Have you ever wanted to start a company that focuses on helping people or society instead of making money? If yes, then a Section 8 company is the perfect option. This type of company is set up to support charitable, social, educational, or environmental causes. Unlike regular businesses, it cannot give profits to its members – every rupee earned is used to further the company’s mission and make a real difference.
Setting up a Section 8 company involves a specific checklist of steps and documents. This blog will help you understand exactly what you need to do to incorporate one in India.
What is a Section 8 Company?
A Section 8 company is a type of non-profit company in India. It is registered under Section 8 of the Companies Act, 2013. The main features of the Section 8 company are:
- Non-profit objectives: The main goal of the Section 8 company is to promote charitable purposes like education, sports, health, social welfare, or arts.
- No profit distribution: Profits are not shared among members or directors. Any surplus profit is reinvested in the company’s objectives.
- Limited liability: Members are not personally responsible for the company’s debts beyond their contribution.
- Legal recognition: It is recognized as a legal entity and enjoys various exemptions and benefits for non-profits.
Advantages of a Section 8 Company
- Legal recognition and enjoys credibility as a registered entity.
- Limited liability of directors and members from personal liability.
- Section 8 companies are eligible for certain income tax benefits and government grants.
- Donors and institutions prefer registered non-profits
- The company continues to exist regardless of changes in members.
Checklist for Incorporation of Section 8 Company
1. Decide the Purpose
- Clearly define the main objective of your company.
- Ensure that the purposes of your company align with the law under Section 8, such as promoting education, the arts, science, social welfare, sports, the environment, or charity.
- Avoid any activity that focuses on profit-making.
2. Choose a Name
- Select a unique name for your company.
- The name should reflect your purpose, but should not resemble an existing company name.
- Avoid words like “Bank,” “Stock Exchange,” or “Insurance” unless you have legal permission.
- Apply for name approval through RUN (Reserve Unique Name) service on the MCA portal.
3. Prepare the Memorandum and Articles of Association (MOA & AOA)
- Memorandum of Association (MOA) defines the company’s objectives, purpose, and scope.
- Articles of Association (AOA) contain the rules for the company’s internal management.
- Both documents must clearly mention that the company will not distribute profits to members, and any surplus will be used for the objectives.
4. Apply fa or License under Section 8
Do you know that you need permission from the Registrar of Companies (ROC) under Section 8 of the Companies Act?
Submit the application Form INC-12 along with the following documents:
- MOA and AOA
- Proof of registered office
- Details of members and directors
- Declaration by directors about compliance with Section 8
- NOC (No Objection Certificate) if required
5. Appoint Directors
- You need at least two directors for a private Section 8 company and three directors for a public Section 8 company.
- Directors must consent to act as directors and submit their DIN (Director Identification Number).\
- Ensure that directors understand their responsibility for not distributing profits.
6. Decide Members
- A Section 8 company requires at least two members for a private company and seven members for a public company.
- Members will contribute to the company’s objectives, but cannot receive profits.
7. Registered Office
- A Section 8 company must have a registered office in India.
- Submit proof like a rental agreement, utility bill, or property ownership documents.
8. Submit the Incorporation Documents
Once all preparations are done, submit the following to the ROC:
- Form INC-12 for license
- MOA & AOA
- Affidavit from directors (Form INC-9)
- Declaration by professionals (Form INC-10)
- ID and address proof of directors and members
9. Incorporation Certificate
- After approval, ROC issues a Certificate of Incorporation.
- Now your company can legally operate in India.
10. Post-Incorporation Compliance
Even after registration, you must follow certain rules:
- Apply for PAN & TAN for the company
- Open a bank account in the company’s name
- Register under GST or other taxes if applicable
- Maintain books of accounts and annual filings with ROC
Common Mistakes to Avoid While incorporating a section 8 company
- Submitting an MOA or AOA that does not clearly state the non-profit objectives of the company.
- Choosing a name for the company that is already registered.
- Choosing a misleading or confusing name for the company.
- Not filing Form INC-12 correctly may delay license approval.
- Not appointing the minimum number of directors or members.
- Using profits of the company for personal benefits (which is strictly prohibited).
Conclusion
A Section 8 company is more than paperwork; it is a way to bring positive change into the world. This checklist is your guide to starting strong, so you can focus on your mission instead of worrying about legal hurdles. With proper setup, your company becomes a trusted platform for helping others, turning your vision for social good into reality.
