Section 8 Company is registered under the Central Government's Ministry of Corporate Affairs (The Companies Act, 2013). Section 8 Company, thus making it more closely regulated and monitored than trusts and societies, and recognized all over the world. Section 8 Company or a Non-Profit organization (NPO) is a Company established for promoting commerce, art, science, religion, charity or any other useful object and it is easy to register, run or manage. Section 8 Company Registration also has higher credibility amongst donors, Government departments and other stakeholders. The Name of Section 8 Company can end with Foundation mostly. The Registration Procedure of Section 8 Company is that of Similar to Private /Public Company as the case may be except of additional requirement of taking License from Central Government after name approval.
An NPO/NGO can be formed for promotion of any useful object like sports, education, research activities etc. The term No Profit does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefited out of those profits.
•Many privileges and exemptions under Company Law
• Exemption from requirement of Minimum Paid-up capital
• Exemption of Stamp duty for registration
• Non-application of Companies Auditing Report Order (CARO) 2003
.• Registered partnership firm can be a member in its own capacity
.• Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
• Profit or Income of the Company shall be applied for the promotion of the main object
• Declaration of dividend or distribution of profit to the promoters is not allowed
• No member shall be appointed as a remunerated officer
• No remuneration / benefit shall be paid to a member being a servant / officer of the Company (except reimbursement of out of pocket expenses, reasonable interest on money lent or reasonable rent on the premises).
• Subsequent alteration of MoA & AoA requires prior approval of Central Govt. (i.e. ROC)
• Minimum 2 Shareholders (for Private Ltd. Co.) and 7 Shareholders (for Public Ltd. Co.)
• Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
• The directors and shareholders can be same person
• DIN (Director Identification Number) for all the Directors
• DSC (Digital Signature Certificate) for two of the Directors
Before taking any step in the registration of Section 8 Company the proposed Directors of the company are required to obtain DIN and DSC for further activities involving of filing of forms with Registrar of Companies.
E ï¿½ FORM 1Aï¿½ NAME APPROVAL Obtain Name Approval Letter from the Registrar of Companies after making an application in E-Form 1A .Six names in preferential order may be proposed in single application .
Once the name is confirmed, an application should be made electronically to the Registrar of Companies for granting of license in Form No.24A. The application should be accompanied by various documents such as Memorandum of Association, Articles of Association, A statement showing details of assets and liabilities, Statement showing estimate of the future annual income and expenditure of the proposed company etc.
Registrar of Companies shall scrutinize the documents and if the Registrar of Companies is satisfied that the application made is complete in all respects and in the best interest of the country, the Registrar of Companies may grant the license within 30 days from the date of filing of application.
Once the license is obtained Form No. 1, 18, 32 is filed for getting the Certificate of Incorporation (COI). The company comes into existence as soon as the Certificate of Incorporation is obtained from the Registrar of Companies.
- What is a Section 8 Company?
An association having objects to promote commerce, art, science, religion, charity or any other useful purpose and not having any profit motive can be registered as Non Profit Company under Section 8 of the Companies Act,1956.
- Are foreigners allowed as board members of the company ?
There is no apparent bar on the foreigners becoming members of the company under Companies Act,1956. However company with foreigners on board cannot avail FCRA benefits so if the company wish to enjoy FCRA benefits the foreigners on board should not be allowed.
- Which are the laws that regulate cooperative societies in India?
Laws regulating Cooperative Societies in India are: State Cooperative Societies Acts of individual states Multi-State Cooperative Societies Act, 2002 for the multi-state Cooperative societies with Area of operation in more than one State.
- What is the time period for which a company can remain registered under the Companies Act, 1956 ?
The registration under Companies Act, 1956 is permanent in nature and provides perpetual existence. Under extreme circumstances such companies can be liquidated. The authority is the official liquidator of companies.
- Can an Indian company registered under Section 8 of the Companies Act 1956 have activities outside India ?
The Companies Act, 1956 do not prohibit activities outside India. The FEMA and FCRA are silent in this regard and under the liberalized regime of RBI, current account transactions are allowable without any prior permission. Therefore, there should not be any problem in transfer of foreign exchange, subject to the guidelines of FEMA. The most important legislation in this context is the Income Tax Act, which under section 11(1)(c), prohibits the activities of Indian NGO outside India without specific permission of the CBDT. An Indian NGO spending money on activities outside India will be subject to income tax on that portion of its income.
- Does an association willing to get registration under Section 8 requires to have minimum paid up capital as required under the provisions of section 3 of the Companies Act, 1956
No, as per sub section 6 of section 3 of the Companies Act, 1956, a company registered under Section 8 shall not be required to have minimum paid up capital.
- What is the time limit for granting licence under Section 8 of the Companies Act, 1956 by the Regional Director ?
As per the Citizenï¿½s Charter of the Department of Company Affairs, Schedule II, Serial No.2, Regional Directors are required to grant the licence within 30 days from the date of filing the application.