Section 8 Companies under Companies act of 2013: The primary purpose of Section 8 under the Companies Act of 2013 is to promote the subjects of commerce, science, art, education, social welfare, research, religion, protection of the environment, charity, and such other issues among companies.
Section 8 of the Companies Act of 2013 proposes the successful application of their profits or other incomes to promote its primary aims and forbids any such dividends among their members.
Table of Contents
- Terms and Conditions for Companies
- Significant Features of companies under Section 8
- Advantages of companies under Section 8
- The Steps to incorporate companies under Section 8
- The documents required for incorporation
Terms and Conditions for Companies
- The Central Government should issue a license following the prescribed method.
- According to this notice, the Government should approve the Company or partnership or association to register themselves under Section 8 without the attachment of the ‘Private Limited’ title to its name or the addition of only ‘limited’ as per the terms prescribed.
- After modifying the Company or association or partnership name, the Registrar can register the association, Company, or partnership under Section 8.
- The Companies registered under Section 8 can register themselves as a non-profit or charitable trust. But even though this Company will fall under the category of a Society or Trust, the only exception is that they will get registered under the Ministry of Corporate Affairs or MCA under the Central Government, unlike ordinary Trusts, which the State Government governs.
- The companies under Section 8 have various advantages compared to general Societies or Trusts. They possess strong trust between donors, multiple departments of the Government, and other stakeholders.
- The most crucial feature of this type of Company is the choice of registering themselves without including the titles’ Private Limited’ and ‘Limited’ as per the case.
Significant Features of Companies under Section 8
- Unique License: The companies that register under Section 8 of the Companies Act of 2013 are uniquely licensed by the Government. Their focus is to work with the public and their welfare; hence, sometimes, they receive funds from the general public.
- No Dividend: The companies under Section 8 do not issue bonuses to their partners or members due to restrictions. Hence, they are unable to distribute profits to members legally as a business objective.
- Charitable Aims: The primary objective of Section 8 under the Companies Act of 2013 is to promote commerce, science, art, education, social welfare, research, religion, protection of the environment, charity, and other issues among companies.
- Regulated Liability: The members or partners of a Private Limited or Limited company limited liability as they are registered under Section 8.
- No restrictions on minimum Capital: Unlike any other company, the companies under Section 8 do not need a minimum paid-up share capital to register legally.
- Firms as the sole members: Apart from individual members of the Company, firms are allowed to the members of the Company, as per Section 8 of the Companies Act of 2013.
Advantages of Companies under Section 8
Original Identity
Companies that fall under Section 8 of the Companies Act of 2013 possess an original identity and exist as an entity with a real presence in society.
The Company holds a legal position and has unique potentials to sustain debts in its name. The Company members do not have liability in the case of debts since they are seen as a separate section. Therefore, the Company functions as an individual with its original Identity.
Regulated Liability
Liabilities in the case of companies registered under Section 8 are regulated. The responsibility of members in the subject of the Company’s duties for company debts or partnerships are limited according to law. In simple words, the duties of company members are restricted to the amount of face value of the total shares.
No Additional suffix
Companies under Section 8 of the Act choose to omit suffixes such as Limited and Private Limited, once legalized by the Government.
Benefits on Tax
A company or association under Section 8 may choose to enjoy benefits on taxes if they are registered 12AA and under Section 80G of the IT Act.
No Restrictions on minimum Capital
Under Section 8, there is no minimum value of Capital required for the incorporation of any Private Limited company. According to the law of 2013, Private Limited company starters can build the foundation without any worries about minimum Capital requirements.
Fewer Stamp Duty
During the incorporation of companies under Section 8 of the Companies Act of 2013, the Government provides an array of benefits that reduces the stamp duty of the Company by a great deal.
The Steps to Incorporate Companies under Section 8
Step 1: Producing an application for the desired company name
The foremost step in the process of incorporation of a company is selecting the desired company name and reserving the unique name in section A of the SPICe Plus form. If the Central Registration Centre rejects the name proposed, then the Company needs to re-file the two names as presented within the time limit of 15 days starting from the day of rejection from CRC.
Step 2: Applying for a DSC or Digital Signature Certificate
Since the incorporation process of a company is entirely online from start to finish, a DSC or Digital Signature Certificate is crucial for the signing of forms by the directors as proposed or the company members via electronic means. The use of DSC is obligatory for all companies, their members, shareholders, and directors.
Step 3: Two-Stage filling method the application Form for the process of incorporation
The incorporation process starts once the company name gets verified. Within the time span of twenty days, application filling should be completed.
Stage A: All relevant documents needed for the process must be uploaded online on the SPICe plus site (combining eight records in one). Through this, the company can propose the following:
- Incorporation
- Name reservation
- PAN application
- TAN application
- DIN application
- GSTIN registration
- ESIC registration
- EPFO registration
Stage B: Filling of this Section of the Form needs details like paid-up capital, the total number of members and directors, number of whole shares by members, legalized share capital, registered company address and addresses of members and directors.
MOA and AOA of the company as proposed should be drafted next, followed by the filling of EPFO, and registering ESIC in detail. Filling AGILE and securing GSTIN are the next steps. Lastly, uploading the signature onto the MCA website is an essential step in this process.
The documents that are needed to be attached are:
- A Physical replica of the MOA draft (including the signature of witnesses and members)
- A Physical replica of the AOA draft (including the signature of witnesses and members)
- The Declaration in Form INC-14 by any such practicing professional
Step 4: Issuing the Certificate of Commencement of the Business
As soon as the application of incorporating the said Company has been approved and the Registrar of Companies has produced the Certificate of Incorporation, the Company must file another seeking for the approval of the commencement of business under 180 days from the Company’s incorporation.
Documents Required for Icorporation
As a Private Limited Company
- Aadhaar Card
- PAN Card
- A Photograph of the proposed Director
Identity Proofs (of the members and proposed Director)
- Voter’s Identity Card
- Driving License
- Passport
Address Proofs (of the members and proposed Director)
- Bank Statement
- Electricity bill
- Telephone/ Mobile Bill
Address Proofs for the prime business location (of the proposed company)
- The Rent Agreement, including Rent Slip
- Utility Bills like Telephone bill, Water bill, Gas Bill and Electricity Bill
- Proof of Ownership