Section 8 Company Formation

Forming a Section 8 Company in India: A Step-by-Step Guide

Section 8 companies, also known as non-profit companies, are a popular legal structure for organizations with social welfare or charitable objectives. They offer a blend of flexibility and accountability, making them ideal for NGOs, social enterprises, and foundations. This article will guide you through the process of forming a Section 8 company in India.

Understanding Section 8 Companies

Before diving into the formation process, it's crucial to understand the key characteristics of a Section 8 company:

• Non-profit Motive: Unlike for-profit companies, Section 8 companies cannot distribute profits among their members. Surplus funds must be used to further the company's social objectives.
• Limited Liability: Similar to private limited companies, members' liability is limited to their share capital contribution. This protects personal assets from company debts.
• Compliance Requirements: Section 8 companies are subject to regulations and filing requirements with the Ministry of Corporate Affairs (MCA).

The Formation Process

The process of forming a Section 8 Company can be broadly divided into six steps:

1. Obtaining Digital Signature Certificates (DSCs):

• A Digital Signature Certificate (DSC) acts as your digital signature for online filings.
• Each proposed director of the company needs to obtain a DSC from a government-approved certifying authority.

2. Director Identification Number (DIN):

• Once the DSCs are procured, file an application (DIR-3) with the Registrar of Companies (ROC) for each director to obtain a Director Identification Number (DIN).
• The DIN is a unique identification number for company directors in India.

3. Reserve a Company Name:

• Choose a name that reflects your organization's mission and is not already in use by another company.
• File an application (RUN) with the MCA to check name availability and reserve your preferred name.

4. Prepare and File Incorporation Documents:

• Memorandum of Association (MOA): This document outlines the company's fundamental details, including its name, registered office address, objectives, and the clause limiting dividend distribution.
• Articles of Association (AOA): This document defines the internal governance rules of the company, such as procedures for meetings, voting rights, and appointment of directors.

5. Obtain License under Section 8:

• File an application (INC-12) with the ROC, along with the MoA, AoA, and other required documents, to obtain a license for operating as a Section 8 company.
• Upon approval, the ROC will issue a Certificate of Incorporation (INC-16).

6. Post-Incorporation Compliances:

• Open a bank account for the company.
• Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
• Register for Goods and Services Tax (GST) if applicable.
• Depending on the nature of your activities, you might need to register with the Employees' Provident Fund Organisation (EPFO) and Employee's State Insurance Corporation (ESIC).

Additional Considerations:

• Minimum Members: A minimum of two members are required to form a Section 8 company.
• Memorandum and Articles: While notarization of the MoA and AoA is not mandatory, it's recommended for added legal validity.
• Professional Help: Considering the legalities involved, consulting a company secretary or lawyer specializing in Section 8 company formation can streamline the process and ensure compliance.

Conclusion

Forming a Section 8 company allows you to establish a credible and legally recognized entity for your social cause. By following these steps and seeking professional guidance when needed, you can navigate the formation process efficiently and begin your journey towards making a positive impact.

Hello, I'm Garima Agrawal, a resident of Agra, where I currently lead a dynamic life. Armed with M.Com and M.Ed degrees. As the proud owner of Mdf Consultancy Services, our platform www.mydigitalfiling.in, specializes in digital filing services.