How to Register Section 8 Company in India for NGO?

A Section 8 Company is a non-profit organization (NPO) in India that promotes many non-profit objectives. Many people wondered how to register Section 8 companies for NGOs in India, so today we are here to help by sharing the easy-to-understand process of registration for Section 8 companies in India. So let’s start.

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What is Section 8 Company Registration for NGOs?

A Section 8 Company Registration allows Non-governmental organizations to register as nonprofit companies. The registration of a Section 8 Company is a legal process established under the Companies Act 2013 in India by the Ministry of Corporate Affairs (MCA). The main goal behind this registration is to promote social welfare, education, arts, sports, charity, and other public interest activities, where the organization gets benefits if any profits are generated rather than the distributed members. While focusing on charitable objectives, it provides a structured way for NGOs to operate with limited liability.

Section 8 Company Registration Eligibility

Before registering for Section 8, you need to know about the eligibility for registration: –
1. The company must have two people who become shareholders and directors of the company who subscribe to the Memorandum of Association (MOA).
2. One of the directors must be a resident of India.
3. Three directors are required if it is a Public Limited Company and two directors must exist if it is a Private Limited Company.
4. The company that you registered must exist in India.
5. The company must have 1 lakh to start a company.
6. The company name must be unique and not used by anyone before.
7. Must promote any of these activities—science, sports, education, etc.—by the company.
These are some of the eligibility criteria you must know before registering Section 8 companies.

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Forms Required for Section 8 Company Registration

There are some forms required when registering section 8 companies, such as Form INC-13 Memorandum of Association (MoA) & Articles of Association (AoA), Form INC-15 a declaration by members; a Digital Signature Certificate (DSC), SPICE+ used for incorporating a company; Form DIR 3 Director Identification Number (DIN); INC-12, application for a license; INC-14 declaration from a practicing CA, Form INC-16 license to incorporate as section 8 company; INC-22, situation of registered office; DIR 2, consent of directors; DIR 12 appointment of directors; etc.

The Process to Register a Section 8 Company

As we learn before, the eligibility to register the section 8 companies, check all these eligibilities and prepare all of these documents, such as a Memorandum of Association (MoA), Articles of Association (AoA), etc.
Documents required to register a section 8 company:
Passport-sized photographs, ID proof, recent bank statements of directors and shareholders, the last 2 months of electricity and water bills, the rent agreement and NOC if the office is rented, the MoA & AoA, the DSC, and relevant resolutions and declarations for any foreign entities or unregistered companies.
Keep in mind the required forms & documents to follow these steps when registering:
1. Obtain a DSC after receiving the file from DIR-3. ID proof and address proof need to be attached when obtaining DSC.
2. The ROC allots a DIN to the proposed directors once the DIR-3 is approved.
3. With the attachment of ID proofs, file INC-12 with ROC to apply for a license for a section 8 company.
4. Once the form is approved, a license for a section 8 company will be issued in Form INC-16.
5. File the SPICe+ Form after completing all the steps.
You will get a certificate of incorporation along with a CIN (Company Identification Number) if the ROC (Registrar of Companies) is satisfied with the form you submit.

Benefits of Section 8 Company for NGOs

Section 8 companies provide some benefits for NGOs, such as:
1. These companies are eligible for tax exemption on their income used for charitable purposes, which means more funds are dedicated to NGO activities under 12A and 80G of the Income Tax Act of 1961.
2. These types of companies are separate legal entities from their members. It means the company can own the property.
3. Unlike other companies, there is no need for the requirement to maintain minimum capital for section 8 companies.
4. To attract funding, these companies can build trust with potential donors.
5. They get limited liability, meaning members of these companies are only liable to the extent of their contributions.
6. The process of registration is easy for Section 8 companies compared to other organizations.

Disadvantages of a Section 8 Company

Apart from the benefits of section 8 companies for NGOs, there are so many disadvantages of these companies.
1. One of the main disadvantages is that the profit generated or earned by the company is not for its members or shareholders. We shared this above in the blog, you can check.
2. Only engage with the activities that come and align with charitable and social welfare purposes.
3. Government authorities closely monitor all documents and compliance with regulations.
4. Maintaining compliance with statutory requirements is a burden.
5. Raising funds is so challenging.

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The Purpose of Section 8 Company for NGOs

The purpose of section 8 is to promote non-profit objectives such as science, sports, education, research, social welfare, religion, protection of the environment, and any other object related to the above.

Penalty for Non-Compliance under the Companies Act

If the company does not meet the guidelines or does not match the activities under the Income Tax Act 2013, then the license of company will be revoked. If the objective of the company seems fraudulent or in violation, the license can be revoked.
The company must impose a penalty of 10 lakh to 1 crore or more. In addition, the director and the members will pay a fine of 25,000 to 25 lakh or more.

Section 8 Company’s Annual Compliance

After the registration process:
• Conduct and file audit reports.
• Maintain and file financial statements in Form AOC-4.
• Hold at least two board meetings annually.
• File annual returns.
• Comply with additional requirements like 12A and 80G registrations.

Conclusion

In conclusion, registering a Section 8 company in India offers NGOs a formal structure to pursue charitable activities with tax benefits and limited liability. While there are compliance requirements, this registration provides credibility and access to funding. For expert guidance on Section 8 registration or tax advisory, consult professionals for seamless navigation.

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