Section 8 company is a company established with the objects of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, and apply all its profits and other income for promoting only the objects of the company and do not pay any dividend to its members.
Characteristics of a Section 8 Company are:
- It must have at least 2 shareholders.
- It must have at least 2 Directors
- The director and shareholder can be the same person
- Minimum share capital requirement is Rs. 1 Lakh
- Prohibited from paying any dividend to its members.
- Profit and other income are applied only for promoting the objects of the company.
Advantages of a Section 8 Company
- Many privileges and exemptions under Company Law.
- Exemption of Stamp duty for registration.
- Registered partnership firm can be a member in its own capacity.
- Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act
- It can be made without any share capital
- No need to add any suffix to its name like ‘limited’ or ‘Private Limited’
- No restriction on transfer of shares
Disadvantages of a Section 8 Company
- 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)
The incorporation process of a Section 8 Company is similar to that of a Private limited company having more than 7 subscribers except that one extra form INC-12 is to be submitted for getting license for incorporation under Section 8 of Companies Act, 2013 by Central Government.
We have to follow the following basic procedure for incorporation:
- Apply for Directors Identification Number (DIN) and Digital Signatures
- Selection of name for the proposed company.
- Filing of required forms on MCA Portal (Procedure is mentioned below)
- Payment of Fees.
- Obtain Certificate of Incorporation.
Forms that are required to be submitted on the MCA portal are:
|Form||Required For||Requirements for filing|
|DIR-3||Application of DIN||Proof of identity and residence of applicant|
|E-Form INC 1||Getting the name availability (6 names can be proposed)||No|
|E-Form INC 12||Application of License for incorporation under Section 8||
1. MOA and AOA in Form INC 13
2. Declaration in Form INC 14 by an Advocate, CA / CS / CWA in practice
3. Declaration by every person making application in INC 15
4. Estimate of future annual income and expenditure of the company for next 3 years, specifying the sources of the income and objects of expenditures.
5. Grounds of application
6. List of proposed directors.
7. List of proposed promoters
8. Affidavit for non-acceptance of deposits
|E-Form INC 7||Filing of Incorporation documents||
1.Memorandum of Association
2. Articles of Association
3. Form INC 8 – Declaration of Professional CA/CS/CMA;
4. Form INC-9 – Affidavit from Subscriber and First Directors;
5. Form No. INC-10 -Specimen Signature and Photographs of every Subscriber;
6. proof of residential address which should not be older than two months;
7. proof of identity;
8. PAN card and
9. Undertaking of non-acceptance of deposits
|E-Form DIR 12||Particulars of appointment of directors and the key managerial personnel and the changes among them||
DIR -2 – Consent to act as a director
Attachments of DIR-2
Proof of identity and residence
|E-Form INC 22||Notice and Verification of situation of Registered Office||1. Proof of registered office address (Conveyance/ Lease deed/ Rent Agreement etc. along with the rent receipts;
2. Copies of the utility bills (proof of evidence of any utility service like telephone, gas ,electricity etc. depicting the address of the premises not older than two months;
3. Proof that the company is permitted to use the address as the registered office of the Company (i.e. NOC from the owner)