All about Section 8 Company Eligibility to Apply for Section 8 Company

Section 8 Company

All About Registration of Section 8 Company with Procedure all about section 8 company under company law

An individual or an association of individuals are eligible to be registered as Section 8 Company if it holds below-mentioned intentions or objectives. The objectives have to be confirmed to the satisfaction of the Central Government. There is no minimum or maximum prescription for Directors in section 8 company.

  • When the company intends to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment or alike other objectives;
  • When the company holds an intention to invest all the profits (if any) or any other income generated after incorporation in the promotion of such objects only;
  • When the company does not intend to pay any dividend to its members.

Non-profit Organization does not mean that the company cannot make a profit or income. It only signifies that the company can earn income but the promoters are not to benefit from those profits. The profits cannot be distributed among the promoters. All incomes must be applied to promoting the object.

Documents Required for Section 8 Company

  1. PAN Card, Aadhar Card and Photos of all the directors.
  2. Address Proof of Proposed Directors (Electricity Bill or Passport can be submitted).
  3. Other Details must be provided such as Contact details and E-mail of directors.
  4. Initial Authorized Share Capital is optional.
  5. Registered Documents of Premises (Notarized copy of lease / rent agreement in the name of the company along with a copy of rent paid receipt not older than one month if premises are on rent/lease).
  6. Authorization from the Landlord (Name mentioned in the Electricity Bill or Property Tax Receipt) to use the premises by the company as its registered office (this is usually referred to as NOC).
  7. DIN if available with parties.
  8. Digital Signatures of all directors.

Points to be considered:

Parties are advised to first search name of company through professionals and then go for further process of registration. Name of each company has to be unique and should not be similar to any other registered company.

The name on the PAN Card will be used by the Ministry of Corporate Affairs for all matters pertaining to the company. Hence, PAN Card must be correct with proper name of the person company. All the documents can be sent through courier or Mail.

Benefits available to Non-profit organization

Distinct Legal Identity

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.

Zero Stamp Duty

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.

No Minimum Capital Requirement

No minimum capital limit has been mentioned for a Section 8 Company in India. And the capital structure can be altered at any stage as per the growth requirements of the company. This implies that it can be formed without any share capital. The funds necessary for carrying the business operations can be brought, later, in the form of donations and/or subscriptions from members and the general public.

Name of the Company

Section 8 Company is not required to suffix “Public Limited or Private Limited”, next to its legal name. It can be registered with names such as “Association, Society, Council, Club, Charities, Foundation, Academy, Institute, Organization, and Federation”

CARO Applicability

Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.

Tax Benefits

For Section 8 Companies in India, many tax benefits are available.

Credibility

Section 8 Companies are more reliable than all other forms of charitable organizations. They are governed by the Companies Act and are regulated strictly.

Exemption to the donors

Those donating to a Section 8 Company are eligible for tax exemptions u/s 12A and 80G of the Income Tax Act.

Membership

A registered partnership firm can become a member in its individual capacity and obtain Directorship.

Checklist for Annual Compliance

Appointment of Auditor by filing Form ADT-1

  • The Auditor is appointed as per Section 139 of the Companies Act. The first auditor in a section 8 Company is to be appointed within 30 days from the date of its incorporation.
  • The auditor can be an individual or a firm.
  • The auditor needs to check all the financial filings of the company.
  • The Auditor is to be appointed in first Annual General Meeting.
  • The Auditor shall hold office from the conclusion of the First Annual General Meeting to the conclusion of the sixth Annual General Meeting that is for five years.
  • A notice of Auditor’s appointment must be filed with the Registrar within fifteen days of the Auditor’s appointment.
  • All the criteria’s mentioned in Section 141[1] for eligibility of the auditor must be fulfilled.

Maintenance of Financial Statements

  • Section 8 Company has to prepare its financial records on an annual basis.
  • After preparation of the financial records and statements, it must be produced to the registrar.
  • The financial records shall contain financial statements such as Trading Account, Profit and Loss Account and Balance sheet.

Registers are to be maintained

  • All Section 8 Companies are expected to have statutory records in registers.
  • Registers are to be maintained on a yearly basis to check how active the company has been annually. The Register will contain the details of members, charges, loans and investments.

Preparation of the Director’s Report

  • The Directors Report is to be filed in Form AOC-4 as per Section 134 of the Companies Act, 2013.
  • A Directors Report is prepared with the intention to explain the shareholders the exact financial position of the company and the scope of its business.
  • The signed ‘minutes of meetings’ need to be maintained at the Registered Office.

Income Tax Return Filing

  • A Section 8 Company has to file Income Tax Returns on or before 30th September of the next financial year.
  • To give a complete overview of the income of the company, it is necessary to file Income Tax returns online.
  • But it can claim certain income to be excluded from income tax.
  • If the company gets registered under Section 12A and 80G it can claim from tax exemption.

Conducting Board Meeting

  • Board meeting of every company should be held twice a year in case of small companies.
  • The gap between the two meetings should not be more than 90 days.

Conducting Annual General Meeting

  • Annual General Meeting is to be held every year on or before 30th September.
  • All the Directors, members, and auditors should be notified about the meeting.
  • The notice should be sent to the directors, members, and auditors by giving not less than 21 days’ notice.
  • The notice of the Annual General Meeting should be published on the Company’s Official website.
  • A report of the Annual General Meeting must be submitted within 30 days of the meeting in Form MGT- 15.

Filing of Financial Statements with ROC

  • A copy of financial statements should be filed in e-form AOC-4.
  • It should be filed within thirty days from the date on which the annual general meeting is held.

Filing of Annual return with ROC

  • The annual return is to be filed in Form MGT-7.
  • It should be filed within 60 days from the conclusion of the Annual General Meeting.
  • Where in any year no Annual General Meeting is held, the annual return should be filed within sixty days from the days on which the annual General Meeting should have been held that is 30 September.
  • It should be attached with the statement mentioning the reasons for not holding the Annual General Meeting.

Penalties for Non-Compliance

The Ministry of Corporate Affairs has set up penalty for section 8 Company not complying with the procedures:

  • The Central Government may revoke the license granted to the company if it finds that the company is working fraudulently or in a manner violative to the object of the company.
  • The companies will be punishable with fine, which shall not be less than ten lakh rupees and can be extended to one crore rupees.
  • The directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to twenty-five lakh rupees or with both.

If it is found that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447.

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