What is a Section 8 Company?
A Section 8 Company is a Non-Profit Organization (NPO) registered under the Companies Act, 2013 .
Its primary objective is to promote charitable activities such as commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection.
Unlike typical companies, its profits cannot be distributed as dividends to members and must be reinvested into its objectives.
While they can have share capital, it doesn't function in the traditional profit-making sense..
A minimum of two individuals with a non-profit goal can obtain a Section 8 company registration.
This creates a trusted legal structure, allowing the organization to manage its funds, sign contracts, and handle all legal matters in its name.
Features of a Section 8 Company These companies have unique characteristics that separate them from standard for-profit businesses, focusing entirely on their social mission.
Here are the features: Focus on a Cause: These companies are created solely to promote non-profit goals like education, arts, social welfare, or environmental work.
Profits are reinvested: Any money earned must be put back into the organization's mission and cannot be paid out as dividends to members.
Distinct Legal Identity: The company is legally separate from its members, allowing it to own property, sign contracts, and manage legal matters in its name.
Limited Liability for Members: The personal assets of the members are safe.
Their financial responsibility is limited, typically to the amount they promised to contribute (in a company limited by guarantee) or the value of their shares (if any).
Official Government License: They operate under a license from the Ministry of Corporate Affairs (MCA), which adds to their credibility and requires them to follow specific rules.
No "Ltd." or "Pvt.
Ltd." in Name: Unlike other companies, they are exempt from adding "Limited" or "Private Limited" to their name, highlighting their non-profit nature.
Eligible for Tax Exemptions: After registration, they can apply for tax benefits under sections 12AB and 80G of the Income Tax Act.
(Note: The former Section 12A registration is now governed under the new Section 12AB).
Purpose of Incorporating a Section 8 Company Founders choose to register a Section 8 Company for several key reasons, such as: Build a Formal Organization: This step provides an official legal structure to carry out a non-profit mission, transforming an informal idea into a recognized entity.
Gain Public Trust: Being regulated by the government makes the organization more transparent and trustworthy in the eyes of donors, partners, and the public.
Improve Access to Funding: This registration is often required to receive CSR (Corporate Social Responsibility) funds, government grants, and large-scale national or international donations.
Ensure Long-Term Existence: The company is a perpetual entity, meaning it continues to exist even if its founding members change.
This ensures the mission can outlive its founders.
Legally Manage Funds and Assets: It creates a legal way to open a dedicated bank account, own property, and manage all finances under the organization's name, keeping them separate from personal funds.
Legal Framework and Authorities Governing Section 8 Company Registration To register your non-profit, you need to understand the laws that govern its formation and operation.
These laws ensure your company gains legal standing and can access benefits.
Section 8 Company Registration in India is primarily governed by: The Companies Act, 2013: Specifically, Section 8 of the Companies Act provides the legal framework for establishing and regulating non-profit companies.
Ministry of Corporate Affairs (MCA): This is the central government ministry responsible for administering the Companies Act, 2013.
The entire registration process is managed through the Section 8 company registration MCA portal.
Registrar of Companies (ROC): The ROC in each state is the main authority responsible for the incorporation of a Section 8 company.
It grants the license and the Certificate of Incorporation.
Income Tax Department: For availing tax exemptions on donations (80G) and income (12AB), companies must register with the Income Tax Department after incorporation.
Benefits of Section 8 Company Registration Registering as a Section 8 company provides a strong foundation for non-profits, offering the following legal and financial benefits: Legal Recognition and Credibility: A registered company has higher credibility among donors, government agencies, and corporate partners compared to unregistered entities.
Tax Exemptions: Eligible for crucial tax benefits under Sections 12AB (tax exemption on income) and 80G (donors can claim tax deductions) of the Income Tax Act.
No Minimum Capital: There is no prescribed minimum paid-up share capital requirement for the incorporation of a Section 8 company.
Stamp Duty Exemption: Many states offer exemptions from stamp duty on the company's Memorandum and Articles of Association , reducing the registration cost for the Section 8 company.
Separate Legal Identity: It can own property, enter into contracts, and sue or be sued in its name.
Limited Liability: Members' assets are protected, as their liability is limited to unpaid shares.
Perpetual Succession: The company's existence is continuous, unaffected by changes in its members.
Enhanced Fundraising: Its formal structure and tax benefits make it easier to attract funds from various sources, including CSR and grants.
Disadvantages of Section 8 Company Registration While a Section 8 company offers many benefits, it also comes with certain challenges that require careful attention, such as: Strict Compliance: These companies face stringent compliance requirements under the Companies Act, 2013, involving regular filings and meetings, which can incur substantial professional fees.
No Profit Distribution: Members cannot receive any profits, which are to be reinvested into the company's objectives.
This is a major drawback for those seeking personal financial returns.
Complex Regulations: The process and rules governed by the MCA are more complex compared to a trust or society.
Revocable License: The Central Government holds the power to revoke the license if the company is found to be working against its stated objectives or violating legal provisions.
No Personal Member Benefits: Beyond contributing to a cause, members gain no direct personal financial benefits, ownership stakes, or transferable shares.
Eligibility Criteria for Registering a Section 8 Company To begin the registration process, you must meet a few basic requirements regarding the company's structure and the necessary paperwork.
Basic requirements are: 1.
Core Requirements Minimum Two Directors: A Section 8 company requires a minimum of two directors.
If it is incorporated as a public limited company , it will require a minimum of three directors.
At least one director must be a resident of India.
Minimum Two Members: The company must have at least 2 members/subscribers to get started.
The members and directors can be the same people.
A Unique Company Name: The proposed name must be unique and cannot be similar to any existing company or trademark.
It should reflect the company's social objectives.
Clear Non-Profit Objectives: The company's founding documents (the Memorandum and Articles of Association) must clearly state its charitable or non-profit goals.
An Official Address in India: You must provide a valid physical address in India that will serve as the company's registered office.
2.
Mandatory Prerequisites Basic KYC Documents: All proposed directors and members must provide their identity and address proofs, such as their PAN Card and Aadhaar Card.
Digital Signature Certificate (DSC): All proposed directors must obtain a Digital Signature Certificate (DSC) .
This is essential for signing e-forms and documents electronically during the online registration process with the Ministry of Corporate Affairs (MCA).
Director Identification Number (DIN): Every proposed director needs a Director Identification Number (DIN) .
This unique 8-digit number is allotted by the Central Government and is required for anyone intending to be a director in an Indian company.
Forms Required for Section 8 Company Registration in India The process of registering a Section 8 Company in India is simple and fully online through the Ministry of Corporate Affairs (MCA) portal.
You'll mostly need to fill out one main form, along with a few other linked forms.
Here’s a look at the essential forms for the registration: Form Name / Number Purpose of the Form Key Details SPICe+ (Part A) Name Reservation To apply for and reserve a unique name for the company.
The name must align with its non-profit objectives and Rule 8 of the Companies (Incorporation) Rules, 2014.
SPICe+ (Part B) Company Incorporation This is the main application for incorporation.
It also integrates applications for Director Identification Number (DIN), PAN, and TAN.
e-MoA (INC-33) Memorandum of Association Defines the company's charitable objectives.
It must be prepared as per the format of Form INC-13 electronically.
e-AoA (INC-34) Articles of Association Outlines the internal rules, regulations, and governance structure of the company.
AGILE-PRO-S (INC-35) Linked Registrations A mandatory linked form for GSTIN, EPFO, ESIC, Professional Tax, and opening a company bank account.
INC-9 Declaration An auto-generated declaration by all subscribers and directors certifying their compliance with company law.
It is submitted as part of SPICe+.
Documents Required for Section 8 Company Registration Here's a checklist for the incorporation of a Section 8 company via the MCA portal (mca.gov.in): From Directors/Members: PAN Card (mandatory for Indian nationals).
Identity Proof (Aadhaar Card, Voter ID, Passport, or Driving License).
Address Proof (Recent bank statement, utility bill).
Passport-size photographs.
For the Registered Office: Address Proof (Recent utility bill, like electricity or telephone bill).
No Objection Certificate (NOC) from the property owner.
Rent Agreement (if the premises are rented).
Other Documents: Digital Signature Certificate (DSC) for at least one director.
Drafted Memorandum of Association (MOA) in Form INC-13.
Drafted Articles of Association (AOA).
How to Register a Section 8 Company: Step-by-Step Process Here's a guide on the steps for incorporation of a Section 8 company through the Section 8 company registration online portal (MCA): Pre-Registration Checklist for Section 8 Company Registration 1.
Obtain Digital Signature Certificate (DSC) & Director Identification Number (DIN): The first step is to procure a DSC for the proposed directors, which is used to sign forms electronically.
DIN is a unique eight-digit number assigned to directors by the MCA.
2.
Name Reservation (SPICe+ Part A): Apply for name reservation for the proposed company using the SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) Part A web form on the MCA portal.
The name should reflect the charitable objects.
3.
Draft MOA & AOA: Prepare the Memorandum of Association (as per Form INC-13) and Articles of Association.
These documents outline the company's objectives and internal rules.
4.
File Incorporation Forms (SPICe+ Part B): Fill out the main Section 8 company registration form, SPICe+ Part B, on the MCA portal.
This single form integrates applications for: Company Incorporation DIN allotment PAN and TAN for the company GST Registration (optional) EPFO (Employees' Provident Fund Organisation) Registration ESIC (Employees' State Insurance Corporation) Registration (if applicable) 5.
Submit Linked Forms: Upload the signed MOA and AOA, along with the AGILE-PRO-S form (Application for Goods and Services Tax, Employee Provident Fund, and Employee State Insurance).
6.
Scrutiny by ROC: The Registrar of Companies will review the application and documents.
If everything is in order, the ROC will grant the license in Form INC-16.
This license is mandatory for a Section 8 company to operate as a non-profit entity.
7.
Issuance of Certificate: Once the license is issued, the ROC will issue the Section 8 Company Registration Certificate (Form INC-11), which serves as conclusive proof of incorporation.
Post-Incorporation Compliance Checklist for Section 8 Company Maintaining compliance is crucial for a Section 8 Company to retain its non-profit status and avoid penalties.
Here's a checklist in a table format: Compliance Area Specific Requirement Due Date/Frequency Forms/Remarks Initial Compliances (Post-Incorporation) First Board Meeting Hold the first Board Meeting.
Directors to disclose interest in other entities (MBP-1) and declare non-disqualification (DIR-8).
Within 30 days of incorporation Minutes of Meeting, Form MBP-1, Form DIR-8 Appointment of First Auditor Appoint the first Statutory Auditor.
Within 30 days of incorporation (at the first Board Meeting) No e-filing initially; ADT-1 filed within 15 days of AGM after the auditor's appointment.
Registered Office If not provided at incorporation, establish a registered office and file details.
Within 30 days of incorporation (if not already filed) Form INC-22 Commencement of Business File a declaration for the commencement of business.
Within 180 days of incorporation Form INC-20A Bank Account Open a company bank account and deposit subscription money (if any).
Within 60 days of incorporation for subscription money (though operational sooner) Bank documents (COI, MOA, AOA, PAN, etc.) Statutory Registers & Books of Accounts Maintain various statutory registers (Members, Directors, Loans, Charges, etc.) and proper books of accounts at the registered office.
Ongoing, from the date of incorporation Physical registers, proper accounting records.
Annual Compliances Board Meetings Hold at least two Board Meetings in a financial year, with a maximum gap of 120 days between two consecutive meetings.
At least twice a year (gap not exceeding 120 days) Minutes of Meetings Annual General Meeting (AGM) Convene the Annual General Meeting to approve financial statements, the auditor's report, etc.
Within 6 months of the end of the financial year Notice of AGM, Minutes of Meeting Filing of Financial Statements File the company's audited financial statements (Balance Sheet, Profit & Loss Account, Cash Flow Statement).
Within 30 days from the date of the AGM Form AOC-4 Filing of Annual Return File the company's annual return, containing details of directors, shareholders, etc.
Within 60 days from the date of the AGM Form MGT-7 Income Tax Return (ITR) File the annual Income Tax Return.
September 30th of the assessment year (for companies subject to audit) Applicable ITR Form DIR-3 KYC Directors who hold a Director Identification Number (DIN) must complete their KYC annually.
September 30th of every year Form DIR-3 KYC (web-based or e-form) 12AB & 80G Compliance If registered under Section 12AB and 80G, comply with conditions, including the filing of donation statements.
As per Income Tax Act rules (e.g., Form 10BD for donations) Forms 10A/10AB, Form 10BD Event-Based Compliances Change in Directors Report any appointment, resignation, or change in designation of directors.
Within 30 days of the change Form DIR-12 Alteration in MOA/AOA If there are any changes to the Memorandum or Articles of Association.
Within 30 days of passing the resolution Form MGT-14 GST Registration If annual turnover exceeds the prescribed limit (₹20 Lakhs for services, ₹40 Lakhs for goods).
As and when the turnover threshold is crossed GST REG-01, etc.
Foreign Contribution (FCRA) If receiving foreign contributions, comply with FCRA regulations, including the filing of annual returns.
Annually (Form FC-4), and other event-based filings as required Form FC-4 Significant Beneficial Ownership (SBO) Maintain a register of SBOs and report changes to the ROC.
As and when applicable Form BEN-2 Note: This checklist provides a general overview.
Specific compliance requirements may vary based on the company's activities, turnover, and other factors.
It is highly recommended to consult with a professional to ensure complete and timely compliance.
Section 8 Company Registration Fees The total Section 8 Company registration fees are a combination of government charges and professional service costs.
The overall cost can vary based on the complexity of the application and the state of registration.
Here are the details: Type of Fee Description Estimated Cost (INR) Government Fees (MCA Fees) SPICe+ form, name reservation (RUN), MoA, AoA filings.
₹500 to ₹8,000 Digital Signature Certificate (DSC) & Director Identification Number (DIN) Mandatory for all directors.
Includes DSC token + DIN application.
₹1,000 to ₹3,000 per director Stamp Duty Exempt in most states for Section 8, but some states charge a nominal stamp duty.
Typically Exempt – ₹100 to ₹2,500 Notary and Other Charges Notarization, affidavits, courier, and document printing.
₹200 to ₹1,000 Professional Fees Consultant/CA/CS charges for end-to-end support, including MoA/AoA drafting.
₹10,000 to ₹25,000 PAN & TAN Application Mandatory post-registration under SPICe+ Part B.
₹1,000 (optional if needed separately) Incorporation Certificate Copy Fees (Physical/Certified) If a certified copy is requested from the ROC.
₹100 to ₹500 GST Registration (if applicable) It may be needed for revenue-generating activities or fundraising.
₹1,000 to ₹2,500 (professional fee) Bank Account Opening Assistance Optional professional support or document couriering.
₹500 to ₹1,000 Post-Incorporation Compliance (Optional/First Year) Filing ADT-1 (auditor), annual returns, etc.
₹5,000 to ₹10,000 (first-year advisory) Section 8 Company Registration Timeline, Validity & Renewal Understanding the time it takes to register and the nature of its validity is crucial for planning your non-profit activities.
Validity: The registration of a Section 8 Company is valid for perpetuity, meaning it is valid for a lifetime.
As long as the company complies with the annual legal requirements, its registration does not expire.
Renewal: There is no requirement for renewal of the registration.
The Certificate of Incorporation for a Section 8 Company is permanent, ensuring the long-term sustainability and uninterrupted operation of the non-profit organisation.
Penalty for Non-Compliance under the Companies Act Failure to comply with the Companies Act requirements can lead to severe consequences, including significant fines and potential company dissolution.
1.
Financial Penalties for Late Filing ₹100 per day per form for delayed annual filings (Financial Statements - AOC-4, Annual Return - MGT-7).
Maximum caps apply: Up to ₹10 Lakh for the company on AOC-4 (plus ₹1 Lakh on officers), and up to ₹5 Lakh on MGT-7 (plus ₹50,000 on officers, and a daily penalty capped at ₹5 Lakh).
Persistent non-filing can lead to director disqualification and the company being marked "Defaulting." 2.
Revocation of Section 8 Company License (Section 8(6)) The Central Government can revoke the license if the company acts fraudulently, violates its objectives, or goes against public interest.
The company must be given a reasonable opportunity to be heard.
The company may be wound up or amalgamated with another Section 8 company, or directed to change its name to "Limited" or "Private Limited." 3.
General Penalties for Section 8 Contraventions (Section 8(11)) If a Section 8 Company defaults on any Section 8 requirement, it faces a fine of ₹10 Lakh to ₹1 Crore.
Defaulting directors/officers can face imprisonment up to 3 years or a fine of ₹25,000 to ₹25 Lakh, or both.
Fraudulent conduct under this section also triggers penalties under Section 447.
4.
Penalty for Fraud (Section 447) Serious fraud (₹10 Lakh or 1% of turnover, whichever is lower): Imprisonment from 6 months to 10 years and a fine of 1 to 3 times the fraud amount.
If public interest is involved, the minimum imprisonment is 3 years.
Smaller fraud (less than ₹10 Lakh or 1% of turnover, not involving public interest): Imprisonment up to 5 years or a fine up to ₹50 Lakh, or both.
Registration under Sections 12A/12AB and 80G for Section 8 Companies For a Section 8 Company, incorporation alone doesn't provide tax benefits.
The next step is getting registrations under Sections 12A (Previously governed by Sections 12A and 12AA; the process is now consolidated under Section 12AB) and 80G of the Income Tax Act, 1961.
These are vital for the financial health and credibility of any non-profit organisation (NPO).
1.
Section 12A/12AB Registration: For Tax Exemption on Income Section 12A registration (now governed by Section 12AB) is a one-time process that grants a Section 8 Company tax-exempt status.
Benefits: Tax-Free Income: With 12A registration, the company's entire income is exempt from tax, as long as it's used for charitable purposes.
Eligibility for Grants: It's a mandatory requirement for receiving government grants, foreign contributions, and corporate CSR funding.
Required for 80G: You must have a 12A/12AB certificate before applying for 80G registration.
2.
Section 80G Registration: To Encourage Donations 80G registration benefits the donors of a Section 8 company, creating a strong incentive for people and corporations to donate.
Benefits: Tax Deduction for Donors: An 80G certificate allows donors to claim a tax deduction on their donations, encouraging larger contributions.
Attracts More Donors: It enhances credibility and attracts donors who wish to save on their taxes.
Wider Funding Pool: This registration helps attract a broader range of both individual and corporate donors.
The Combined Application Process (Form 10A/10AB) New Section 8 Companies must apply for provisional registration for both sections at the same time.
Application Form: The application for provisional registration is filed online via Form 10A for both Section 12AB and 80G.
Timing: File the application at least one month before the financial year begins or within six months of starting activities, whichever is earlier.
Provisional Registration: A provisional certificate is granted upon submission, which is usually valid for three years.
Permanent Registration: Before the provisional period ends, the company must apply for permanent registration using Form 10AB, providing proof of its charitable work.
Key Documents Required For filing Form 10A/10AB, you need to upload: Self-certified copy of the Certificate of Incorporation .
Self-certified copies of the company’s Memorandum of Association (MoA) and Articles of Association (AoA).
PAN card of the Section 8 Company.
KYC documents of the directors (PAN, Aadhaar).
A note on the company's activities.
Financial statements for the last three years (if applicable).
These certificates are the key to financial sustainability, allowing tax-free operations and encouraging donations.
Certificate of Incorporation of a Section 8 Company The Certificate of Incorporation is the official document that proves the legal existence of the Section 8 Company.
Issuing Authority: It is issued by the Ministry of Corporate Affairs (MCA) through the jurisdictional Registrar of Companies (ROC).
Form Number: The certificate is issued in Form INC-11.
Key Details: The certificate includes the company's name, its unique 21-digit Corporate Identity Number (CIN), the date of incorporation, and the PAN and TAN of the company.
Evidence of Existence: It serves as conclusive evidence that all the requirements for registration under the Companies Act have been fulfilled.
License Number: For a Section 8 company, the license number granted by the Central Government is also mentioned in the Certificate of Incorporation, confirming its special status as a non-profit entity.
How to Download a Section 8 Company Certificate Online?
If you want to download the Certificate of Incorporation or the license issued under Section 8, follow these steps: Visit the MCA Website: Go to the official Ministry of Corporate Affairs (MCA) website (mca.gov.in) Log In with Your Credentials: Click on the ‘Login’ button in the top right corner.
Enter your registered email ID and password to access your account.
Use the 'View Public Documents' Option: Once logged in, hover over the ‘MCA Services’ tab in the main menu.
From the dropdown, choose ‘View Public Documents’.
Search for Your Company: Enter your company's Corporate Identification Number (CIN) or name in the search box.
Fill in the security code (captcha) and click Submit.
Make the Required Payment: To access the incorporation certificate and related documents, you may need to pay a small fee (usually ₹100 per company).
Follow the on-screen instructions to complete the payment securely online.
Access and Download the Certificate: After payment, go to ‘My Workspace’ > ‘Documents’ on the MCA portal.
Locate the Certificate of Incorporation or Section 8 License in the list and click to download it as a PDF.
Comparison between Trust, Societies & Section 8 Company Choosing the right legal structure is a critical first step for any nonprofit initiative.
Here is a comparison of the three primary forms of NPOs in India.
Feature Trust Society Section 8 Company Governing Law Indian Trusts Act,1882 (for private trusts) or State Trust Acts Societies Registration Act, 1860 (or state-specific acts) Companies Act, 2013 Registration Authority Sub-Registrar of the respective area Registrar of Societies of the respective state Registrar of Companies (ROC), Ministry of Corporate Affairs Minimum Members Minimum 2 Trustees Minimum 7 Members Minimum 2 Members/Directors (for Private Ltd.) Governing Document Trust Deed Memorandum of Association & Rules Memorandum of Association (MoA) & Articles of Association (AoA) Credibility & Recognition Moderate Moderate to High (varies by state) Very High (Nationally and Internationally) Annual Compliance Minimal (filing ITR) Moderate (filing annual reports with the Registrar of Societies) High (ROC filings, Board meetings, statutory registers) Ease of Formation Relatively Easy Moderately Easy Complex and Professional assistance required Best Suited For Small-scale charitable activities, managing property for a cause.
Membership-based organizations, educational institutions, and welfare groups.
NPOs aiming for large-scale operations, CSR funding, and national reach.
For businesses looking for a different structure, company registration online makes it simple to register.
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