What is an NGO?
A non-governmental organisation (NGO) is a non-profit organization that works for the benefit of the community. Section 8 company of the Companies Act, 2013 talks about the NGO establishment which is governed by the Ministry of Corporate Affairs (MCA). NGOs registered as a trust are governed by the state government under the registrar of state.
As registration under section 8 company has more benefits than registration under trust and society. As they are more credible to the government departments, donors and other stakeholders.
Laws in India applicable to an NGO
In India, NGOs can be registered under any of the laws:
i. Indian Trust Act, 1882
ii. Societies Registration Act, 1860
iii. Companies Act, 2013 under Section 8
Purpose of NGO – Section 8 Company Meaning
For promoting non-profit objectives is the main purpose of establishing under section 8 company. Such as:
• Commerce
• Art
• Science
• Sports
• Education
• Research
• Social Welfare
• Religion
• Charity
• Environment Protection
For the registration under section 8 companies, the person or association of individuals must satisfy the Central Government that they established a limited company having the above-mentioned objectives. When the Central Government is satisfied with the same it shall grant the license to register under section 8 under the Companies Act, 2013.
Section 8 Company Benefits
1. No Minimum Capital: There is no minimum capital requirement for the incorporation and the capital structure of section 8 can be changed according to the growth requirement of the company.
2. Benefits of Tax: Tax benefits under 80G of the Income Tax Act, 1961. As Company Auditor’s Report Order (CARO) does not apply to section 8 company.
3. No Stamp Duty: Incorporating under section 8 company does not impose stamp duty in India.
4. Limited Liability: Section 8 company members have limited liability towards their share subscribed. As they are not directly liable for any losses of the company.
5. Credibility: Registering under section 8 companies are more credible and reliable than any other charitable organization.
Section 8 Company Registration Eligibility
• HUF is eligible for registration under section 8 company as an individual in India.
• Two persons or more than two persons who act as directors and who fulfil the compliances of Section 8 companies can incorporate under this act.
• At least one director must be a resident of India under section 8 company.
• Objectives must be the same.
• Profits gained by the members cannot distributed between the members and directors of the company.
Section 8 Company Incorporation Requirement
1. Directors:
• Minimum two directors if incorporated under a private limited company.
• Minimum three directors in case of the public limited company.
2. Capital Requirements and the Name: No requirements of minimum paid-up under section 8 companies. And if NGOs are established under Section 8 companies then they will not use the words “Limited” or “private limited”.
3. Companies incorporated under section 8 companies must incorporate with the non-profit objectives.
4. Managed by the Board of Directors according to the MOA and AOA of the company.
5. Section 8 companies must follow the rules and regulations of the Companies Act, 2013.
6. A Digital Signature Certificate of the directors is necessary.
7. Apply for the Director Identification Number (DIN).
Forms Required for Section 8 Company Registration
• SPICE+
• INC 12
• INC 13
• INC 14
• INC15
• INC 16
• INC 22
• DIR 2
• DIR 3
• DIR12
Purpose of the Section 8 Company Forms
• SPICE+ - Incorporation of Company Application
• INC 12 – License Application
• INC 13- Memorandum of Association
• INC 14 – Declaration from Charted Accountant who is practising
• INC15 – Declaration from each person who making an Application
• INC 16 – License for the incorporation under section 8 company
• INC 22- Registered Office situation
• DIR 2- Directors Consent
• DIR 3- For DIN, application to the ROC
• DIR12- Appointment of Directors
Procedure for incorporation of a Section 8 company
1. DSC from Directors of the company of the section 8 company. After receiving DSC, file form DIR-3 with ROC for DIN. For obtaining DSC it is required that you attach proof of identity and address proof.
2. After approval of SIR-3, ROC will allot DIN to the proposed Directors
3. For applying for the license file Form INC- 12 with ROC attached with the required documents.
4. After the form is approved you will issue the license under section 8 in Form INC-16.
5. Once you get the license, you have to file Form SPICE+ for incorporation with ROC.
6. After reviewing your Form and ROC's satisfaction with the forms, he issues a certificate of Incorporation along with the Company Identification Number (CIN).
Conclusion
Registering as an NGO under section 8 Companies of the Company Act, 2013 involved a process that ensures the legal recognition of the NGO. Once the NGO is registered it can operate legally and have the various advantages of tax benefits. NGOs must register under section 8 Companies of the Company Act, 2013 for transparency and credibility.
Author:
Leave a Comment
Previous Comments