A company formed and registered under section 8 of the Companies Act 2013 is known as Section 8 Company. According to section 8 of Companies Act, 2013 a non-profit making company which has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other useful object, 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.
The term ‘No Profit’ does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters. It means that the company can earn profits but the promoters cannot be benefited out of those profits.
Who Can Apply For Registration
Any person or an association of person intending to be registered as a limited company for a charitable purpose can apply for registration of section 8 company.
Significant Provisions Regarding Section 8 Company
a) Section 8 Company can be registered as Private limited or Public limited. However, it is not mandatory to add the words ‘limited’ or ‘private limited’ to its name.
b) The proposed name should not fall under the category of undesirable names specified in Rule of Companies Act.
c) The company shall prohibit the payment of dividend to its member.
d) License from the Central government is required.
e) The proposed name should include the words like Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust etc.
f) Section 8 company shall not be treated as small company.
g) It is the duty of the applicant to prove to the satisfaction of the Central Government the proposed company shall be formed for the charitable purposes only.
h) Section 8 companies enjoy various privileges and exemptions including exemption from the payment of stamp duty on registration.
Checklist for Incorporation of Section 8 Company
1) Check whether a person or an association of persons proposed to be registered under section 8 of the Companies Act, 2013 as a limited company—
(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
(b) intends to apply its profits, if any, or other income in promoting its objects. and
(c) intends to prohibit the payment of any dividend to its members.
2) Check whether an application has been made to the registrar for the grant of license in the prescribed form under sub-section 1 of section 8.
3) Check whether the application made to the Registrar shall be accompanied by the following documents, namely:-
(a) the draft memorandum and articles of association of the proposed company.
(b) the declaration in the prescribed form by an Advocate, a Chartered accountant, Cost Accountant or Company Secretary in Practice that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with.
(c) 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. and
(d) a declaration by each of the persons making the application in the prescribed form.
4) Check whether all the proposed directors and promoters have applied to the licensed Certifying Authority for the grant of Digital Signature Certificate.
5) Check whether the proposed directors have applied for Director Identification Number in the prescribed form.
6) Check whether the applicant has applied for the reservation of the proposed name. While applying for the name, the applicant shall comply with the provisions of the Companies Act, 2013 and rules thereon. The approval received from ROC is valid for 60 days from the date of approval.
7) After the approval of the name, the Memorandum of Association and Articles of Association shall be prepared. The MOA shall be in accordance with the objective and provisions of the Companies Act 2013. The MOA and AOA shall be signed by the subscriber to MOA.
8) After the issue of license, an application for incorporation shall be made in the prescribed form along with following:
9) The Registrar, on the basis of documents and information filed ,shall register all the documents and information and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.
10) A company shall, within thirty days of incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it.
11) The company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation in the prescribed form.
12) Prescribed forms
|(i) Application to the Registrar for the grant of license||INC-12|
|(ii) Draft MOA of the proposed company||INC-13|
|(iii) Declaration by an Advocate, CA, Cost Accountant or Company Secretary in Practice||INC-14|
|(iv) Declaration by each of the persons making the application||INC-15|
|(v) License issued by Registrar||INC-16|
|(vi) Application for Incorporation||INC-7|
|(vi) Certificate of Incorporation||INC-11|
|(vii) Verification of Incorporation||INC-22|
|(viii) Application for Director Identification Number||DIR-3|