Section 8 Company

The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives. These companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.

These companies were previously defined under Section 25 of Companies Act, 1956 with more or less the same provisions. The new Act has, however, prescribed more objectives that Section 8 companies can have.

Number of Directors in a Section 8 Company

Section 149(1) of the Companies Act 2013 – prescribed minimum of 3 & 2 directors for public limited & private limited company respectively and a maximum of 15 directors. But there is no minimum or maximum prescription for section 8 company.

Features of a Section 8 Company

A Section 8 company comprises of the following distinct features that most other kinds of companies do not have:

• Charitable objectives: Section 8 companies do not aim to make profits. Their objectives are purely charitable in nature. They aim to further causes like science, culture, research, sports, religion, etc.
• No minimum share capital: Section 8 companies, unlike all other companies, do not require a prescribed minimum paid-up share capital.
• Limited liability: Members of these companies can only have limited liability. Their liabilities cannot be unlimited in any case.
• Government license: Such companies can function only if they have the Central Government’s license. The Government can revoke this license as well.
• Privileges: Since these companies possess charitable objectives, the Companies Act has accorded several benefits and exemptions to them.
• Firms as members: Apart from individuals and associations of persons, Section 8 also allows firms to be members of these companies.

Check list

 Directors

• ID and Address Proof {Bank Statement/Electricity Bill/Telephone bill/ Mobile Bill (not later than 2 months) of Directors & Shareholders
• ID proof and Address Proof of the Promoters/Subscribers/Shareholders (PAN, Aadhar Card, Passport) 
• Passport size pictures of Directors
• DSC of Directors and Shareholders
• Mobile No. and Email id of Directors
• Provide DIN if already have of Directors

 Company

•  Authorized Capital and the proportion of contribution by the Shareholders
•  Detailed Objects of the Company
•  Utility bill for registered office of the Company(Not older than 2 months)
•  Proof of ownership along with NOC of the owner

Advantages:

People generally prefer to conduct charitable activities by forming Section 8 companies instead of regular NGOs and associations.

This is because they have limited liability, so their personal assets will not be used in paying debts of the company. Here are some advantages that these companies enjoy:

• Members have limited liability.
• No minimum capital requirements.
• They get several tax exemptions.
• Stamp duties and high fees are not payable for registration.
• They have perpetual existence and separate legal status.
• Exemptions from carrying out several procedural compliances.
• More credibility than compared to NGOs, societies, and trusts because they are recognized by the Central Government’s license.

Certificate of Incorporation

• When the eForm is processed and DIN is generated, an acknowledgement email of Certificate of Incorporation (CoI) is sent on email. 
• Further, on approval of SPICe+ forms, the Certificate of Incorporation (CoI) is issued with PAN and TAN as allotted by the Income Tax Department.
• An electronic mail with Certificate of Incorporation (CoI) as an attachment along with PAN and TAN is also sent to the user.

Annual Compliance Under Section 8 Company

• Appointment of an auditor: Under section 139 of the Companies Act 2013, it is essential for the firms to hire an auditor within 30 days from the start date. The book of accounts and manual returns of the company will get audited through the statutory auditor who would be hired for the duration of 5 years.
• Maintenance of Statutory Registers: It is obligated for the company to maintain a statutory register consisting of members, loans received, charges made, its directors, and others. as listed under section 8 of the companies act 2013.
• Calling board meet: Section 8 companies will have at least one meeting every 6 calendar months.
• Statutory Audit: Every entity who would enroll under the companies act would need to audit their books of accounts every year from a CA.(refer to point 1).
• GM notice: A section 8 company could hold a general meeting i.e whether yearly or extraordinary with min 14 days’ notice.
• Calling AGM: Annual general body meet would be held once a year within 6 months of the finish of the fiscal year. But, in the case of the first annual general meeting, the company could hold AGM in less than 9 months from the finish of the first fiscal year. You must learn that the time duration between 2 annual general meetings need not surpass 15 months.
• Board Reports: The Board of directors of the company will furnish their board’s report in a specific way, it comprises all the financial statements and additional annexure. The board report would be needed to get furnished in Form AOC-4.
• Making of Financials Statement of the Company: The organization would obtain the balance sheet, profit, loss A/C, cash flow statement as well as additional financial statements audited via statutory auditor i.e is to be furnished with ROC.
• Tax returns: Income tax return would be needed to get furnished during the finish of every assessment year prior to the date 31st Oct.
• Tax audit: Tax audit report in Form 10B would get filed through a charitable or religious trust or institution that would be enrolled u/s 12A or who has submitted an application for registration by filing Form 10A. Form 10B is an audit report which is provided by a CA upon nomination by the taxpayer.
• Filing Financial Statements: The financial statement would get furnished in the suitable form ( E-FORM AOC-4), within 30 days from the date of the annual general meeting (Discussed in point 7 above).
• Annual Return Filing: The annual return filing consists of all the details such as management details, and shareholders’ information would be filed in Form MGT-7 with the Registrar of Companies (ROC), within 60 days of the annual general meeting.
• DIN KYC: Every person who would be provided with a DIN dated 31st March of the fiscal year should submit his KYC on or prior to September 30 of the next fiscal year.