Section 8 Company

Overview Naming Criteria Eligibility Documents Required Advantages & Disadvantages Exemptions FAQs

Where it is proved to the satisfaction of the Central Government (Power delegated to ROC) that a person or an association of persons proposed to be registered under this Act as a limited company—

has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
intends to apply its profits, if any, or other income in promoting its objects; and
intends to prohibit the payment of any dividend to its members.

The Central Government may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word ― “Limited”, or as the case may be, the words ― “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.

Some important points in Section 8 of The Companies Act, 2013:

The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.

A firm may be a member of the company registered under this section (not any other company).

A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.

A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.

Naming Criteria of a Section 8 Company

Any company should have a short, unique and meaningful name shall not be identical with or too nearly resembles the name of an existing company.

No company shall have a name which, in the opinion of Central Government, is undesirable or the name proposed resembles any connection with Government or State patronage, unless prior approval of the Central Government is obtained.

The name should not be such that its use by the company will constitute on offence under any law.

The name should not be illegal or offensive.

The name should not be misleading for the public.
The Companies Act 2013 provides that the name of a Section 8 company must end with the word “Limited” or “Private Limited”.

Eligibility for registering a Section 8 Company

The minimum age of the person to be a director in the company should be at least 18.
A resident or citizen of India can become a shareholder or director of the company.
One of the Directors of company has to be an Indian Citizen and Indian Resident.
The other director(s) can be a Foreign National.
The shareholders can be natural persons or an artificial legal entity.

Minimum requirements of a Section 8 Company

Minimum 2 members
Minimum 2 directors

Maximum requirements of a Section 8 Company

Maximum 200 members
Maximum 15 directors

Documents/Details Required for Incorporation of a Section 8 Company

Following self-attested documents of the Proposed Director and members is required:

Two identity proof documents of Directors and Shareholders – Copy of Aadhaar Card/ Voter ID Card/ PAN Card (compulsory).
Address proof of the Director or the Shareholder (Voter ID, Passport, Driving license, etc.)
In case your own premise, ownership and sale deed and one address proof document of registered office (like water, telephone, mobile bill or copy of bank pass book or net banking statement mentioning address of the applicant).
In case the property is on rent, then you need to submit a copy of the rent agreement with NOC from Landlord.
Passport size photo of the proposed director & shareholders.
Occupation details, Email address, Contact details of directors as well as shareholders.
MOA and AOA subscriber sheets.
DIN (Director Identification Number) of all directors.
DSC (Digital Signature Certificate) of all directors.
Nationality proof of foreign national subscriber (if any).

Documents/Details Required for GST Registration of a Section 8 Company after incorporation

PAN card of the company.
Proof of identity of all the directors. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
Details of bank.
In case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and electricity bill/property tax receipt/water bill copy of the registered office property.
In case of own property, copy of sale deed along with the electricity bill/property tax receipt/water bill copy of the registered office property.
Appointment Proof of authorised signatory.

Advantages

Section 8 Company is a separate legal entity and is different from its members. The Company has perpetual existence. Along with having organized operations and greater flexibility.

A Section 8 Company is exempt from the requirement of paying stamp duty on the MOA and AOA of the private or public limited company, which is applicable for registration of other kinds of company structures.
Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.
For Section 8 Companies in India, many tax benefits are granted.

Disadvantages

Profit or Any other Income of the Company is applied for the promotion of the main object only.
Declaration of dividend or distribution of profit to the members is not allowed.
No member can be appointed as a remunerated officer of the Company.
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)

Exemptions for a Section 8 Company

A general meeting may be called by giving notice not less than 14 clear days instead of 21 clear days.
It shall be enough for a Section 8 Company to hold at least 1 board meeting within every 6 calendar months instead of holding 4 meetings a year.
Recording of minutes of General Meetings, Board Meeting and other resolutions has been withdrawn. However, the minutes of meetings may be recorded within 30 days of conclusion of the meeting in cases where the company’s articles provide for confirmation by way of circulation of minutes.
Conditions requiring and governing appointment of independent directors have also been waived off.
Any person can be appointed as Company Secretary even if he/she is not a member of Institute of Company Secretaries of India.
The maximum limit of 15 directors and appointment of more than 15 directors by passing special resolution has been withdrawn.
The bar on taking up directorship in more than 20 companies has been relaxed.
A firm can even be a member of a Section 8 Company.

FAQs

1. What is Section 8 Company Registration?

1. The company should be formed for the promotion of a social cause. It may be charity, education, industry, sport, etc.

2. Income and profits should be used for this purpose or object only.

3. No dividend should be paid to its members.

2. How to register a Section 8 Company?

A Section 8 Company is at first to be registered in the same manner as a limited company. After this registration procedure, it needs to obtain a license from the Central Government to be registered under this Section. This license is provided on the basis of the Company’s objectives which have been mentioned in MOA and AOA and some other criteria.

3. What documents are required for Section 8 Company registration?

Below documents are needed for the registration of the Section 8 Company:

DSC & DIN of the Directors.
Director’s ID proof and Address proof.
Objectives and projected work of the Company.
Financial statements like assets and liabilities, the proposal for 3-years, etc. Registered office address documents.

4. Can a Section 8 Company be converted into a private limited company?

Yes. A Section 8 company can be converted into a private limited company after taking approval from ROC.

5. What are the annual compliances for Section 8 Company?

The annual compliances which must be met by a Section 8 Company are the same as other normal companies registered under the Companies Act. Conducting 2 Board Meetings, at least, in a year. Mandatory audit of the Books of Accounts. Annual returns, along with other e-filing forms such as MGT-7, AOC-4, etc. Income tax returns. Additional compliances to fulfil the registration u/s12AA, 80G, of the Income Tax Act, applicable to donations, etc.

6. Can a Section 8 company raise Foreign Funding?

Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been done. FCRA license can only be applied after 3-years from the date of registration. However, if some really urgent foreign donations are necessary, then you may apply for a prior permission from the commissioner.

7. Can a Section 8 Company invest in another company?

Yes. Section 8 Companies can invest in other companies to meet the objectives of its formation.

8. Can a Section 8 Company form a normal subsidiary company?

Yes, it can form a subsidiary company which is normal and plans to make profits.

9. How to obtain Digital Signature for Directors?

Section 8 Company will be governed by the Board of Directors, similar to a Private Limited Company. During the process of incorporation, the DSC is obtained for the proposed directors. The following documents must be submitted. 1. PAN or Aadhaar card. 2. Drivers License/ Passport/ Election ID/ Government Issued ID. After submitting these documents, the applicant must complete an OTP and eKYC procedure to obtain a DSC in their name.

10. Is an office required for starting a Section 8 Company?

An address in India where the registered office of the Company will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.