A company registered as a Non-Profit Organization (NPO) is known as Section 8 Company. In India, it is regulated by the Companies Act 2013. Section 8 of company act 2013 contains the rules, procedures, and eligibility requirements.

Section 8 company is a company having the main object of promoting arts, commerce, research, science, education, sports activity, charity, social welfare, religion, environment protection, or another similar kind of objectives. These companies invest their profits in the furtherance of their objectives. The company does not need to pay any dividends to its members.

As per section 2 of companies act, 2013 under clause 20 “Company” means a company incorporated or formed under the Companies Act,2013 or under any previous Companies law. Section 2 gives all the definitions under the Act. There is an exemption to Section 8 companies where it is provided that the appointment of a company secretary does not apply to Section 8 companies.

There is no requirement of having an independent director as well for Section 8 companies. Secretarial Standards are also not applicable to section 8 of company act 2013. These companies can appoint more than 15 directors without passing a special resolution in the general meeting. The board shall convene a board meeting in at least one meeting every six calendar months.

Incorporation Of Company As Per Section 8 of Company Act 2013

The fundamental basis of section 8 of company act, 2013 is for forming non-profit objects and it prohibits the payment of dividends to its members. Thus, It means that any income of Section 8 Company must be used for the objects for which Section 8 Company is formed.

There are 3 legal ways for making an NGO:

1. Trusts,

2. Societies,

3. Section 8 Company

Section 8 of company act 2013 is more closely monitored and administered by the Companies Act, 2013 than trusts and societies. Section 8 company is registered for charitable and non-profit purposes. One of the key points of this company is that it can be formed without using the word “Limited” or “Private Limited”.

Characteristics of Section 8 company:

Created for social welfare:

The main objective is the promotion of social welfare and works towards society as a whole and not to earn profits from it. Their main objects show the reasons for their incorporation, also the objects are like promoting commerce, art, science, education, research, social welfare, religion, charity, protection of the environment, such other object.

No minimum capital for Section 8 of Company Act 2013:

Section 8 companies don’t need to have any minimum paid-up share capital. It is licensed by the central government under section 8 of the companies act.

Limited liability:

Section 8 company can also be formed as a private or public limited company with limited liability.

No dividend distribution:

The company doesn’t give any dividends to its members because it is restricted by the law to do so. However, they can invest their profit in the promotion of their business objectives.

Advantages of Section 8 Company

Separate legal entity:

The company and its members are different in the eyes of law. Section 8 of Company Act 2013 is established under the law and is formed under the rules and regulations given under the act. The members don’t have any personal liability toward the debts of the company.

No-Minimum capital requirement:

Section 8 companies don’t need to have any minimum paid-up share capital. It is licensed by the central government under section 8 of company act 2013.

Stamp duty is less:

At the time of incorporation, there is a minimum charge of stamp duty levied on the company.

There is no suffix:

it can be formed without using the word “Limited” or “Private Limited”. The name of Section 8 of company act 2013 shall include words like ‘Federation, Foundation, Association, Council’ etc.

Benefits in tax:

Section 8 gets a tax benefit if the registration is under the mentioned section of the Act.

The List Of Companies Registered Under Section 8 of Companies Act, 2013

A Section 8 Company is a company registered under the companies act, 2013 with the object for promotion of non-profit motives such as commerce, trade, arts, charity, education, religion, environment protection, social welfare, sports research, etc., and having the intention to invest the profits or any other income in promoting its objects.

Section 8 Company Registration Process

1. Name application by RUN services:

Name availability Application must be made through the “RUN” facility. The name of Section 8 Company includes the words Association, Federation, Foundation, Council, etc. A person can mention a maximum of two names at a time and you are allowed to get one resubmission. Section 8 of company act 2013 should attach the object clause with the name application. When the name is approved, it is valid for only 20 days.

2. Apply for DSC of Directors:

You shall apply for the digital signatures of directors and members.

3. Drafting of MOA, AOA of company and other related documents:

MOA is the fundamental document of the company which gives the scope and object of the business activities. AOA is an internal document that determines the management of the company. The memorandum of Section 8 Company shall be in Form INC-13. You can adapt table F provisions for the AOA format.

4. E-Form SPICe 32 for Incorporation:

The incorporation of section 8 of company act 2013 is filed in E-Form SPICe 32 with the attachments.

The attachments to the E-form SPICe 32 of incorporation of Section 8 Company are as follows:

1. MOA of the company in Form INC-13;

2. AOA of the company; (No Specified format)

3. A declaration in Form INC-14 by practicing CA/CS/CWA, about the draft MOA & AOA has been made in conformation with the rules and the provisions of Section 8 of companies act.

4. Declaration by every individual giving the application in Form INC-15;

5. Give an estimated figure of the future annual profit and loss of the company for the next three years;

7. Section 8 of company act 2013 should take consent from the first Directors in Form DIR-2;

8. Self-declaration from first subscribers of MOA in Form INC-9;

11. Proof of Registered office, NOC in case of rent.

e-MOA and e-AOA in E-Form SPICe 33 and 34 are not available for Section 8 Company. Section 8 companies are compulsorily required to file and submit MOA and AOA as pdf attachments to E-Form SPICe-32. You can download the section 8 company act, 2013 pdf from the website.

After effects Of Contravening Section 8 of Companies Act

The Central government if required then:

1. Can revoke or cancel the license issued and can order to convert into Private Limited or Public Limited Companies.

2. Can give the order to amalgamate with other companies having the same object under section 230 of companies act, 2013.

However, A Section 8 Company cannot amalgamate with a company other than a Section 8 company.

3. Can pass an order of Winding up.

4. The company and officer in default shall be held liable for the penal provisions under the Act.

FAQs

What is the amendment under Section 2(85) of Companies Act, 2013?

As per the recent amendment in Section 8 of company act 2013 As per section 2(85) of companies act 2013 the definition of a Small Company is the:-

Paid-up share capital of not exceeding 50 lakhs or more as may be given which shall not exceed 10 crores; AND

Annual turnover of not exceeding 2 crores or more as may be given which shall not exceed 100 crores. These 2 conditions need to be fulfilled for a small company.

2. What period is given in the act for keeping the books of accounts of a Section 8 Company?

According to the provisions of the Companies Act, 2013 the books of account and registers of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the Section 8 of company act 2013 company had been in existence for a period less than eight years, in respect of all the earlier years along with the vouchers related to any entry in such books of account shall be kept in good manner.

3. Do a Secretarial Audit needed for a Section 8 Company?

Yes, when a Section 8 Company is in eligibility specified in the Section 8 of company act 2013. Then it should be either a listed company or any public company having a paid-up share capital of Rs. 50 crores or higher or any public company having a turnover of Rs. 250 crores or more, is required to attach a secretarial audit report to its board report.

4. Do a Section 8 Companies Act,2013 prepare its annual accounts in Schedule III of the Companies Act, 2013?

Yes, As per the rules of the Companies Act, it gives that the financial accounts shall be in the form specified in Schedule III to the Act and therefore comply with Indian Accounting Standards, in case applicable. There is no exemption given in respect of section 8 companies.

5. What are the actions taken by the government at the time of fraudulent affairs conducted by section 8 companies?

Punishment of fraud: Every officer in default is held liable for action under the prescribed Section 8 of company act 2013. The punishment is imprisonment for a period not less than 6 months which may also extend to 10 years and also he shall be liable for a fine which shall not be less than the money involved in the fraud which may extend to three times the money involved in the fraud. Under the provision of law, It is a non-compoundable offense.

6. What was the provision of Section 8 of Companies Act,2013 in the previous Companies Act?

Section 25 companies act 1956 is given in the old Companies Act, 1956. However, some people search for Section 25 companies act, 2013. This section is about the Document containing the offer of securities for sale to the deemed prospectus of the New Companies Act, 2013

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