What is section 8 Company :
A Section 8 Company is an organization which is registered as a Non-Profit Organization (NPO). NPO/company has its objective of promotion of arts, commerce, charity, education, protection of environment, science, social welfare, sports, research, religion and intends to apply its profits, if any, or other income in promoting its objects. It functions exactly like a limited company including all the rights and obligations that come with such a company. However, it differs from a company in one very crucial aspect, i.e. it cannot use the words “Section 8” or “Limited” in its name.
The income of the Company must be used to promote only charitable objects and cannot pay any dividend to the members of the company. The central government provides an incorporation certificate to all such companies and also informs them about some restrictions and conditions. In case they don’t fulfil them, the central government may also order them to wind up the company. In case fraud objectives of the Company are proved, legal action will be taken against all officers of the Company.
As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc.
Who can apply for registration of a Section 8 Company?
Any person or an association of persons intending to register a limited liability company for objects specified below can opt to apply for registration of Section 8 Company. The following have to be proved to the satisfaction of the Central Government that:
(a) its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(b) the company after incorporation intends to apply its profits, if any, or other income in promoting such objects only; and
(c) the company intends to prohibit the payment of any dividend to its members.
Procedure for incorporation of a Section 8 Company as per companies act,2013?
To incorporate a Section 8 Company, an application shall be made to the Registrar of Companies in Form no. INC.12, which shall be accompanied, inter alia, by the following documents:
- Draft Memorandum of Association (MOA) and Articles of association (AOA) of the Company in prescribed format (Form no. INC - 13) where the photographs of subscribers are affixed.
- A Declaration is to be attached in Form no. INC-14 (on the stamp paper, duly notarized) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with.
- 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.
- A declaration (in Form no. INC-15) on stamp paper duly notarized by each of the persons making the application and
- Form no. INC-9 from each subscriber and first directors, on appropriate stamp paper of the State and duly notarized.
New process of Incorporation of Section 8 Companies as per Companies (Incorporation) Sixth Amendment Rules, 2019:
No Requirement for INC 12 Filling Companies (Incorporation) Sixth Amendment Rules, 2019 dated 7th June, 2019, with a view to simplify the process for incorporating Section 8 Companies, requirement of prior filing of INC-12 for new section-8 companies is being dispensed.
So, the Process of Incorporation of Section 8 Companies is now simple as the process of incorporation of other Companies.
Section 8 Companies can be incorporated by either reserving names through Run and filing SPICe thereafter or by directly filing SPICe. Licence No. for a section 8 company shall henceforth be allotted at the time of incorporation itself.
If already obtain License Number?
Stakeholders who have already obtained License Numbers and are yet to file SPICe form for incorporating Sec 8 companies may do so at their convenience but may please note that the forms shall be processed only after a certain time lag to allow for work flow changes to take effect,
If already filed SPICe forms which are pending at CRC?
In view of the above, all pending INC-12 SRNs for new Companies pending at respective RoCs would be marked as ‘Rejected’ on 15th August 2019. Such applicants may thereafter directly file SPICe for obtaining License Number and for incorporation of Section 8 Companies.
Those stakeholders who have already filed SPICe forms which are pending at CRC may kindly await processing of these forms after the work flow changes take effect by MCA.
Documents Required for Section 8 Company Registration
- Digital Signature Certificate
- Director Identification Number
- Memorandum of Association
- Articles of Association
- Id Proof for Members: (Aadhar Card, Passport, Voter Id)
- Passport Size Photographs
- Director’s Details (If Members Are Other Companies/LLPs)
- Address Proof
Minimum and Maximum number of directors in a Section 8 Company?
The prescription under section 149(1) of Companies Act 2013 as to having Minimum of three directors for public limited company and two directors for private limited company and maximum of fifteen directors is not applicable to section 8 company and thus there is no prescription with respect to minimum or maximum directors in a section 8 Company.
However, second proviso to section 149(1) requires a woman director in prescribed class of companies. Also, section 149(3) requires every company to have a resident director. As per section 165 of companies act,2013, Directorship in Section 8 Companies will not be counted for calculating the total number of maximum directorships i.e. twenty as prescribed the ceiling in Act. Section 8 Companies are exempted from the requirement of appointment of independent director and all the consequential provisions relating to Independent directors under section 149(1) of the Companies Act, 2013 vide exemption notification dated June 05, 2016.
Section 8 company is required to have at least one director who has stayed in India for a total period of not less than182days (one hundred and eighty-two days) within the previous calendar year i.e. Resident Director under section 149(3).
Number of Board meetings and its Quorum Required:
In view of exemption notification read with section 173(1), section 8 companies are required to have atleast one meeting within every six calendar months. As per section 174(1) read with exemption notification, quorum for board meetings of section 8 companies is eight directors or 25% of its total strength, whichever is lower. However, the quorum shall not be less than two members.