Section 8 Companies
About Section 8 Companies:-
Section 8 Companies are not for profit making entities which are registered under Section 8 of the Companies Act, 2013 with the specified objects of promotion of art, commerce, science, sports, education, research, social welfare, religion, charity and protection of environment or any such other object.
The license to these Companies are issued by the Central Government after proper scrutiny of documents.
The Salient Features of Section 8 Companies are as under:-
1. Section 8 companies can be incorporated in the form of a Private Limited or Public Limited. The regulatory compliance of the Company depends upon the nature of the Company i.e Private Limited or Public Limited.
2. These Companies are registered without any suffix Private Limited or Public Limited in order to signify the specified nature.
3. It is a type of non-Profit Organization, where the Company is required to utilize all its profit for attainment of its specified object.
4. Declaration of dividend to members is prohibited for these type of entities.
5. These types of Companies can be registered under Section 12A of Income Tax Act 1961, Post which any donation made to such Companies become eligible for donation under Section 80G of the Income Tax Act 1961.
REGISTRATION OF SECTION 8 COMPANY
The process of registration of a Section 8 Company is governed by The Registrar of Companies, Ministry of Corporate Affairs. The Applicant needs to make online application with Registrar of Companies along with required documents for the Incorporation of Section 8 Companies.
Registration of a Section 8 Companies involves drafting of various documents along with Memorandum of Association and Articles of Association of the Company (hereinafter referred to as MOA/AOA).
A Section 8 Company additionally requires a license from Central Government, which is not required in case of a normal Private Limited Company and/or Public Limited Company. The applicant is required to make an application for license of Section 8 Companies along with the Incorporation of the Company.
The principle requirements for Incorporation of a Section 8 Companies are as under:-
1. Directors and Shareholders of the Company
Directors are the individuals, who manage the affairs of the Company. Directors may or may not be the member(s) of the Company. They are the employee(s) of the Company who are responsible for the day to day management affairs and conduct of business.
There is a requirement of at least two directors and two shareholders for the Incorporation of a Section 8 Company as a Private Limited Company.
Documents related to Initial Proposed Directors and Shareholders, being subscribers to the MOA/AOA of the Section 8 Company:-
S.No.
Particulars of Documents
Proposed Directors
Minimum 2 in case of Private Limited Company or 3 in case of Public Limited Company
Proposed Shareholders/Subscribers to MOA/AOA
Minimum 2 in case of Private Limited Company or 7 in case of Public Limited Company
1 – Identity Proof
Voter ID/ Passport/Aadhar Card/ Driving License for both initial or Proposed Directors & Shareholders
2 – Address Proof
Bank Statement/Telephone Bill/Electricity Bill/Water Bill (Should not be more than 2 months old]
3 – PAN
For both Initial Proposed Directors & Shareholders
4- Digital Signature
For both Initial Proposed Directors & Shareholders
5 – DIN (Director Identification Number
For both Initial Proposed Directors & Shareholders
6 – Contact Details
Mobile Number and Email Id of both Initial Proposed Directors & Shareholders
7 – Occupation
For both Initial Proposed Directors & Shareholders
8 – Form INC-15
From both Directors & Promoters
9 – Passport Size Photograph
Directors Only
No Requirement
10 – Consent Letter in Form DIR-2
Directors Only
No Requirement
11 – Interest in Other Entities
Directors Only
No Requirement
12 – Declaration for non-acceptance of Deposit
Directors Only
No Requirement
13 – Estimated Income and Expenditure
Signed by atleast two Directors
No Requirement
14 – Estimated Assets and Liabilities
Signed by atleast two Directors
No Requirement
15 – Brief Description of work
Signed by atleast two Directors
No Requirement
2. Name of the Company and Place of Registered Office Address
Every Company must have its own name which must be distinct from any other existing Company. There are certain guidelines which are prescribed by Ministry of Corporate Affairs regarding availability of Name. The Registrar of Companies on the basis of those guidelines issued by MCA, approves or rejects the name of the proposed Company. The proposed name of section 8 company does not contain the word Private Limited or Limited at the end of the proposed name.
Secondly, every Company must have its own registered office address where all the statutory correspondence can be done. On the basis of Registered office of the Company, the Jurisdiction of the Company with respect to ROC, Income Tax, GST and other statutory authorities is determined.
Documents related to proposed name and place of Registered office:-
- S No
- Details required for proposed names
- Details required for proposed Registered office
1. Proposed Names (Minimum 2)
Copy of the Recent Utility bill (not more than 2 months old) of the proposed premises, which should be in Principal Owner’s name
Utility Bill covers Telephone Bill/Electricity Bill/Water Bill.
2. Any certificate / registration documents supporting proposed name of the Company. (Applicable in specific cases)
No Objection Certificate from the principal owner of the property, to use the premises for the purposes of Registered Office of the proposed Section 8 Company, if the property is not in the name of the proposed Company.
3. Copy of the Rent Agreement/Lease Deed if the property is taken on rent/lease.
3. Principal Main Objects of the Company
This is one of the most important aspect for the Incorporation of a Section 8 company. The object of the Company should not be other than objects of promotion of art, commerce, science, sports, education, research, social welfare, religion, charity, protection of environment or any such object which are related to charity.
The proposed object form parts of Memorandum of Association of the Company. In addition, the MOA contains the details about Name of the Company, State of Registered office of the Company, Objects of the Company, Liability of the Member, Share Capital of the Company and Subscriber’s sheet. The MOA is drafted on the basis of information provided by the applicant.
The Articles of Association of the Company are the bye laws of the Company, which provides rules and regulation that govern the Company’s internal affairs.
4. Amount of Initial Authorized and Paid Up Share Capital
The Share capital of the Company is divided into two parts, Authorized Share Capital and Paid up Share Capital.
Authorized Share Capital : Authorized Share Capital is the overall ceiling share capital, which is approved by the shareholders of the Company, upto which the Board of Directors can raise funds from the Shareholders/Investors of the Company by issuing shares. The Initial Authorized Share Capital has to be determined by deciding upon the and the Initial Number of Ceiling Shares, and the Face Value of each Shares (Re. 1 to Rs. 1000 or as the case may be),
Authorized Share Capital = Initial Number of Ceiling Shares * Face Value of Each Share
Paid Up Share Capital : Paid Up Share Capital is the Capital which is raised by the Company from the shareholders by issuing shares. This is a subset of the Authorized Share Capital, and is determined by the amount of initial money to be paid up in the Company’s bank account, to begin the business operations.
Paid Up Share Capital = Initial Number of Paid Up Shares * Face Value of Each Share
Process of Incorporation of a Section 8 Company
1. Submission of the Application for Incorporation –
An Applicant is required to make an application to Registrar of Companies for Incorporation of the Companies along with the required details & documents.
The Application can be done in 2 ways:-
1. Applicant needs to first apply for availability of Name, once the name is approved then he/she needs to file further application with Registrar of the Companies for incorporation of the Company along with all the documents.
2. Applicant to directly file the form for Incorporation of Company along with proposed name and all the required documents.
The difference in the two processes is that the Applicant get the confirmation for the name in first method, and then proceeds for Incorporation, while the Applicant files the complete documents and application in the second method, without getting the confirmation for the name, which may be objected afterwards by the ROC.
Therefore, an Applicant should choose the first method in case, he is looking for a specific name, while he may proceed for the second in case he is open to accept the name as proposed by the ROC.
2. Certification by the Practicing Professional :
The Application is required to be certified by practicing professional like Chartered Accountants /Company Secretary/ Cost Accountant, who shall verify the correctness of the application.
For incorporation of Section 8 Companies a declaration from practicing professional in the form INC-14 is also require to be attached with the application.
Post the verification and certification of the professionals, the application needs to filed with the concerned Registrar of the Companies online, who shall scrutinize the application made for Incorporation.
3. Review by the Registrar of Companies:
Once the Registrar of Companies, is satisfied with the application filed, he/she shall issue the Certificate of Incorporation of the Company.
4. Declaration before commencement of Business :
Once the Company is incorporated and has received the Certificate of Incorporation from Registrar of Companies, the applicant is compulsory required to file E- Form INC-20A for commencement of business of the Company within 180 days of Incorporation of the Company.
No company can commence business or exercise borrowing power without filing form INC-20 A with Registrar of Companies for commencement of business.
Once the Company files form INC-20A the Company can commence its business operation and start borrowing power.
COMPLIANCES OF A SECTION 8 COMPANIES AFTER INCORPORATION:-
A. COMPLIANCE RELATED TO REGISTRAR OF COMPANIES/COMPANIES ACT, 2013.
ANNUAL COMPLIANCES:-
The Regulatory compliance of section 8 companies are based as per the class of company i.e Private Limited or Public Limited, Accordingly there are listed mandatory compliances with Registrar of Companies and other Govt Authority, annually, which are applicable to Private Limited Company as well as section 8 companies, which is formed as a Private Limited Company.
1. Audit of Account by a Practicing Chartered Accountant
Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed.
Accordingly, a Section 8 company is also required to appoint Statutory Auditor to Audit the accounts of Private Limited Company.
The Appointment of Auditor shall be done within thirty days from the date of incorporation which shall hold office upto 01st Annual General Meeting.
2. Form AOC-4 (Form for filling Financial Statement and other documents with Registrar)
Every Company is required to file its Audited Financial Statement along Audit Report, Directors’ Report etc. with Ministry of Corporate affairs within 30 days from the Annual General Meeting
3. Form MGT-7 (Form for filing Annual Return by a Company)
Every Company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting.
4. Form MGT-8 (Form for Certification from a Practicing Company Secretary)
Every Company having paid up share Capital Rs. 10 Crores or more OR Turnover of Rs. 50 crores or more is required to obtain MGT-8 certificate from Company Secretary in Practice every year.
5. Secretarial Audit by a Practicing Company Secretary :-
Every company whether it is public or private having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more, requires Secretarial Audit report from practicing Company Secretary.
It is hereby clarified that the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account.
MAJOR EVENT WISE COMPLIANCES :-
In addition to the above annual compliances, there are certain event based compliances, which are required to be done as listed below:-
- S No
- Forms
- Particulars of Events
1. Form DIR-12
Appointment & Cessation of Directors (Including Key Managerial Personnel)
2. Form INC-22
Shifting of Registered office of the Company
3. Form SH-7
Increase in Authorized Share Capital
4. Form PAS-3
Allotment of Shares
5. Form MGT-14
Filing of Various Management Resolutions
6. Form ADT-1
Appointment of Statutory Auditors
7. Form INC-24
Change of Name
8. Other Compliances
As Specified under Various Provisions of the Act
B. COMPLIANCE RELATED TO GOODS AND SERVICE TAX
Goods & Service Tax Department of India has laid certain norms for GST Registration and Filling of returns on monthly, quarterly and annual basis, if any entity meets the turnover/other specific criteria for GST registration.
Accordingly, if any Private Limited Company meets the criteria as specified for GST registration, then it is required to get itself registered with Goods & Services Tax Department.
C. COMPLIANCE RELATED TO INCOME TAX ACT
Income Tax Return:-
Section 8 Company is also is required to comply the rules and regulations of Income Tax Act. Section 8 companies are also require to file Income Tax Return every year.
However there is exemption for payment of income tax if the section 8 company is registered under section 12A of Income Tax Act.
KEY REGISTRATIONS
There certain registration which can be opted by Section 8 companies as per the nature of business, turnover, investment, area of operation etc. The details of Key registration can be accessed here
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