Key Points to Consider for Incorporation of Section 8 Companies under Companies Act, 2013:

Name Reservation: 

A Section 8 company can be incorporated either as a private company or as a public company.

Main Object of the company should be towards the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any such other object. It aims to utilize any profits or other income for advancing its objectives and intends to disallow the payment of dividends to its members.

It can propose two names at the time of Name Reservation keeping the following in consideration:

• The name should not include the words Private Limited or Limited at the end of its name.
• Must end with the words prescribed for this purpose like foundation, forum, association, federation, chambers, confederation, council, electoral trust, etc.

The Name shall not violate the provision of Section 4(2) of Companies Act, 2013.

Mandatory Requirements for the Incorporation: 

Number of Directors: A Section 8 company intending to operate as a private limited company must have a minimum of two directors. However, if the entity intends to operate as a public limited company, it must have at least three directors.  

Documents Requirement for Registration:

• • Registered Office Proof
  • Details of Director along with identity proof and address proof
  • Digital Signature Certificate
  • Passport Size Photograph
  • Memorandum of Association and Articles of Association

Additional Points on Section 8 Company Incorporation:

Board of Directors: A Section 8 Company must have a board of directors, responsible for managing the company’s affairs. The board must meet regularly and make decisions in the best interest of the company’s objectives.

Tax Benefits: Section 8 Companies are eligible for various tax benefits under the Income Tax Act, 1961. They are exempt from paying income tax on their surplus income, provided the income is used for the company’s objectives. Also, Section 8 companies can apply for 80G Registration under the Income Tax Act which provides benefits to the donors of funds, whereas Section 12A Registration allows Section 8 company to get its income exempt from tax. 

Annual Compliance: Section 8 Companies are required to comply with certain annual filing requirements, such as filing of financial statements and annual returns with the Registrar of Companies (ROC). Not adhering to these requirements may lead to penalties.

Restrictions on Distribution of Profits: Section 8 Companies, unlike other entities, are prohibited from distributing their profits among members. Any surplus income must be reinvested in the company’s objectives.

Conversion: Section 8 Companies can be converted into other types of companies, such as private limited companies or public limited companies, subject to certain conditions and approval from the ROC.

Corporate Social Responsibility (CSR): Section 8 Companies are also subject to the CSR provisions under the Companies Act, 2013. They are required to spend a certain percentage of their profits on CSR activities, which align with their objectives.

Legal Status: Section 8 Companies possess a distinct legal identity from their members, enabling the company to litigate or be litigated against in its own capacity. This shields the members from personal liability.

Public Recognition: Being registered as a Section 8 Company enhances the credibility and public recognition of the organization, which can be beneficial for fundraising and partnership opportunities.

Compliance with Companies Act, 2013: Section 8 Companies must comply with all the provisions of the Companies Act, 2013, and any other applicable laws and regulations.