A non-profit making company (NPO/NGO) termed as section 8 company as per companies act 2013, can be formed for the promotion of any useful object like sports, education, research activities etc. The term No Profit does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefited out of those profits.
According to section 8 of companies act 2013, section 8 company means a Non-profit making Company which Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other useful object, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.
In former Companies Act, 1956 it was regulated by Section 25 and that is why it was popular as Section 25 Company. However, in Companies Act 2013 provisions related to non-profit making company are given in Section 8 that is why it is known as Section 8 Company.
1. These companies incorporated only for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any such other object.
2. Section-8 Company will not treat as Small Company.
3. Section 8 Company shall enjoy all the privileges and be subject to all the obligations of Limited Liability Company.
4. It is a duty of Company to prove to Central Government that it will incorporate for the above-mentioned purpose only.
5. The Central Government may issue a license with such conditions as it deems fit and allows the registration of such person or association of persons as a limited company without the addition to its name of the word Limited, or as the case may be, the words Private Limited.
6. The power of the Central government is delegated to the Registrar of Companies having Jurisdiction over the area where the registered office of the company is proposed to be situated. Hence, the application for registering such company is to be made to the ROC.
7. Many privileges and exemptions under Company Law.
8. Exemption of Stamp duty for registration.
9. Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
10. These companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and the general public.
Any person or an association of persons intending to be registered as a limited company for a charitable purpose can apply for registration of section 8 company.
However, it shall prove to the satisfaction of the Central Government that.
(a) its objects include promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any such other object.
(b) the company on incorporation intends to apply its profits, if any, or other income in promoting such object.
(c) the company intends to prohibit the payment of any dividend to its members. After perusal, the Central Government may issue license with such conditions as it deems fit and allows the registration of such person or association of persons as a limited company without the addition to its name of the word Limited, or as the case may be, the words Private Limited.
Obtain DSC & DIN
Digital Signature Certificate (DSC) and Director Identification Number (DIN) are required for the proposed Directors of the Section 8 Company.
Name Approval & License
Once DIN and DSC are available for at least two Directors, application for reservation of name for section 8 company can be made to MCA.
Make an application.
To incorporate a Section 8 company an application shall be made in Form no. INC-12 and application shall be accompanied by following documents
(a) Draft Memorandum of association (MOA) and Articles of association (AOA) of the Company, in Form no. INC-13. Ensure to affix the photographs of the subscribers in subscriber pages of MOA and AOA
(b) Declaration (in Form no. INC-14) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with. It shall be on appropriate stamp paper of the State and duly notarized.
(c) An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
(d) A declaration (in Form no. INC-15) by each of the persons making the application. It shall be on appropriate stamp paper of the State and duly notarized
(e) Form no. INC-9 from each subscriber and first directors, on appropriate stamp paper of the State and duly notarized.
Approval of other authorities.
The Registrar of Companies may require the applicant to furnish the approval or concurrence of any appropriate authority, regulatory body, department or Ministry of the Central or State Government(s).
To decide on granting of license under section 8
The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers. The Registrar may also consult necessary authorities and regulatory bodies. Thereafter, the Registrar of Companies at its discretion may grant the license. And such license may contain conditions as deemed necessary by the Registrar. The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such conditions of the license as may be specified by the Registrar in this behalf.