Section 8 company registration – a brief guide

“Over the past 30 years, we have been witnessing rapid urban development and economic growth. Such rapid transformation has created the progressive image in the mind of everyone. No doubt, the dream of megacity will turn into reality soon”.

Long back, there was a merchant who wanted teach his son how to perceive things or situations from different perspective. One bright morning, he took his son to the city and introduced his him to several merchants. All merchants were leaving to different cities to sell their goods by using different modes of transport.

Merchant A was travelling through the city of Ashur and over the mountains to the trading colony of Kanesh. There he would trade his textiles for silver and gold.

Merchant B was travelling by boat to the island of Dilmun. There he would trade his grain and textiles for carnelian, copper and pearls.

Merchant C was travelling by donkey north to the city of Mari. There he would trade textiles and fish oil for wine and timber.

The father asked his son which merchant he would want to go with? The son immediately chose Merchant A, who was not using any mode to trade and was still successfully trading in precious jewels”. Life gives us many choices. It depends on us how we perceive it and go for it. All merchants were dealing with the same goods, but the idea of trading varied for all as per their ability to do business and their vision. No business is big or small. It is our vision and hard work, which makes a business successful.

Emergence of trade and commerce is not new. The concept of barter system has been around for a very long. Do we remember Chola and Patliputra, who were popularly known as clients of trade? Trade and commerce flourished at a very high speed during their regime. With the ever changing scenario of business environment, many business forms have emerged out. Since ages, when the history of corporate Law was very mature in India, the idea of incorporating a non-profit making company started prevailing in the business community.

Non-profit organisations have always been seen as special purpose vehicle (SPV) that act as an instrument and driving force in helping out the government in doing things which they always want to do, but could not do due to the lack of various factors. NPOs are direct link between society and their well-being and provide a platform where one can join hands to work for the society and community, and ultimately to make this world a better place. India being a diversified country lack behind in many areas like education, health care, employment generation, food and safety, etc. The fact that most of these issues are not addressed by government policy due to many factors has created a demand and space for organisations ‘that aim to address those’ and thus the idea of non-profit organisation came into picture.

As far as structure is concerned, it is similar to a trust or society. The main object behind incorporating Section 8 company is to avail various privileges and exemptions available. Section 8 companies has various advantages over Trust or Society like recognition and better legal standing, higher credibility amongst donors, government departments and other stakeholders. The internal governance of a Section 8 company is similar to that of a society.

Non-profit making company is registered under the Central Government’s Ministry of Corporate Affairs. The objective behind the incorporation of non-profit making company is to promote science, sports, art, education, research, social welfare, religion, charity and environment protection, etc., where profit doesn’t play any role. It is important to have objects with non-profit motive.

Before opting to incorporate Section 8 company, one must be clear about the basics of it, which are as follows:

How much capital is required?

As per Companies Act, 2013, there is no such restriction regarding capital to incorporate a company. This limit can be increased at any stage of the business in future as the business grows.

Who can be a director of a Section 8 company?

The director required must be a natural person and above 18 years of age. He may or may not be a resident of India. Even foreign nationals can become directors in Indian Section 8 company.

What is the minimum and maximum limit of directors to incorporate a Section 8 company?

Minimum two directors are required if incorporated as private limited and minimum three directors are required if incorporated as a public limited company. Maximum there can be 200 members if incorporated as private limited, but if incorporated as public limited there is no limit as such.

What are the benefits associated with the Section 8 company?

There are many privileges and advantages under the Company Law to Section 8 companies.

• Forming Section 8 company is an easy process
• Minimum paid-up capital is not required
• Stamp duty registration is exempted
• Any registered partnership firm can be a member in its individual capacity
• Tax deductions benefits u/s 12AA and u/s 80G of Income Tax Act to the donors of the company
• Greater flexibility

What is the time taken to register a Section 8 company?

It takes around 30-45 working days to register a Section 8 company. This duration can be lesser in case the Regional Director approves the application earlier.

Is it necessary to have a charitable object to register a Section 8 company?

Yes, it important to have non-profit motive to incorporate a Section 8 company.

What are the documents required for registering Section 8 company?

• Copy of PAN card.
• ID proof: Voter ID or Passport or Aadhar card or Driving license (any one).
• Address proof: It includes latest bank account statement or telephone bill or electricity bill not older than two months.
• Passport size photo
• Address proof of the company, which includes any utility bill not older than two months.
• No Objection Certificate (NOC) from the owner.
• Copy of rent agreement in case of rented premises.

If the applicant is an NRI then the all the documents must be notarised or apostil and passport is compulsory.

What is the span of the company?

The life of the company is not dependent on or related to the life of a particular individual or individuals. It could go on indefinitely until it accomplishes its objective, merges with another business, or goes bankrupt.

After getting familiar with the basics, one can take professional advice before taking a step ahead.

As we look around us, we see everybody is running behind money. There exists, however, many institutions at large whose objective is to serve the society and cater their good quality services with all the best possible efforts in all areas, especially remote areas where the government is unable to reach. But being a part of this society, the government also supports such organisations in their best way and provide all possible assistance.

“The best way to find yourself is to lose yourself in the service of others” – Mahatma Gandhi 

What is the procedure of non-profit making company?

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)