Incorporation of Section 8 Company (Non-profit organisation)
This article was last updated on 12 April 2020.
In India, the provisions related to a Company operating as Non-Profit Organization is govern under Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014 of the Companies Act, 2013.
Non-Profit Organizations are the Organizations working for a Charitable purpose its objects are the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object Such Companies are licensed under Section 8 of the Companies Act, 2013 (the Act), and incorporated without using the word “Limited” or “Private Limited”:-
With the main objects as promoting research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment or any such other object as per sec 8(1)(a),
Provided that the profits, if any, or the other income is applied for promoting only the objects of the company as per sec 8(1)(b)and
Intends to prohibit the payment of any dividend to its members as per sec 8(1)(c).
Includes the word Foundation, Forum, Association, Federation, Chamber, Confederation, Council, Electoral Trust and the like etc as per Rule 8(7).
Special License with charitable objects
As per the Provisions of Section 8 of Companies Act 2013, where it is proved to the satisfaction of the Central Government (power delegated to ROC) that an association of persons want to register themselves under section 8 as a limited company for the furtherance of above mentioned objects, the Central Government may issue a license in prescribed manner in Form INC 16 under Rule 19 of the Companies Rules (Incorporation), 2014 of Section 8 to register themselves as a limited company without the addition to its name of the word “Limited” or the words “Private Limited” as the case may be.
Privileges/ Restrictions for Section 8 Companies
The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies
The Tax deductions benefits u/s 12AA and u/s 80G of Income Tax Act to the donors of the company
A firm may be a member of the company registered under this section.
Company Secretaries are not mandatory
A Section 8 company cannot be converted into a One Person Company.
A Section 8 company shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
A Section 8 company shall amalgamate only with another Section 8 company and having similar objects.
A Section 8 Company shall not be treated as a Small Company.
A Section 8 company can only be incorporated after grant of license by the Central Government (power delegated to RD).
The Central Government may, by order, revoke the license if the company contravenes any of the requirements of this section or the affairs of the company are conducted fraudulently prejudicial to public interest, and without prejudice to any other action against the company under this Act, direct the company to convert its status and change its name to add the word “Limited” or the words “Private Limited”, as the case may be, to its name.
Procedure for Incorporation of Section 8 Company
Obtain Digital Signature of all the directors and applicant promoter.
Apply for Director Identification Number (DIN) of all the Directors.
An application for incorporation shall be made in web based form SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the Registrar for a license under sub-section (1) of section 8.
An application under sub rule (1) of Rule 19 shall be accompanied with the following documents namely:-
The Memorandum of Association (Form No. INC-13) and Articles of Association;
The declaration in Form No. INC-14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the MOA and AOA have been complied with the provisions of section 8 and rules made thereunder;
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;
The declaration by each of the persons making the application in Form No. INC-15 that the draft memorandum and articles of association are in conformity with the provisions of section 8 and rules made thereunder;
The Grounds of filing application for license of Section 8 company;
Arrange no objection certificate/approval of the concerned authority, if required to carry on the objectives as mentioned for Section 8 Company;
Attach I’d, Address Proof of all the directors and the subscribers desirous of Incorporating a Company;
Arrange declaration in Form INC-9 from each subscriber and from those persons whose name is given as first directors in the article of association, declaring that they have not been convicted of any offence and has not been found guilty of any fraud or misfeasance or of any breach of duty to any company in the last 5 years;
Arrange consent of first directors in Form DIR-2 and their eligibility of appointment as a director in Form DIR-8 along with their identity and residence proof.
The Registrar of Companies, having delegated power of Central Government,
after examining all documents, grants the license in Form INC-16; And
After verification of all the documents, the Registrar shall issue a Certificate of Incorporation in Form INC-11 which will be a conclusive evidence of incorporation of a company.
After incorporation of the company, having a share capital, in order to commence its business or to exercise its borrowing powers, is required to file a declaration by a director within a period of one hundred and eighty days of the date of incorporation of the company in Form No. INC-20A with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration.
For any queries related to incorporation and Conversion of Existing Company into Section 8 Company (i.e. Non Profit Making Company) please contact:
J. K. Gupta & Associates
257, Vardhaman City Center,
Gulabi Bagh Near Shakti Nagar Railway Under Bridge
Phone No- 011-23654449/
Email Id:- [email protected]