OVERVIEW
According to Section 8 of the Companies Act, 2013, a Section 8 Company can be established for the ‘promotion of commerce, social welfare, religion, charity, art, science, sports, education, research, protection of environment or any such other similar object, provided it intends to apply its profits, if any, or the other income in promoting its object’ and it also intends to prohibit the payment of any of the dividend to its members.
However some of the Minimum Requirements for Section 8 Company:
There must be a minimum of two shareholders;
There must be a minimum of two Directors (Directors and shareholders can be the same There is No requirement for Minimum capital
The Income-tax PAN is a mandatory requirement in case of the Indian nationals;
Any one of the Identity Proofs be it Voter ID/Aadhar Card/Driving License/Passport is required; a Passport is, however, a mandatory requirement for the proof of identity in case of foreign nationals Any one of the Proofs of Residence (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);
The Registered Office address proof (that is the rent agreement along with the latest rent receipt and a copy of the latest utility bill in the name of the landlord and a no objection certificate from the owner of the premises, in case of rented premises);
In case the premises are owned by either the Director or the Promoters, any of the documents establishing the ownership such as Sale Deed/House Tax receipt, etc along with the no objection certificate.
FEATURES OF SECTION 8 COMPANY
A Section 8 company comprises 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 cause like science, culture, research, sports, religion, etc. No Minimum Capital: Section 8 companies, unlike all other companies, do not require a stipulated minimum paid-up share capital.
Limited Liability: Members of this company may only have limited liability. Their duties are by no means unlimited.
State license: These companies can only operate if they have a license from the central government. The government can also revoke these licenses. Privileges: Since these companies are charitable organizations, corporate law provides for a number of exemptions and exemptions.
Companies as Members: In addition to individuals and individual associations, Section 8 permits companies to become members of such companies. Section 8 Benefits of Registering a Company.
ADVANTAGES OF REGISTERING AS A SECTION 8 COMPANY
Take advantage of tax benefits - Because Section 8 companies are more of a charitable organization, they have access to various exceptions under information technology law. These businesses are eligible for various tax incentives and tax relief. Section 80G of the Income Tax Act[1] provided many tax concessions to these companies.
Zero stamp duty- Section 8 companies are not required to pay stamp duty on MOAs and AOAs unlike other legal entities subject to the Companies Act 2013.
Minimum capital - Unlike private, public, or OPCs, Section 8 companies can be formed with no minimum paid-up capital. These companies may subsequently change their capital structure according to their requirements.
Free from all names - Section 8 companies are not required to add terms such as Limited or Private Limited to their names. These organizations are registered with limited liability.
Separate entity - Section 8 corporations have a special legal status, meaning that the entity's existence is independent of its members. Section 8 entities exist permanently.
Improved trust - The flexible and transparent constitutional structure of Section 8 companies allows them to gain more credibility than other types of NGOs such as Societies and Trusts.
Rights Donations to Foreign - Section 8 companies may receive foreign funds in the form of contributions if they are registered under the Foreign Contributions Regulations Act 2010. This helps them fuel their charitable campaigns that are in desperate need of results.
EXEMPTION AND RELIEF UNDER THE COMPANIES ACT 2013 AND UNDER TAXATION
Directorships of Section 8 companies are not considered when evaluating the limits associated with the maximum number. Directors as specified in u/s 165 of the Act.
The general meeting may be convened by giving notice.
Clause 8 The company, unlike other companies, is not obliged to notify the members of the general meeting of shareholders 21 days in advance. This period was shortened by 7 days according to the law.
Section 8 companies cannot hold 4 meetings every 6 months. Current law allows only one session to be held at a designated time
These companies are not subject to requirements such as keeping minutes of the board of directors, general meetings, and other decisions. However, if the company's articles of incorporation stipulate that the meeting minutes be confirmed by mail, the minutes may be prepared within 30 days after the end of the meeting.
Any company or institution may become a member of a Section 8 company.
Section 149(1) of the Act does not apply to the entities referred to in Section
Such companies are not required to appoint independent directors. Also for this reason, such companies' audit committees are not required to have independent directors on their boards. 8. Organizations subject to Article 8 are not required to appoint a CS practitioner as corporate secretary. These companies are also exempt from adhering to secretarial standards. Section 178 of the Act does not apply to section 8 companies, so those companies are not required to have a compensation and nominations committee.
They are also exempted from the composition of the Stakeholder Engagement Committee. There are various sections such as Sections 150, 152(5), 160, etc. which do not deal with Section 8 companies.
CONCLUSION
Section 8 helps governments achieve their philanthropic goals. Because profit is not the primary goal, these institutions need ongoing funding and perks to achieve their goals. The exceptions mentioned above are likely to provide much-needed support to these companies. Section 8 companies are generally established for charitable purposes, such as the promotion of the arts, culture, science, philanthropy, etc. By registering, these companies face minimal legal hurdles to obtaining legal status. However, this does not apply to the post-establishment phase. This is because these companies have to comply with various legal ramifications that act as barriers. Lack of profit sharing among members and lack of stability are some of the common drawbacks of Section 8 Companies. However, in terms of taxation, these companies have several advantages.
eStartIndia will help you with Section 8 Company Registration from the comfort of your home.
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