Incorporation under Section 8 Companies

A person or an association of persons can make an application to the Registrar of Companies using requisite forms to form a company with charitable objectives under Section 8 of Companies Act. The Central Government, if satisfied, can accept such an application upon any terms and conditions imposed under the license granted by it. Once accepted, the Registrar of Companies will register the company after the applicants pay all requisite fees.

It is important to note that such companies can only be limited companies. All privileges and obligations of limited companies apply in this case. Further, these companies also do not need to include the words “Limited” or “Private Limited” in their names, as all other companies have to.

The Central Government is empowered under the provisions of Companies Act to grant license to associations/companies which to its satisfaction:

Intend to promote commerce, art, science, sports, education, research, social welfare, religion, charity protection of environment or any such other object, Intend to apply its profits, if any, or other income for promoting its objects, and Intend to prohibit the payment of any dividend to its members.

Eligibility for section 8 company under companies Act 2013:

The objects of the section 8 company in India as defined in the companies act 2013, shall relate to all or any of the following:

  • A company must be working and promoting commerce, art, science, sports, education,
  • Research, social welfare, religion, charity, protection of environment etc.
  • A company Intends to apply its profits, if any, or other income in promoting its objects.
  • A company Intends to prohibit the payment of any dividend to its members.
  • A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
  • A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed by the act.

Steps to Register a Company:

Step 1. Obtain Digital Signatures Nowadays various document prescribed under the Companies Act, 2013, are required to be filed with the digital signature of the Managing Director or Director or Manager or Secretary of the Company, therefore, it is essential to Obtain a Class II Digital Signature Certificate from authorized DSC issuing Company for at least one director to sign the E-forms related to incorporate like form INC.1 and other documents.

Step 2. Obtain Director Identification Number As per section 153 of the Companies Act, 2013, every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number in form DIR.3 to the Central Government in such form and manner and along with such fees as may be prescribed. Therefore, before submission of e-Form INC.1 for availability of name, all the directors of the proposed company must ensure that they are having DIN and if they are not having DIN, it should be first obtained.

Step 3. Name availability for proposed company Section 8 Companies can be incorporated by either reserving names through Run and filing Spice thereafter or by directly filing Spice. Prior approval required from the Registrar of Companies in the relevant state/ U.T

Step 4. Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA) Drafting of the MOA and AOA is generally a step subsequent to the availability of name made by the Registrar. It should be noted that the main objects should match with the objects shown in e-Form INC.1. The memorandum of association of the proposed company shall be in Form No.INC.13. No stamp paper required for Memorandum & Articles of Association.

Step 5. License under section 8 for new companies with charitable objects License No. for a section 8 company shall henceforth be allotted at the time of incorporation itself.

Step 6. Attachment of Required Documents: Documents Required for Registration are mentioned below:

The draft Memorandum of Association of the proposed company.

The draft Articles of Association of the proposed company.

The 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 thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with.

The declaration by each of the persons making the application in Form No. INC.15.

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;

Step 7. Duty of registrar to scrutinize the documents If after filling the Requisite forms for incorporation with the Registrar of Companies along with fees, ROC is satisfied with the contents of the documents filed, ROC will issue the license in form No. INC.16 under section 8(1) read with rule 19 of Companies (Incorporation) Rules, 2014.

Step 8. Certificate of Incorporation Once all clarifications are provided, the Certificate of Incorporation is issued by the ROC and the company is deemed to be incorporated from the date of the Certificate of Incorporation.

Cost of Registration

It may costs 25k to 50k to register a section 8 company under the companies Act, 2013. The cost mentioned above includes the cost of Digital Signature Certificate (DSC), Director Identification Number (DIN), Name approval, RD approval fees, MOA, AOA & incorporation fees, PAN & TAN application as well as professional fees including taxes.

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