Introduction
The majority of us are familiar with businesses like public limited companies, LLPs, and private limited corporations. These are real companies that offer services or create any kind of goods on the market. Contrarily, Section 8 businesses are set up across a variety of industries for the benefit of society.
These are limited businesses that have been formed under the Companies Act and will continue to be considered as such even though their names do not contain the word "limited." Either as "private limited or public limited businesses," they may have been registered. These Section 8 businesses are very different from typical commercial enterprises. In this article, some of the main advantages of a Section 8 company are covered.
What is Section 8 Company?
The ability of the central government to consider a company as an establishment, not a branch office. The Central Government has the authority to issue an order stating that, in the case of any company, either (1) any establishment carrying on the exact or considerably the same task as that carried out by the company's head office, or (2) any institution involved in any production, processing, or manufacture, shall not be regarded as a branch office of the organization for all or any purposes of this Act.
Requirements for Section 8 Companies Act
The following requirements are to be met for a company to be registered under section 8.
There should be at least two shareholders for that company that is seeking registration.
Furthermore, Section 8 of the 2013 Companies Act stipulates that you must apply for a license from the government.
There should be at least two Directors for a private limited company and 3 for public limited companies (shareholders and directors may be the same individual);
One of the directors must reside in India at all times means he should have stayed in India for a total period of not less than 182 days in a previous calendar year;
There must be a valid name for the company.
There is no minimum share capital, unlike the other companies.
Documents required for Section 8 Company
Income taxes PAN is a condition that must be met for Indian nationals;
It is necessary to present identities proof: such as a voter ID, Aadhar card, driver's license, or passport; However, for foreign nationals, a passport is required for the evidence of identity;
Any one of the following for checking residence: an electricity bill, a telephone bill, a mobile phone bill, or a bank statement;
The proof of the registered office address: which is the lease agreement, the most recent rent receipt, a copy of the most recent utility bill in the landlord's name, and, in the event of rented property, a letter from the property owner stating that they have no objections;
Any of the ownership-establishing documents: such as a sale deed, house tax receipt, etc., combined with the certificate of no objection, if the property is held by either the Director or the Promoters.
Memorandum of Association: The organization's founding principles are outlined in the Memorandum of Association, a legal document. It is a guidebook that contains all the rules and legislation that apply to how a business interacts with the external world. The MoA for the Business must contain at least two or three subscribers, depending on whether it is recommended that it be formed as a private or public company.
Article of Association: The way a corporation will share resources, dividend payments, inspect financial records, and grant voting rights is frequently specified in the articles of organization. Because it describes the process for carrying out the daily duties that must be done, this list of regulations can be seen as the company's user handbook.
Director Identification Number (DIN): An person who is appointed as a director of a business is given a DIN after applying by sections 153 and 154 of the Companies Act of 2013. All directors must have a DIN and a Digital Signature Certificate which is DSC.
The registration process for Section 8 Company
1. Reserve Unique Name (RUN)-
The "RUN" facility is where applications for name allocation must be submitted. The phrases like Institution, Forum, Association, Confederation, Chambers, Federation, Council, and similar terms must be included in the name of Section 8 Company.
In the RUN facility, a maximum of 2 names may be proposed at once, and a single resubmission is permitted. The cost of RUN is Rs. 1000. Attaching the proposed company's object clause is a good idea. Once approved, a name is good for 20 days.
2. Other documents-
Such as the articles of association and the memorandum of association the MOA serves as the company's charter and establishes the range of its activities. An AOA is a documentation that governs how the business is run internally. Each subscriber shall sign the MOA and AOA of the company in the presence of a minimum of one witness who will attest to the signature and shall also sign along with the subscriber's name, address, description, and employment.
Obtaining the first directors' digital signatures- The following stage is to obtain the first subscribers' and directors' class 3 digital signatures, which are necessary for submitting the incorporation form to the ROC.
3. SPICe 32 Form filing-
After the proposed name has been approved, form SPICe 32 may be submitted. Spice 32's attachments: The following papers must be included using the SPICe form to incorporate a Section 8 company.
Articles of Association;
Memorandum of Association in Form INC-13
A statement made in Form INC-14 by CS/CA/CWA stating that the draught MOA and AOA have been drafted by Section 8 provisions and rules made thereunder and that all Act and rule requirements about Section 8 registration of the company, as well as issues incidental or supplemental thereto, have been met;
A declaration made by each applicant on the Form INC-15;
A projection of the company's annual income and expenses for the following three years;
A letter of name authorization from CRC;
First Directors' consent and statement on Form DIR-2;
First Subscribers' self-declaration on Form INC-9;
First director's and subscribers' PAN cards;
First director's and subscribers' Aadhar cards;
Evidence of a registered office, such as a sale or lease agreement or a rental agreement;
The most recent electricity bill from the registered office;
Owner approval is required if the registered office is leased or rented. Section 8 companies cannot employ SPICe 33 and 34, also known as e-MOA and e-AOA. MOA and AOA must be sent to SPICe-32 as pdf attachments by Section 8 firms.
Why do we register a company under Section 8 of the Companies Act?
1. Tax Benefits:
Since Section 8 firms are non-profit entities, they have the benefit of not having to pay income taxes. Because of Section 80G of the Income Tax Act of 1961, the firms can also take advantage of several other tax advantages and benefit from several other privileges. Individuals and businesses can also claim tax deductions for gifts they make to Section 8 companies.
2. Zero Stamp Duty:
Unlike private and public limited businesses, Section 8 corporations are not required to pay stamp duty when they register.
3. Unrestricted Transfer of Ownership:
Unlike Limited Liability Partnership firms, Section 8 companies are permitted to change the title and ownership of both moveable and permanent properties without any limitations. The Section 8 firms, unlike public limited companies, are not bound to keep a minimum share capital because they were formed to carry out charity acts or carry out research activities. But, the capital can be extended per the company's needs.
4. Unique Legal Identity:
A Section 8 company is regarded as a distinct corporate structure and has a different legal identity from other companies under the 2013 Companies Act.
5. Possibility of Owning Property:
A Section 8 business can still own or transfer either tangible or intangible goods by itself because it is a separate legal entity. The property may be residential or non-residential, such as a research center, training facility, school, gallery, etc. The property will belong to the company, and neither a shareholder nor a member could lay claim to it.
6. Eternal Succession:
These businesses have perpetual existence up until they are lawfully dissolved, just like private limited companies. The company endures forever, regardless of the demise or dismissal of its members.
7. Credibility:
Because Section 8 corporations are granted licenses by the Central Government, they have greater credibility than Trusts or Societies. The MoA and AoA cannot be changed after registration, although these businesses are NPOs. These businesses enjoy widespread trust and a solid reputation as a result of the strict steps they take.
8. Limited Accountability:
Members of a Section 8 business are protected from personal liability if the firm incurs debts or incurs liabilities, protecting their assets. The company's shareholders are not personally responsible for paying off the obligations of the business.
9. Participants in the Company:
In addition to people, businesses and corporations can join the company as members.
10. Titles Are Not Required:
Titles like "private limited company," "public limited company," etc. are necessary for corporations governed by the Companies Act. Such restrictions do not apply to Section 8 companies, though. Companies that fall under Section 8 are not required to disclose their liability position to the public.
Conclusion
The businesses created by Section 8 of the Companies Act of 2013 significantly improve communities. The method of incorporating a business under Section 8 is particularly simple for encouraging more people to contribute to society and rewarding those who currently do so. It is quick, has several benefits, and is done by loose standards. You can quickly establish a Section 8 corporation as long as you fill out the proper procedures and have the necessary paperwork on hand.
eStartIndia will help you with Section 8 Company Registration from the comfort of your home.
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