How to Start a Section 8 Company: A Step-by-Step Guide
Introduction:
A Section 8 company, also known as a not-for-profit organization, is established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other similar objective. Unlike other companies, Section 8 companies do not distribute profits among their members and instead utilize the income for promoting their objectives.
Here’s a step-by-step guide on how to start a Section 8 company in India.
- Determine the Objectives: Identify the primary objectives and purposes of the Section 8 company. This could include social welfare, education, healthcare, environmental conservation, or any other charitable cause. Clearly define the mission and vision of the organization to guide its activities effectively.
- Choose Suitable Directors: Select a minimum of two individuals to serve as directors of the Section 8 company. Ensure that the directors are individuals of sound mind, above the age of 18, and not disqualified under the Companies Act, 2013. The directors play a crucial role in managing the affairs of the company and ensuring compliance with legal requirements.
- Name Reservation and Approval: Choose a unique name for the Section 8 company and check its availability with the Registrar of Companies (RoC). Once the name is finalized, file an application for name reservation with the RoC. Ensure that the proposed name complies with the naming guidelines specified under the Companies Act, 2013.
- Draft Memorandum and Articles of Association: Prepare the Memorandum of Association (MoA) and Articles of Association (AoA) of the Section 8 company. The MoA should clearly outline the objectives, powers, and scope of activities of the company, while the AoA should specify the rules and regulations governing its internal management and operations.
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN): Apply for Digital Signature Certificates (DSCs) for all proposed directors of the Section 8 company. Additionally, obtain Director Identification Numbers (DINs) for the directors by filing Form DIR-3 with the Ministry of Corporate Affairs (MCA). DSCs and DINs are essential for digitally signing documents and filings with government authorities.
- File Incorporation Documents: Once the name is approved, and necessary approvals are obtained, file the incorporation documents of the Section 8 company with the RoC. The documents include the MoA, AoA, Form INC-12 (declaration for incorporation of a company), and Form INC-22 (notice of situation or change of situation of the registered office).
- Obtain Certificate of Incorporation: Upon scrutiny of the incorporation documents and compliance with legal requirements, the RoC will issue a Certificate of Incorporation for the Section 8 company. This certificate signifies the legal existence of the company and its incorporation under the Companies Act, 2013.
- Apply for Section 8 License: After obtaining the Certificate of Incorporation, apply for a license under Section 8 of the Companies Act, 2013. Submit Form INC-13 along with the required documents, including a detailed project report, financial projections, and declaration of assets and liabilities. The license is granted by the Central Government upon satisfaction of the prescribed criteria.
Conclusion:
Starting a Section 8 company involves a systematic process of registration and compliance with legal requirements. By following these steps diligently and seeking professional guidance when necessary, aspiring entrepreneurs and social activists can establish Section 8 companies to pursue philanthropic objectives and contribute to societal welfare effectively.
