A company which is registered for social welfare and as a Non-Profit Organisation (NPO) is known as a Section 8 company. These companies are registered under the “Ministry of Corporate Affairs”. For registration of a company under Section 8 of the Company’s Law, the company should have the will and motivation to promote a diverse range of social subjects varies from arts, education, commerce, protection of the environment, science, religion, research, sports and other fields related to charitable and social welfare.
The companies registered under Section 8 of the Companies Act, 2013 get their incorporation certificates from the central government as compared to other companies which get their incorporation certificates from the state government. and income or profits gained by such companies must be used to promote social welfare and other charitable subjects. The income earned by these companies cannot be shown for the payment of dividends to the members of these companies.
There are several characteristics of companies registered under Section 8 of the Companies Act. These are given below: -
Promotion of Social Welfare
These companies are incorporated with the sole aim of promoting charity, social welfare, religion, art, science, environment, education, and research and their main aim is to promote social welfare activities. That’s the objective behind their incorporation under Section 8 of the company’s Act.
No Minimum Capital
Like other companies, these companies do not require any prescribed minimum paid-up share capital.
Licensed by Government
These companies are licensed by the central government and receive their certificates of incorporation from the central government, unlike other companies. These companies are non-profit organizations and receive donations from the general public for social work and welfare.
No Dividend Distribution
These companies don’t distribute dividends to their members because it is restricted in the section. They cannot distribute profits to their members, rather the profits and income can be used for the promotion of social welfare.
These companies under section 8 are formed as private limited or public limited companies. Members of this company have limited liability as per their shares.
The following steps are required for the incorporation of a Section 8 company. These are mentioned below: -
Selection of the Desired Name
The first and foremost step required for the incorporation of a company is by selecting and reserving two proposed names in Part-A of the SPICe+ form. If CRC or Central Registration Centre reject a particular name, then the applicant has a right to apply for two new proposed names within 15 days of the date of rejection.
Apply for the DSC (Digital Signature Certificate)
The process of incorporation of the company is online in India. Hence, applying for DSC or digital signature certificate becomes crucial. DSC must be applied mandatorily for each member or shareholder of a company. DSC or digital signature certificate becomes compulsory for the incorporation of the company.
Filing of Application for Incorporation
After reserving the company’s name, the applicant 20 days needs to fill out the form for incorporation of the company along with all the requisite documents and attachments and upload it online. SPICe+ is an advanced form combination of 8 forms in one. One can apply for various registrations via one form such as GSTIN registration, TAN, PAN, EPFO, ESIC registration, etc.
The Part B of the form contains details regarding the internal structure of a company such as the total number of directors and members, authorised share capital etc. These details need to be filled in precisely along with the drafting of MoA, and AoA and filling the AGILE form for procuring GSTIN.
When all these details are filled, signatures will be attached and all the forms along with requisite documents are uploaded on the website of MCA (Ministry of Corporate Affairs).
Certificate of Commencement of Business
Once the incorporation form is approved by the Ministry of Corporate Affairs, the incorporation certificate will be issued, and the company can file for the approval of the commencement of business within 180 days from the date of incorporation of the company.
Documents Required for the Incorporation of Section 8 Companies
The following documents are required which are given below: -
Documents Required for Incorporation of a Private Limited Company
ID Proof of Proposed Directors and Members
Address Proof of Proposed Members and Directors
There are several advantages of Section 8 companies, these are given below: -
In a nutshell, it can be concluded that Section 8 companies are incorporated with the intent to promote social welfare such as charity, religion, science, arts, research, innovation, etc. These companies get many perks and privileges from the central government so that they can function efficiently and seamlessly.
It is a wealth or assets owned by either a company or an individual that is available for investing or starting a company.
The dividend is the amount of money a company pays to its shareholders for owning a share of its stock divided by the current price of the stock.
A private limited company unlike public companies has limited liability and is private in nature i.e not listed in the public listings.