A company is referred to as Section 8 Company when it registered as a Non-Profit Organization (NPO) i.e. when it has motive of promoting arts, commerce, education, charity, protection of environment, sports, science, research, social welfare, religion and intends to use its profits (if any) or other income for promoting these objectives.
The income of NPO can not be used for paying out dividends to the company’s members and has to be for the promotion of charitable objectives. Such companies obtain an incorporation certificate from the central government and are liable to adhere to the rules specified by the government.
According to the rules, failure to comply with the responsibilities stated by the Central Government may lead to the winding up of the company on the orders of government. Besides, strict legal action will be taken against all the members of the company if the objectives laid down by the company proves to be bogus.
Eligibility to Apply for Section 8 Company
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.
Incorporation of a Section 8 Company
Companies Act, 2013 deals with the procedure of Incorporation of a Section 8 Company and as per this section, an application in Form No. INC.12 has to be submitted along with the below-mentioned documents to the Registrar of Companies.
Form no. INC – 13 – Company’s Draft Memorandum of Association (MOA) and Articles of association (AOA) in Form No. INC – 13 (as specified in Act) along with the affixation of subscribers’ photographs.
Form no. INC-14 – A Declaration is to be affixed in Form no. INC-14 that the draft MOA & AOA are compliant with the provisions & norms of section 8 and the requirements as per Section 8 have been duly taken care of.
Note: The declaration has to be made on stamp paper & should be notarized by an Advocate, a Company Secretary, a Chartered Accountant or a Cost Accountant, practicing the profession.
Form no. INC-15 – A declaration in Form no. INC-15 on stamp paper & notarized by each member of the company who is applying.
Form no. INC-9 – Form no. INC-9 form first directors as well as each subscriber, on the relevant State’s stamp paper and appropriately notarized.
An estimation of the company’s future annual income and expenditure for the next three years, mentioning the sources of the income and the purpose of the expenditure.
New & Simplified Process of Incorporation of Section 8 Companies
Companies (Incorporation) Sixth Amendment Rules,
2019 dated 7th June 2019 to ease the Incorporation process has knocked off
the need for filing Form no. INC 12, which was initially needed.
This amendment has made the Process of Incorporation of Section 8 Companies as
easy & simple as that of other companies.
Section 8 Companies can be incorporated by reserving names in part A of Spice+ followed by part B of Spice+ form or by directly filing Spice+. License No. shall be given to section 8 company during the incorporation.
Documents Requirement for the Registration of Section 8 Company
· Digital Signature Certificate
· Memorandum of Association
· Articles of Association
· Passport Size Photographs
· Members’ Id Proof such as Aadhar Card, Passport, Voter Id
· Details of Director (When the Members Are Other Companies/LLPs)
· Address Evidence
· Director Identification Number
Section 8 Company Total Exemptions and Reliefs
Companies Act 2013:
· The directorship under section 8 companies shall not come under the computation of the ceiling towards the highest number of the directorships which has been mentioned beneath Section 165 of the Act.
· Through furnishing the notice of not less than 14 exact days rather than 21 exact days a general meeting has been conducted.
· Section 8 firm would conduct at least one meeting every 6 calendar months rather than holding 4 meetings for a year.
· Recording of Minutes of General Meetings, Board Meeting along with additional resolutions shall not be subjected to apply upon the section 8 company. But the minutes of meetings might be recorded in 30 days of the outcome of the meeting towards the cases in which the firm articles furnish towards the confirmation through the method of circulation of minutes.
· A company would be a member of a section 8 company.
· Section 149(1) of the Act will not apply towards Section 8 company as per the Section 8 company shall not need to hire an Independent director. From the reasons above the Audit committee under section 8 company will not be needed to have independent directors similar to its board members.
· Section 8 firms shall not be needed to hire the qualified CS professional as its company secretary.
· From the applicability of secretarial standards, the same gets privileged.
· Section 8 firms shall not be needed to appoint a Nomination and Remuneration Committee and nor a Stakeholders Relationship Committee.
Created & Posted by (Anuj)
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