SB Ebusinesswala

Menu

Section 8 Company

Demystifying Section 8 Companies: Non-Profit Powerhouses

A Section 8 Company, established under the Companies Act, 2013, is a special type of organization dedicated to social good. Unlike traditional companies focused on profit, Section 8 Companies prioritize promoting activities like education, science, art, charity, and environmental protection.   

 
 

Key Characteristics:

  • Non-Profit Motive: Profits earned cannot be distributed to members but reinvested in achieving the company’s social objectives.
  • No Minimum Capital: There’s no mandated minimum capital requirement for registration.
  • Democratic Structure: Voting rights are typically based on the number of shares held by members, similar to other companies.
  • Limited Liability: Members’ personal assets are shielded from company debt.
  • One Resident Director: At least one director must be a resident of India for at least 182 days in a financial year.
     

Benefits of a Section 8 Company:

  • Tax Advantages: Can apply for tax exemption under Section 12AA of the Income Tax Act, 1961.
  • Funding Opportunities: Eligible to receive donations and grants from individuals, corporates, and even foreign entities with proper registration (FCRA).   
  • Credibility and Recognition: A legal structure fosters trust and enhances potential for attracting resources.
  • Limited Liability Protection: Safeguards personal assets of members from company liabilities.

    SB Ebusinesswala  Consultants’ Services:

    SB Ebusinesswala Consultants can assist you with the entire Section 8 Company incorporation process, including:

    • Digital signatures and Director Identification Numbers (DINs)
    • Spice form filing
    • Obtaining incorporation certificate, PAN, and TAN
    • Drafting Memorandum and Articles of Association   
    • Provisional PF and ESI registration
    • GST and MSME registration

      Important Considerations:

      • Income Tax Exemptions: Registration as a Section 8 Company doesn’t guarantee automatic income tax exemption. A separate application under Section 12AA of the Income Tax Act is required.
      • Donor Exemptions: Donors can claim tax benefits under Section 80G only if the Section 8 Company is registered under this section.

Enquiry Now:

Starting an NPO/NGO:

Section 8 Companies are an ideal vehicle for establishing a Non-Profit Organization (NPO) or Non-Governmental Organization (NGO). Their structure provides legal recognition, limited liability, and access to various funding avenues.  

 
 

Incorporation Process:

  1. Document Collection: Prepare required documents like PAN cards, ID proofs, and address proofs for directors and subscribers.
  2. Digital Signatures and Name Check: Obtain digital signatures and check for name availability.
  3. Document Preparation: Draft necessary documents like the Memorandum and Articles of Association.
  4. Spice Form Filing: Submit the Spice Form to the Registrar of Companies.

FAQs:

  • Eligible Activities: Section 8 Companies can be formed for various social causes like education, poverty alleviation, healthcare, environmental protection, and more.   
     
  • Conversion to Private Limited Company: Yes, with Registrar of Companies’ approval.
  • Auditor Appointment: The board appoints an auditor within 30 days, without requiring Central Government approval.
  • Fundraising: Allowed via domestic donations, equity offerings (issuing new shares), and foreign donations with FCRA registration.
  • Promoters as Employees: No, promoters cannot be paid employees of the company.