Startups

Section 8 Company

Section 8 Company is a Company that is licensed under Section 8 of the Companies Act, 2013 (the Act), which had the main objective for promoting research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment or any such other object, provided that the profits, if any, or the other income is applied for promoting only the objects of the company and Also, No dividend is paid to its members. Therefore, Section 8 Company is a company which is registered for charitable or not-for-profit purposes.

Section 8 Company Features

1. No Profit Motive

The companies registered under section 8 of the companies act, cannot distribute profits or assets to its members.

2. Voting Rights

The voting rights to the members of section 8 company are based on the number of shares, similar to that of any other company.

3. No Minimum Capital

There is no minimum level of capital prescribed, hence a section 8 company can be incorporated with the capital as required by it.

4. One Resident Director

One director of the company must be resident in India. A person is said to be a resident when he stays in India for at least 182 days in the FY.

Process of Registration

1. Creation of DIR – Obtain the DSC for the proposed Directors of the Section 8 Company. After obtaining the DSC, file form DIR 3 with the ROC for getting a Director Identification Numbers. Once approved, the ROC will allot the Director Identification Number to the proposed Director.
2. Submission of forms – Form INC 1 with ROC for company name registraion; Form INC 12 to apply for a license for the Section 8 Company; SPICe Form 32 with the ROC for incorporation along with the affidavits, declarations, KYC, consent letter, draft MOA, and AOA after he obtains the license

Document Required

1. Director Identification Number (DIN)
2. Digital Signature Certificate
3. Memorandum of Association
4. Articles of Association
5. Passport size Photographs
6. Members Id Proof such as Aadhar Card, Passport, Voter ID.
7. Details of Director
8. Address Proof

paperwork

Frequently Asked Questions

The name of a section 8 company shall not include Private Limited or Limited at the end of its name and must end with any of the below words: Foundation,Forum,Association,Federation,Chambers,Confederation,Council,Electoral Trust and the like etc.

Yes, Foreign Direct Investment is allowed Section 8 Companies subject to the compliance of FEMA Regulations. However, in terms of the Foreign Contribution (Regulation) Act, 2010 [FCRA] read with the Frequently asked questions (FAQ) on the website of the ministry of the home of the union government of India, the infusion of capital in a section 8 company is a foreign contribution. In simple words, though FDI in section 8 companies is permissible, as the same is considered as a Foreign Contribution in terms of FCRA, it can be infused only with prior permission/registration from the central government.

Yes, there is no specific restriction on making an investment in any other company by section 8 companies even if the investee company is a profit-making entity.

In case the section 8 company is incorporated as private limited the minimum requirements of directors on the board is 2 and in case of a public limited company it must be 3.

For incorporation of a section 8 company under the companies act, 2013, any document from below list of the document is acceptable as Identity Proof of the director or shareholder or the proposed company.

  • Passport
  • Driving License
  • Voter ID Card

For Company Incorporation, any one document from below list of address proof of the director or shareholder is acceptable. The document in support of address proof should not be older than two months.

  1. Bank Statement or Passbook with the transaction entry,
  2. Electricity Bill in the name of the promoter,
  3. Telephone bill, or any other Mobile Bill,
  4. Utility bill in the name of promoters like Gas Bill

A Section 8 Company is incorporated with a physical address to be declared as the registered office of the newly registered company. Following are the list of the document which is acceptable as proof of premises where the registered office of the company is situated. The premises proof should not be older than two months.

  • Electricity Bill
  • Gas Bill
  • Telephone Bill
  • Mobile Bill
  • NOC from the owner

Before a company occupies any premises as its registered address, a no objection certificate must be obtained from the owner of the premises. Similarly, at the time of filing for company registration, we need a NOC from the current owner of the premises along with proof of ownership as explained above.

A registered office is required to be declared at the time of company incorporation and to be maintained by the company under section 12 of The Companies Act, 2013, which must be capable of receiving and acknowledging all communications and notices as may be addressed to it. Further, the statutory records of the company also need to be maintained at the registered address of the company. Hence having registered address at co-working space is not acceptable unless this is a lockable area.