Registration of Section 8 Company: Process & Benefits
Introduction to Section 8 Company
A Section 8 company, as defined by the Companies Act, 2013, is an organization that operates for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and protection of the environment. It’s established with the intention of applying its profits or other income towards the promotion of these objectives.
Advantages of Section 8 Company
Setting up a Section 8 company offers several advantages. Firstly, it enjoys tax exemptions as per the Income Tax Act. Moreover, it holds limited liability, safeguarding the personal assets of its members. The perpetual succession ensures its existence beyond its founders. Additionally, a Section 8 company has enhanced credibility and better access to grants and donations.
Eligibility Criteria
For obtaining the status of a Section 8 company, certain criteria must be met. The company should have an objective of promoting activities mentioned in its memorandum. It must utilize its profits for these objectives, and its income and property should not be distributed among its members.
Step-by-Step Registration Process
● Name Approval
The initial step involves selecting a unique and meaningful name for the company. The name should reflect the company’s purpose and should not resemble any existing company name. The chosen name must be submitted to the Registrar of Companies (RoC) for approval.
● Drafting Memorandum and Articles
The next step includes drafting the memorandum of association (MOA) and articles of association (AOA). These documents outline the company’s objectives, rules, and regulations. The MOA and AOA must be filed with the RoC.
● Obtaining Digital Signature Certificates
Digital signatures are essential for online filing. The directors and subscribers of the company are required to obtain digital signature certificates from certified authorities.
● Applying for Director Identification Numbers (DIN)
Each director of the company must apply for a DIN, a unique identification number. This step is crucial for director-related filings.
● Filing for Incorporation
Once all prerequisites are met, the application for incorporation should be filed with the RoC. The application should include necessary documents such as the MOA, AOA, and declaration by the directors.
Documents Required
- Address proof of registered office
- Identity proof of directors and subscribers
- Residential proof of directors
- NOC from the landlord (if applicable)
- Consent to act as directors
Restrictions and Regulations
While a Section 8 company holds several privileges, it’s subject to certain restrictions. It cannot alter its MOA and AOA without the approval of the central government. Moreover, any profits earned must solely be utilized for the company’s objectives.
Tax Benefits for Section 8 Company
Section 8 companies enjoy tax exemptions on income tax and are eligible to receive foreign contributions under the Foreign Contribution (Regulation) Act, 2010.
Difference Between Section 8 Company and Non-Profit Organizations
Section 8 companies and non-profit organizations share similarities, but they differ in terms of registration processes and regulatory bodies.
Compliances and Reporting
A Section 8 company must adhere to annual compliances, including filing financial statements, annual returns, and audit reports with the RoC.
Amendment and Alteration of Objectives
Any change in the company’s objectives requires approval from the central government. This ensures that the company continues to serve its intended purposes.
Dissolution of a Section 8 Company
If a Section 8 company intends to dissolve, its assets must be transferred to another Section 8 company with similar objectives.
Impact and Outreach
Section 8 companies play a pivotal role in addressing various social and economic challenges. They contribute significantly to areas such as education, healthcare, and poverty alleviation.
Challenges Faced
Despite its noble intentions, establishing and managing a Section 8 company can be challenging due to complex regulatory procedures and compliance requirements.
Conclusion
The registration of a Section 8 company offers a unique opportunity to combine entrepreneurial spirit with social welfare objectives. By navigating the registration process and complying with regulations, you can establish an organization that makes a lasting impact on society.
FAQs
● Can a Section 8 company earn profits?
No, a Section 8 company cannot distribute its profits among its members; the earnings must be used for its objectives.
● What distinguishes a Section 8 company from a trust or society?
Unlike trusts or societies, a Section 8 company is registered under the Companies Act and is subject to its regulations.
● Are there any tax benefits for donors to Section 8 companies?
Yes, donations made to Section 8 companies are eligible for tax deductions under certain sections of the Income Tax Act.
● Is it possible to alter the objectives of a Section 8 company?
Yes, the objectives can be altered, but it requires approval from the central government.
● Can foreign nationals become directors of a Section 8 company?
Yes, foreign nationals can become directors, provided they obtain a Director Identification Number (DIN) and adhere to necessary regulations.
