Non-Government Organization (NGO) is an organization that works for non-profit or for charitable purposes. In this blog, we will briefly explain the Incorporation of Section 8 Company, under Companies Act, 2013.
Briefly explain the concept of Section 8 Company?
A Non Profit Organization (NPO or NGO) in India is registered under Companies Act 2013, as Section 8 Company with a non-profit motive. A Section 8 Company is a specific form of Company which is incorporated with the objective of promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of environment or any such other object. The income of NPO must be used to promote only charitable objects and cannot be used to pay any dividend to the members of the company. It work exactly like a limited company including all the rights and obligations that come with such a company. However, it cannot use the words “Section 8” or “Limited” in its name. Section 8 Company is easy to register, run or manage. It is most popular form of NGO in India.
What are the eligibilities for Incorporation of Section 8 Company?
In case of Private Limited NGO
- Minimum 2 Shareholders & Maximum up to 200
- Minimum 2 directors & Maximum up to 15
- Registered Office Address
In case of Public Limited NGO
- Minimum 7 Shareholders & Maximum there is no limit
- Minimum 3 directors & Maximum up to 15
- Registered Office Address
What is the process of Incorporation of Section 8 Company?
1. Choose the Name of the proposed Company
The first step for incorporation of Section 8 Company is to select the name of the proposed Company. Choosing a name is a brainstorming thus while choosing the name, it must be noted that the name mainly consists of 2 parts that are
- Main name of the company &
- Activities carried out by the company.
2. Obtain Digital Signature Certificate (DSC) – Section 24 of the IT Act, 2000
The next step is to apply for DSC for proposed directors and members. It is used to sign the documents in e-form as it ensures the authenticity and security of the E-Documents.
3. Form SPICe+ (Part A)
Since the name is decided above, so now apply for the reservation of name by filing Part A of SPICe+ Form with the ROC. 2 names are required to be proposed for reservation, if Central Registration Centre (CRC) accepts the name then proceed with further steps and in case the CRC rejects the name then again 2 new names required to be filed within 15 days from the date of rejection.
4. File the Form SPICe+ (Part B)
As the name gets reserved, fill the Part B of Form SPICe+ online with the ROC within 20 days from the date of name approval.
The form shall contain all the required details such as Total number of members and directors, Authorized Share Capital, Details of Company. This form shall be annexed with following documents and forms –
- SPICe_Memorandum of Association (E-MOA)
- SPICe_Article of Association (E-AOA)
- AGILE for GSTIN
- INC-9 –Subscribers Declaration or First Director of Company
5. Certificate of Incorporation
Thereafter, the Department shall scrutinize the filled form and other related documents and if it is satisfied with the form details and documents then it shall grant the Certificate of Incorporation.
Briefly explain the concept of Spice+ Form
It is important to know that the whole process has become simplified with the occurrence of SPICe+ Form. SPICe+ stands for Simplified Performa for Incorporating a Company Electronically Plus. Now only one form is required to incorporate a private limited company.
SPICe Plus form is an integrated web form which offers 10 services with following 3 Central Government Ministries-
- Ministry of Corporate Affairs
- Ministry of Labor
- Department of Revenue in the Finance Ministry
Therefore, we can say that the Incorporation procedure has become time-effective and cost-efficient.
The SPICe+ form is divided into two Parts –
Part A – For Reservation of Name
Part B – For other 9 Services that are
- Company Registration
- Director Identification Number (DIN)
- Permanent Account Number (PAN)
- Tax Deduction and Collection Number (TAN)
- Employees Provident Fund Organization (EPFO) Registration
- Employees State Insurance Corporation (ESIC) Registration
- Opening a Bank Account
- Goods and Services Registration (If applicable)
- Profession Tax Registration (If applicable)
What is the Checklist of Mandatory Documents for Incorporation of Section 8 Company?
- PAN Card and Aadhar Card of Directors and Subscribers.
- Voter ID card or Driving License of Directors.
- Latest Bank Statement of Directors.
- Passport Size Photographs of Directors.
- Registered Office Address Proof.
- Copy of Utility Bills (Not be older than 2 months).
- Directors Consent in Form DIR-2.
- Digital Signature Certificate (DSC)
What are the benefits of Section 8 Company?
Several Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies, they can claim the Tax exemption against the donation they made to a Section 8 company.
There is no specific limit for section 8 companies for the minimum capital requirement unlike other entities such as public limited, but the capital structure can be changed at any stage as required for the growth of the company.
A Section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as Private limited or a Public limited company.
Separate Legal Entity-
A Section 8 Company also holds its own identity like other companies structures, and has its own separate legal standing from its member. This Company also has a perpetual existence.
A Section 8 Company has more reliability as compared to any other Non-profit organization structure. As it is a licensed by the central government. It has more strict regulations such as no change in MOA and AOA can be done at any stage or situation in a Section 8 Company. It is having a more reliable image in comparison to other legal structures.
Transfer of Ownership-
The members of private limited company cannot transfer their shares. But in Section 8 Company, members can easily transfer the ownership of the company.
Section 8 Company is the most popular form of body corporate among all NPOs, as it requires less compliances for incorporation and operating a business. Moreover, it has limited liability for shareholders. In case of any Query for Section 8 Company Incorporation, then contact Manthan Experts for immediate relief.