section 8 company registration admin August 31, 2023
Transforming a Private Limited Company into a Public Limited Company
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Section 8 Company

A Section 8 company, established under the provisions of the Companies Act, 2013, plays a pivotal role in advancing various altruistic causes, such as research and social work. This legal structure is the contemporary counterpart of what was formerly known as a Section 25 Company under the Companies Act of 1956.

Section 8 Companies are legally recognized as ‘Non-Profit Organizations (NPOs)’ or ‘Non-Governmental Organizations (NGOs)’. These entities are dedicated to contributing to the greater good of society rather than generating profits. They are granted a special status due to their charitable and philanthropic objectives.

One notable feature of a Section 8 Company is its nationwide jurisdiction. It possesses the authority to operate and carry out its mission across all regions of the country. This widespread reach enables Section 8 Companies to address a wide array of societal issues and make a meaningful impact on a national scale.

In essence, Section 8 Companies are instrumental in channeling resources and efforts towards socially beneficial initiatives, thereby promoting positive change and development within India.

Registration Process for a Section 8 Company
The procedures and requirements for establishing a Section 8 Company closely mirror those of a limited company, encompassing all the rights and obligations associated with such a limited company. The primary distinction lies in the fact that a Section 8 Company is prohibited from using the terms 'Section 8' or 'Limited' in its name.
  • The process for registering a Section 8 Company is identical to that of incorporating an 'NGO, Trust, or Cooperative Society' under the Companies Act 2013.
  • Additional requirements must be met to obtain a license from the Central Government under Section 8 of the Companies Act, 2013.
  • The license essentially grants them the authority to remove 'Private/Public Limited' from their company name. With this permit, the company becomes eligible for specific exemptions from legal provisions and enjoys tax concessions.
  • If the intended Section 8 Company is initially registered as a private limited entity, it necessitates a minimum of 2 directors. However, in the case of a 'public limited Section 8 Company,' a minimum of 3 directors is mandatory.
Qualification

“The objectives of a Section 8 Company must center around the promotion of areas such as Commerce, Art, Science, Education, Research, Sports, Social Welfare, Religion, Charity, Protection of the Environment, or similar purposes. This type of company commits to utilizing its profits or income for the advancement of these objectives and strictly prohibits the distribution of dividends to its members.

Section 8 Companies are established by individuals who are not driven by profit but are dedicated to enhancing specific aspects of society. In addition to meeting the conditions specified in its definition, the following criteria must be satisfied for registering as a Section 8 Company:

  • Legislation: Governed by the Companies Act, 2013.
  • License: Requires a license obtained from the Ministry of Corporate Affairs (MCA).
  • Directors: A minimum of 2 directors for a Private Limited Company and 3 directors for a Public Limited Company are mandatory. Additional directors can be appointed after passing a special resolution in a general meeting.
  • Indian Resident Director: At least 1 director must be an Indian resident, meaning they have resided in India for at least 182 days in the previous calendar year (as per Section 149(3)).
  • Subscribers to Memorandum of Association (MoA): For Private and Public Companies, the MoA must have at least 2 or 3 subscribers, respectively.
  • MoA & AoA: Must outline the company’s name, objectives, registered office address, number of directors and promoters, authorized capital, and the number of shares to be subscribed by each promoter. The plan for achieving social objectives must also be mentioned, as required by the Registrar of Companies (ROC).
  • Initial Capital: The proposed initial capital must be invested in the company within 2 months.
  • Property Management: Company-owned property can only be sold in accordance with the rules defined under the Companies Act, typically requiring consent from the Board of Directors in the form of a resolution.
  • Dissolution: A Section 8 Company can be dissolved only by following its by-laws. After settling all debts and liabilities, the remaining funds and property must be transferred to another Section 8 Company with similar objectives.
  • Annual Compliance: Mandatory annual filing of accounts, statements, and returns with the ROC to meet compliance requirements.
  • Documents: All directors must possess valid Director’s Identification Numbers (DIN) and Digital Signature Certificates (DSCs).”
Funding for a Section 8 Company through Donations
A Section 8 Company is prohibited from raising capital through deposits but can accept donations from the general public. Here are some ways through which it can secure funding:
  • Foreign Donations: Accepting foreign donations is permissible, provided the organization obtains FCRA (Foreign Contribution Regulation Act, 1976) registration. FCRA registration can be sought after three years from the date of registration. In cases of urgent foreign donations, prior permission from the commissioner may be applied for.
  • Equity Funding: A Section 8 Company has the option to raise funds by issuing new equity shares at a higher value.
  • Domestic Donations: There are no restrictions on domestic donations. However, to prevent potential money laundering cases, it is advisable to establish a robust system for oversight and accountability."