Section 8 Company Registration in India Online process

Section 8 companies, classified under the Companies Act of 2013, are entities dedicated to promoting charitable objectives without pursuing profits for distribution among members. This article addresses common queries related to their registration and operations.

The Companies Act, 2013 maintains provisions for Section 8 company registration, which are designed to operate under specific frameworks outlined in Section 8 of the Act. Key provisions include:

• Profit Utilization: Section 8 restricts the application of profits solely for the purposes for which the company is established. It prohibits the distribution of dividends to its members.
• Membership: Section 8 companies are permitted to have partnership firms as members, facilitating broader participation in their operations.

Section 8 Companies, as per the Companies Act, 2013, are companies formed for promoting charitable or non-profit objectives. Unlike other companies that distribute profits to shareholders, Section 8 Companies cannot distribute dividends to their members.

Shares in Section 8 Companies:

1. Non-Profit Nature: Section 8 Companies do not distribute profits among members. Any income generated must be reinvested in furthering the company’s charitable objectives.
2. No Dividends: Since Section 8 Companies are formed for charitable purposes, they are prohibited from paying dividends to their members.
3. Membership: Members of a Section 8 Company may contribute to its operations and may have voting rights, but they do not receive dividends or financial returns.
4. Contributions: Members can contribute funds or assets to support the company’s activities, but these contributions are not treated as investments in the traditional sense since they are not meant to yield financial returns.
5. Limited Liability: Like other types of companies, members of Section 8 Companies enjoy limited liability, meaning their personal assets are protected in case of company liabilities.

Other part, shares in Section 8 Companies differ significantly from those in for-profit companies, primarily due to their non-profit nature and the prohibition on distributing dividends.

These provisions ensure that Section 8 companies remain focused on their charitable or welfare objectives without deviating into profit distribution, thereby maintaining their nonprofit character as intended by the legislation. Learn about Section 8 Company today with Compliance Calendar LLP in FAQ mode:-

Who can apply for registration of a Section 8 company?

The eligibility criteria for registering a Section 8 Company under the Companies Act, 2013 in India.

1. Objects of the Company: The primary objects of a Section 8 Company must be to promote:

• Commerce
• Art
• Science
• Sports
• Education
• Research
• Social welfare
• Religion
• Charity
• Protection of the environment, or any other similar object of public benefit.

2. Utilization of Profits: After incorporation, the company must use its profits, if              any, or other income solely for promoting the specified objects. This means any surplus generated cannot be distributed as dividends to its members.

3.  Prohibition of Dividend Payment: The company must explicitly prohibit the distribution of dividends to its members. Instead, all income must be reinvested in furthering its charitable or other specified objectives.

Section 8 Companies are often formed for non-profit activities where the intention is primarily to serve a public or charitable purpose rather than to generate profits for shareholders.

What is the process of Section 8 company incorporation?

To incorporate a Section 8 Company in India, the following documents and forms are required along with the other linked web based form and INC-35:

1. Draft Memorandum of Association (MOA) and Articles of Association (AOA): These must be in the prescribed format (Form INC-35), in web based format. Introduction of e-MOA and e-AOA for section 8 companies also.
2. Declaration in Form INC-14: This declaration, on a stamp paper and duly notarized, must be made by an Advocate, Chartered Accountant, Cost Accountant, or Company Secretary in practice. It confirms that the Rules and MOA and AOA comply with Section 8 of the Companies Act, 2013 and the rules made thereunder.
3. Estimate of Future Annual Income and Expenditure: This document should outline the projected income and expenditure of the company for the next three years, specifying the sources of income and the objects of expenditure.
4. Declaration in Form INC-15: Each person making the application must provide this declaration on a stamp paper, duly notarized.
5. Web based Form INC-9 for all subscribers: This form must be submitted by each subscriber and the first directors of the company, on appropriate stamp paper of the state, and duly notarized.

These documents collectively demonstrate compliance with the requirements for forming a Section 8 Company, which is intended for promoting charitable or not-for-profit objectives as per the Companies Act, 2013.

What are the rules for naming a Section 8 company?

Names must align with Section 8 rules, including terms like foundation, federation, or council, and exclude terms like Pvt Ltd or Ltd. As per Rule 8(7) of the Companies (Incorporation) Rules, 2014 specifies that for companies registered under Section 8 of the Companies Act, 2013 in India, the name of the company shall include specific words that denote its non-profit nature. These words typically include:

• Foundation
• Forum
• Association
• Federation
• Chambers
• Confederation
• Council
• Electoral trust
• And similar terms that indicate the company’s purpose is non-profit and related to activities like promotion of art, science, commerce, etc.

These words help clearly identify the charitable or non-profit nature of the company to the public and stakeholders. Companies registered under Section 8 are formed primarily for promoting charitable activities, social welfare, education, science, research, sports, etc., without the intention of earning profits for distribution to its members.

Who issues a license to a Section 8 company?

The CRC (MCA)authorized by the Central Government issues the license.

Can an OPC be a Section 8 company?

No, as per rules, an OPC cannot be incorporated as or converted into a Section 8 company directly.

Can Trusts or Cooperative Societies be members of a Section 8 company?

Yes, there are no restrictions under the Companies Act, 2013, allowing Trusts or Cooperative Societies to be members.

Can a Section 8 company accept foreign donations?

Yes, with compliance under the Foreign Contribution (Regulation) Act for donations from foreign entities.

These services ease the process of starting a business in India by consolidating various regulatory and compliance requirements into a single platform, thereby saving time and effort for entrepreneurs.

Compliance Calendar LLP is a legal, tax and compliance platform serving startups, SMEs and Industries since 2016 with company registration, trademark registration, business compliance, virtual CFO and all other regulatory licensing and compliance for private limited companies in India including India Entry Services.