How to start a Section 8 Company?

Companies with the objectives of non-profit motives are usually called Section 8 companies as such companies are defined in section 8 of Companies Act, 2013. If you are seeking to start a section 8 company, then the prerequisite condition is to have a section 8 objective which is been discussed below. Further steps to carry on and start section 8 companies are explained herewith.

STEP 1 – Have a Section 8 Objective

As already said, the prerequisite to start a section 8 company is to have a section 8 objective which is to promote commerce, art, science, education, sports, research, religion, social welfare, charity, protection of environment or any such other object;

So at the very first stage, the objective of your company should be decided.

STEP 2 – Projection and estimation

An estimate of the future annual income and expenditure of the company for next 3 years, specifying the sources of the income and the objects of the expenditure should be prepared, these helps in legitimate use of expenditure vis-a-vis your income.

STEP 3 – Name selection and approval

The name of the company must be unique i.e. it should not be the same or similar to an existing company or trademark in the same industry or field. You can check out our detailed naming guidelines to know how to name your company.

Following site can be referred to check if the words contained are trademarked –

http://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx

STEP 4 – Application for Section 8 Company

With the introduction for SPICe+ Forms, the entire process of Name Approval, Section 8 License, Incorporation, GST Application, EPF ESI Application  and even bank Account Opening have been merged together. So Once you are clear about your objectives then you can go ahead with the registration

Necessary Attachments for SPICe+ Form For Section 8 Company are

  • Memorandum of Association in Form INC-13
  • Articles of Association
  • Declaration by a Chartered Accountant, Cost Accountant or company secretary in practice that MoA and AoA are as per Section 8 (Form INC 14)
  • Projection and Estimation prepared ( 3 years)
  • Declaration by the applicant in INC 15

Once satisfied with the documents and Information subscribed, CRC shall provide approval, and subsequently Certificate of Incorporation shall be provided.

In case of existing company getting converted to section 8 then following further steps should be followed as discussed below.

STEP 5 – License for Existing Companies

An existing company can also get converted to a Section 8 company by applying in Form No.INC.12

Following attachments should be made

  • MoA and AoA
  • Declaration by a Chartered Accountant, Cost Accountant or company secretary in practice that MoA and AoA are as per Section 8 (Form INC 14)
  • the financial statements, (ii) the Board’s reports, and (iii) the audit reports, relating to existing companies for 2 FYs, (1 FY if company was functioning only for 1 year)
  • Details of Asset and liabilities as on the date of the application or within 30 days preceding that date;
  • an estimate of the future annual income and expenditure of the company for next 3 years, specifying the sources of the income and the objects of the expenditure;
  • Board Resolutions/GM Resolutions
  • Declaration by applicant in INC 15

STEP 6 – Publishing of Notice

Within a week from the date of making the application to the Registrar, the company should publish a notice in Form INC 26 at his own expense, and a copy of the notice shall be published in 1 vernacular, 1 English newspaper and website of the company and as notified by CG.

STEP 7 – Issue of License

After obtaining considerations, approval, and objections from the various regulatory authority, the registrar shall grant the license in Form INC 16 or INC 17 which may be with or without conditions.

STEP 8 – Comply with obligations and enjoy the privileges of Companies Act, 2013

All the provisions of companies Act will be applied to the company i.e. to appoint its first auditors within 30 days, should conduct AGM within 9 months from end of 1st FY etc., apart from these there are also numerous exemptions which such companies are entitled, to mention a few these are – It need not appoint independent director, it need not have minimum paid up capital like other companies, need not use words ’’limited’’ or ’’private limited’’ in its name etc.

STEP 9 – Register u/s 12 A of Income tax act to get income tax benefits and exemptions.

Section 8 companies on fulfilling of certain conditions can apply for registration as trust u/s 12A of income tax Act and avail Income tax benefits u/s 11 and 12 i.e. exemption of donations and receipts subject to application in its objects.

STEP 10 – Comply with special provisions of Section 8 companies

  1. Restriction on dividend
  2. Application of profit only for promotion of object of the company
  3. Amendment of articles only with approval of central government.

If you require any assistance In incorporating your Section 8 Company please reach our experts at +91-7008804070