.
  1. Government permit: Such companies can work provided that they have the Central Government’s permit. The Government can renounce this permit too.
  1. Privilege: Since these companies have charitable goals, the Companies Act has agreed a few advantages and Exemptions to them.
  1. Firms as individuals: Apart from individuals and relationship of people, Section 8 likewise permits firms to be individuals from these companies.

ADAVNTAGES OF SEC 8 COMPANY

The following are the advantages of Sec 8 company are as follow-

 

  • Distinct Legal Identity:

Section 8 Company is a different lawful element and is not the same as it’s individuals. The Company has ceaseless presence. Alongside having coordinated activities and more noteworthy adaptability.

  • Zero Stamp Duty:

A Section 8 Company is excluded from the necessity of Incoming stamp obligation on the MoA and AoA of the private or public restricted company, which is material for enlistment of different sorts of company structures.

  • No Minimum Capital Requirement:

At least capital breaking point has been referenced for a Section 8 Company in India. What’s more, the capital design can be modified at any stage according to the development necessities of the company. This suggests that it tends to be shaped with next to no share capital. The assets important for conveying the business activities can be brought, later, as gifts and additionally memberships from individuals and the overall population.

  • Name:

Section 8 Company isn’t expected to addition “Public Limited or Private Limited”, close to it’s legitimate name. It tends to be enrolled with names, for example, “Affiliation, Society, Council, Club, Charities, Foundation, Academy, Institute, Company, and Federation”.

  • CARO:

Requirements of Companies Auditor’s Report Order or CARO don’t make a difference to this sort of company.

  • Tax Benefits:

 For Section 8 Companies in India, many tax reductions are conceded.

  • Validity:

Section 8 Companies are more reliable than any remaining types of charitable organizations. They are represented by the Companies Act and are regulated strictly. Like the prerequisite of an obligatory yearly review, and both the “MOA and AOA” can’t be modified at any stage or circumstance. The principles on dealing with the profit and misfortunes of the company make these companies reliable.

  • Exemption to the donors:

Those giving to a Section 8 Company are qualified for charge exclusions u/s 12A and 80G of the Income Tax Act.

  • Membership:

A registered company firm can turn into a part in its individual limit and get Directorship.

DISADVANTAGES OF SEC 8 COMPANY

Following are the disadvantage of section 8 Company are as follow-

  • Profit distribution is not permissible:

In contrast to private, public, and OPC, Section 8 companies don’t have the influence to attempt profit distribution and assign decent amount to the individuals. The profit acquired by these companies must be utilized to serve charitable targets.

  • Profit is not the main objective:

By no means sec 8 companies can’t serve benefit based goals. Notwithstanding, they are allowed to produce INCOME from genuine sources or through gifts. Unnecessary to make reference to such profit must be utilized to advance charitable targets.

  • Presence of rigid compliances and standards:

Sec 8 companies will undoubtedly keep different dreary compliances and standards to stay functional inside the legitimate scene. All such guidelines ought to be encased in the company’s sanction records like MOA and AOA. The individuals from Section 8 elements approach different advantages. Likewise, these individuals are additionally presented to a few undeniable inadequacies.

  • Forbiddance on naming a part as a compensated official:

Sec 8 companies are not permitted to designate a part as a compensated official. This condition has been explained under the overseeing regulation.

 

FORMATION OF SEC 8 COMAPANY

An individual or an association of people can make an application to the Registrar of Companies utilizing essential structures to frame a company with charitable targets under Section 8 of Companies Act. The Central Government, whenever fulfilled, can accept such an application upon any agreements forced under the permit conceded by it. When acknowledged, the Registrar of Companies will register the company after the applicants income every single imperative expense.

It is critical to take note of that such companies must be limited companies. All Privilege and commitments of limited companies apply for this situation. Further, these companies additionally don’t have to incorporate the words “Limited” or “Private Limited” in their names, as any remaining companies need to.

Since the presence of such companies depends on the permit conceded to them, they cannot modify their reminder or articles of relationship without the Central Government’s consent. They additionally can do nothing that the permit prohibits.

CANCELLATION OF LICENSE

Section 8 company require an award of a permit by the Central Government. All such licenses are revocable also on the accompanying grounds:

  • The company negates arrangements of Section 8;
  • Terms of the permit are abused;
  • At the point when its direct is false, or it abuses its own goals and public arrangement.
  • The Government could arrange the company to be twisted up or amalgamated with one more comparative company in specific situations. The Government needs to hear the company prior to passing such requests.

PROCESS FOR REGISTRATION OF SEC 8 COMPANY REGISTRATION

         Process and Time Line – Registration of Section 8 Company

  • Making of DSC for all Directors and Shareholders –

Choose the name of the company considering naming rules of the MCA. If it’s not too much trouble, allude How to Keep Business Name How to Keep Business Name. Then, at that point, record online RUN Form for name endorsement.

  • Drafting of MOA, AOA, Declarations and Other Relevant Documents, Filing of SPICe+ Form for Incorporation of Company
  • Open Bank Account, move capital and afterward document INC 20A (Declaration to Commence Business of the Company).
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