Section 8 Company Incorporation

Introduction

Section 8 company is a company established for an objective of promoting the fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. Section 8 Companies are registered under the Companies Act, 2013.

Name Applicability:

The name of company should not fall in the ambit of undesirable names specified in Rule 8 of Companies (Incorporation) Rules, 2014. The name can be incorporated without using the word “Limited” or “Private Limited” as the case may be. Name shall include the word Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral trust and the like words – Rule 8(7) of the Companies (Incorporation) Rules, 2014.

One can propose maximum 2 names at a time and 1 resubmission is allowed in RUN facility.

Benefits of Section 8 Company Registration:

• Exemption from Stamp Duty.
• Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
• Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in
• Section 8 Companies are not required to add the suffix Limited or Private Limited at 5.

Incorporation Forms:

• Spice + Part A
• Spice + Part B
• INC-13 e-MOA
• INC-31 e-AOA
• INC-9
• AGILE-PRO S

Attachments

• PAN card of first directors and subscribers
• [Aadhaar Redacted] of first directors and subscribers
• Proof of address of Registered office like Sale Deed/Lease Deed/Rent Agreement.
• Latest Utility Bill of Registered office like Electricity Bill
• NOC of owner if registered office is taken on rent/lease.
• DIR-2 - Consent of Directors.
• An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.

Incorporation Procedure

Step 1. Application for name availability in Form RUN- SPICE + PART A

Application for name availability shall be made in form RUN-LLP. One can propose maximum 2 names at a time and 1 resubmission is allowed in RUN facility. It is advisable to attach the object clause of the proposed company. Name once approved is valid for 20 days.

Step 2. Application for Digital Signature Certificate of First Directors

Application for Digital Signature Certificate of first subscribers and directors whose signatures are required for filing incorporation forms with the ROC.

Step 3. Filing of SPICE + PART B

SPICE + PART B captures crucial information such as capital structure, directors, shareholding pattern etc.

Step 4. Filing of Memorandum of Association, Articles of Association in Form INC-13 and INC-31

MOA is the charter of the company and defines the Objects of company. AOA is a document which regulates the internal management of the company. MOA of Section 8 Company is in form INC-13 and AOA in form INC-31.

(Note – AOA Clause 80 to 88 will not be applicable to Section 8 Companies.)

Step 5. Filing of eForm INC-9

Self-declaration by first subscribers in eForm INC-9 which gets prefilled through Form SPICE + PART B.

Step 6. Filing of AGILE-PRO (INC-35 Form)

AGILE-PRO (INC-35 Form) is a multipurpose application to be mandatorily filled through SPICE + e-form & is used to register for ESIC, EPFO, Professional Tax, Company bank account and GSTIN.

Points to be Noted-

• It is to be noted that e-MOA (INC-33) and e-AOA (INC-34) is not applicable to Section 8 companies.
• Section 8 company does not fall in the ambit of definition of Small Company Section 2(85) of Companies Act 2013. Therefore, share of the said company shall be mandatorily be in Demat Form.
• Clause 80 to 88 of AOA shall not be applicable to Section 8 Company.

Restrictions/Prohibition

• A company with unlimited liabilities cannot be registered as a Section 8 Company.
• As prescribed in Rule 3 of the Companies (Incorporation) Rules, 2014 one person company cannot be incorporated as Section 8 Company.
• Section 8 Company prohibit to issue a dividend, to its members because it is restricted from the law. They cannot distribute their earned profit as dividends to its member; they can promote their business objectives.
• The objectives of a Section 8 Company cannot be altered without the prior approval of the Central Government.
• Section 8 Companies are required to comply with stringent regulations, including the filing of annual returns, conducting regular board meetings, and maintaining proper accounts and records.
• Section 8 Company is prohibited from issue of bonus shares.
• section 8 company cannot maintain its books of accounts on cash basis.

Features and Charecteristics

• Company can hold general meeting with minimum 14 day notice.
• There is no prescription with respect to minimum or maximum directors in a Section 8 Company.
• Section 8 Companies are exempt from requirement of appointment of independent director.
• Section 8 Companies are required to have at last one Board meeting within every six calendar month.
• Quorum for board meetings of Section 8 Companies is eight directors or 25% of its total strength, whichever is lower.
• The definition of Company Secretary in Section 2(24) of the Companies Act, 2013 is not applicable on Section 8 Companies.
• Section 8 company can promote another company and be a holding company of another company.
• Section 8 Company can have “for profit” Subsidiary.
• Companies (Auditors Report) is not applicable to Section 8 Companies.