Section 8 Company Registration - An Overview
What is a Section 8 Company?
A section 8 company which earlier was known as section 25 company is a legal form for non profit organizations (NPO) or Non Governmental organizations (NGO). Section 8 company is a licensed company which is authorized to work anywhere in the country.
Requirements for online registration of Section 8 Company
Property management:All the properties belonging to a company are vested in the name of the company. These can be sold in conformity to the provisions mentioned in the Companies Act, 2013. The Act says the sale can be done with prior consent of the Company Board of Directors, when they pass a resolution regarding the same.
Closure or winding up:The property and funds of the society, upon its dissolution ( as per the society by-laws) and settlement of all liabilities & debts, may not be equally distributed among the company members. Rather, the same can be transferred or given to some other company, preferably with similar objects.
Annual compliance:The company must ensure its annual compliance by filing its annual returns and annual accounts with the RoC
How to register section 8 Company in India ?
Section 8 company registration in India is unique and different concept. It is an non profit entity engaged in social work for the benefit of the country. The registration can be divided into three parts:
- Prepare DSC and file Name Approval: The first step is to prepare DSC and DIN. This takes some time, one to two days. Thereafter, you need to file for name approval. The name should be unique and should end with words like foundation, sanstha etc.
- File for License: After getting the name approved, the next step is to prepare all the documents and then apply for license to the Regional director via form INC 12. This approval takes most of the time.
- File for Incorporation: After getting the license, we need to file for incorporation and once the company is incorporated, you can start the social work under this company.
- DSC and DIN of the Directors.
- Objectives and proposed work of the company.
- Owner’s photograph
- Financial statements like assets and liabilities, the projection for five years etc
- Directors personal documents.
- Registered office address documents
Online Section 8 company registration - A detailed process
There are three major steps in incorporating a Section 8 company apart from the document collection, preparation and drafting. They are
- STEP 1: Run Approval:
- STEP 2: RD 1 License:
- STEP 3: Spice Form:
Reserve Unique Name (RUN) is a form filed for reserving a name for a new company or for changing its existing name. This is the first step of incorporating a section 8 company. A section 8 company shall usually have words like Foundation, Federation, Society, Council, Club, Charities, Institute, Academy, Organisation, Federation, Chamber of Commerce, Development, Association, etc.
The name so approved shall be valid for 20 days
This step is the most crucial in the process of incorporation. The name approval shall be valid at the time of applying for the RD 1 License. RD 1 license is a license granted under section 8 of companies act as they work on a specific objective which is for the upliftment of arts, science, commerce, environment, etc., and the profit they earn shall also be used towards their objectives. All crucial documents like the MoA, AoA, financial statements and other declarations are filed at this stage. The license so approved shall be valid for 30 days.
Both the name and the license shall be valid at the time of filing the SPICe form. This is the final stage of incorporating the section 8 company where the documents relating to the registered office like the rental agreements and utility bills are filed along with the RD-1 license and the name approval certificate.
Is there any maximum limit for the number of members in the Section 8 company?
There is no such maximum limit.
Can any government employee or officer be a member of an NGO?
The answer to this question is yes. Government employees or officers can be part of NGOs provided the NGO is not anti-government. There are a few rules too that these people have to follow, one of them is to make sure that the NGO is not profit-making and the member must not draw any salary from the NGO.
What are the other alternatives for starting an NGO?
The other alternatives are to start a Trust or a Society based on the objectives of your NGO.
How is the property of Section 8 managed?
The property of the company vests in the name of the Company and the same can be sold as per the rules mentioned under the Companies Act, (Eg: With the consent of the Board of Directors in the form of a resolution).