Section 8 companies have a unique business structure. These companies are incorporated for non-commercial purposes. You should apply for Section 8 company registration if you want to create an organisation for charitable purposes. Let us learn about these companies in detail.
What is a Section 8 Company?
As the name suggests, this is a type of business incorporated under section 8 of the Companies Act, 2013. Organisations that have charitable objectives can go for Section 8 registration. They are also known as non-profit organisations.
You can register a non-profit organisation as a Trust or Society as well. However, Section 8 company registration is preferable to the alternatives as they are the easiest to register, run, and manage.
Organisations that are eligible for registration
- Companies incorporated for the promotion of sports, providing medical aid, social welfare, funding any research, environmental purposes, or any other such objectives that are for the welfare of the society.
- Companies that will only be using their funds for charitable purposes.
- A company that will not be paying dividends.
Process for Registration
The registration process is quite simple. One can easily register their section 8 company online by filling out the SPICe+ form available on the MCA website. It’s important to note that for filling SPICe+ form, one needs to register on the MCA website. Additionally, the successful submission also needs certified professionals. Generally, the registration process takes 17-19 days (depending on MCA approval).
Documents required for Registration
- Digital Signature Certificate (DSC) for the to-be directors
- Director Identification Number (DIN) for the to-be directors
- Articles of Association (AoA)
- Memorandum of Association (MoA)
- Copies of Passport Size photographs of the to-be directors
- Copies of ID proofs of the to-be directors. (Aadhar Card, Passport, Voter Id)
- All details of the directors (such as if they are members of other companies or LLPs)
- Proof of address of the to-be directors (via any utility bill)
Benefits of Section 8 Registration
These companies have various benefits. Such as:
Access to Tax benefits
Firstly, they enjoy several tax exemptions. This is because they are non-profit organisations. This includes exemptions under section 80G of the Income Tax Act, such as enjoying tax cuts. This is a huge advantage.
No Share Capital
Secondly, these companies have no minimum paid-up or authorised capital requirement. Additionally, they can modify their capital structure in the future based on their needs.
Zero Stamp Duty
Thirdly, during company registration, one needs to pay stamp duty on the incorporation forms, MoA and AoA. These are exempt from having to pay stamp duty on MoA and AoA. They are the only type of company under the Companies Act that enjoys this exemption.
Separate legal entity
Moroever, even though they are non-profit organisations, these companies come under the Companies Act. Due to this, they have a separate legal identity from their owners. They also get to enjoy perpetual success and have limited liability like other companies.
As mentioned before, the Companies Act, 2013 governs these companies. Hence, they come under the purview of the MCA (Ministry of Corporate Affairs). This gives such companies higher credibility in comparison to other non-profit organisations as there are stringent compliance requirements that they have to follow.
Eligible for overseas donations
Additionally, these companies can receive donations as overseas funds under the Foreign Contribution Regulation Act, 2010. This makes it convenient for the non-profit organisation to get funds for their charitable objectives.
Section 8 companies are registered for charitable or altruistic purposes. While they cannot make profits or issue any shares, they are eligible for many tax benefits. They also have a very simple registration process. They also enjoy added credibility as they are governed by the MCA.
Frequently Asked Questions