Procedure for incorporation of section 8 company

A Section 8 company in India is a special type of non-profit organization registered under the Companies Act, 2013, with the purpose of promoting commerce, art, science, sports, education, research, welfare, religion, charity, and environmental protection. Unlike other businesses, Section 8 companies do not distribute profits among members.

Advantages of Section 8 Company

• Tax benefits under the Income Tax Act

• Greater credibility with donors and government agencies

• No minimum capital requirement

• Exemption from various compliance requirements

Legal Framework Under Companies Act, 2013

The procedure for incorporation of Section 8 company registration is governed by:

• Section 8 of the Companies Act, 2013

• Rule 19 of Companies (Incorporation) Rules, 2014

• Administered by the Ministry of Corporate Affairs (MCA)

Eligibility Criteria for Section 8 Company

To incorporate a Section 8 company, the proposed entity must:

• Promote charitable objectives such as education, environment, or social welfare

• Intend to apply profits only for promoting the objective

• Prohibit dividend distribution to its members

Key Features of Section 8 Company

• Non-Profit Motive: Main aim is not to earn profit

• No Dividend Payouts: Members cannot take home profit shares

• Limited Liability: Members’ liability is limited

• Legal Recognition: More credibility than Trusts or Societies

Pre-Incorporation Requirements

Before starting the procedure, the following prerequisites are mandatory:

Digital Signature Certificate (DSC)

All proposed directors must have a DSC to sign electronic documents.

Director Identification Number (DIN)

DIN is required to appoint any individual as a director.

Choosing the Name of the Company

The name must reflect the charitable nature and must avoid terms like "Private Limited" or "Limited."

RUN (Reserve Unique Name) Form

Applicants must file this online form with two name options and justification for the name.

Documents Required for Incorporation

Founders’ Documents

• PAN and Aadhar Card

• Passport-size photograph

• Address proof

Company Documents

• Proof of registered office (utility bill, rent agreement)

• No Objection Certificate (NOC) from the property owner

MOA and AOA

These define the vision and internal governance structure of the company.

Procedure for Incorporation

Let’s walk through the 7-step simplified procedure for incorporation of Section 8 company:

Step 1: Obtain DSC and DIN

All directors must acquire digital signatures and Director Identification Numbers.

Step 2: Apply for Name Approval

Use the RUN form to reserve the company name.

Step 3: File Form INC-12

This form is filed to get a license under Section 8 from the Central Government.

Step 4: Draft MOA and AOA

MOA outlines the objectives; AOA governs the operations.

Step 5: Apply for Incorporation via SPICe+

SPICe+ Form (Part A & B) includes multiple services:

• Name Reservation

• DIN Allocation

• PAN/TAN

• EPFO/ESIC Registration

• GSTIN (optional)

Step 6: Upload Attachments and Pay Fees

Upload documents like INC-15 (Declaration by Directors), INC-9 (Declaration by Subscribers), and others.

Step 7: Get the Certificate of Incorporation

Once approved, MCA issues the COI and the Section 8 License.

Forms Involved in Section 8 Company Registration

• INC-12 – Application for Section 8 License

• SPICe+ – Incorporation Form

• INC-13 – Memorandum of Association (MOA) in the prescribed format

• INC-14 – Declaration by a practicing professional (CA/CS/CMA)

• INC-15 – Declaration by each subscriber to the MOA

• INC-22 – Proof of Registered Office Address

• DIR-2 – Consent to act as a Director

License from Central Government (Form INC-12)

This is a step where you submit:

• MOA and AOA

• Projected income-expenditure (3 years)

• Declaration from a Chartered Accountant or Company Secretary

• Details of promoters and directors

MOA and AOA of Section 8 Company

These documents are tailored to reflect the charitable nature of the company. Sample clauses include:

• No profit distribution

• Clear charitable objectives

• Governance provisions

Statutory Compliance After Incorporation

After incorporation, the company must:

• Apply for PAN and TAN

• Open a bank account

• File for commencement of business

Tax Exemptions and Benefits

Section 8 companies enjoy:

• Exemption under Section 12A (Income tax)

• Deduction under Section 80G (for donors)

• Lower compliance burden than private companies

Common Mistakes to Avoid

• Submitting incorrect MOA clauses

• Using names that suggest profit motive

• Missing declarations or signatures

• Ignoring post-registration compliance

Conclusion

Incorporating a Section 8 company in India is a structured yet rewarding process that enables individuals and organizations to legally pursue charitable and social objectives. By adhering to the prescribed steps under the Companies Act 2013, from securing digital signatures and name approval to filing the necessary forms and obtaining a government license you ensure legal compliance and enhanced credibility. The procedure, though detailed, is manageable with the right documentation and professional guidance. Section 8 companies not only gain recognition but also enjoy tax benefits and increased trust among donors and stakeholders. Whether you're promoting education, environment, or social welfare, following the correct incorporation steps sets a strong foundation for your mission-driven organization to thrive. A methodical approach ensures your nonprofit journey starts smoothly and lawfully.

FAQs

Q1. What is a Section 8 Company and who can register one?

Ans. A Section 8 Company is a nonprofit organization registered under the Companies Act, 2013, formed to promote charitable objectives like education, art, environment, or social welfare. Any individual or association of people intending to promote such objectives can register a Section 8 Company.

Q2. Is it mandatory to get a Section 8 license before incorporation?

Ans. Yes, obtaining a license under Section 8 from the Registrar of Companies (via Form INC-12) is a mandatory step before proceeding with the actual incorporation.Q3. Can a Section 8 Company be formed with just one director or subscriber?

Ans.

No, a minimum of two directors and two subscribers are required to form a private Section 8 Company, and three directors for a public one.

Q4. Is there a need to have a registered office during incorporation?

Ans. Yes, providing the address of the registered office along with supporting documents is mandatory and must be filed through Form INC-22.

Q5. Do Section 8 Companies enjoy any tax exemptions?

Ans. Yes, once registered, Section 8 Companies can apply for tax exemptions under sections 12A and 80G Registration of the Income Tax Act, subject to fulfilling the required conditions.