NGOs in India are commonly registered as trusts or societies but registering as a Section 8 company NGO can be a good option. A Section 8 company is a non-profit organization that is registered under the Companies Act, 2013 and is intended to promote charitable or non-profit objectives. A Section 8 NGO Company Registration is a not-for-profit organization formed for the promotion of art, science, commerce, social welfare, religion, charity, or any other useful object.
Following the Section-8 Company Benefits if registering as a Private Limited Company-
1. One of the advantages of registering as a Section 8 company is that it provides greater credibility and transparency to the organization, as it is registered with the Ministry of Corporate Affairs (MCA) and is subject to its regulations and compliances. This can be particularly important for NGOs that want to attract donations or grants from donors who require transparency and accountability.
2. Another advantage of registering as a Section 8 company is that it provides limited liability protection to the members and directors of the organization, which can be beneficial in case of legal disputes or liabilities.
3. Section 8 NGOs are eligible to receive grants and donations from government bodies, international organizations, and other funding agencies, which can help them raise funds for their activities.
4. Section 8 NGOs can expand their activities beyond their initial geographic boundaries, which can help them reach a wider audience and achieve their objectives more effectively.
5. Section 8 NGOs are eligible for tax exemptions under Section 12A and Section 80G of the Income Tax Act, which makes them more attractive to donors and contributors.
6. Members of a Section 8 company have limited liability, which means that their assets are protected in case of any legal or financial liability of the company.
Who can Apply for registration of Section-8 Company in India-
Any person or association of persons (AOP) can apply for a license under Section 8 of the Companies Act, 2013 if they meet the criteria laid down for the incorporation of a Section 8 company. The license is issued by the Central Government after considering the application and the documents submitted by the applicant.
Section-8 license will be granted by CRC, along with the incorporation of the company. The process of incorporation is similar to that of a regular company, except for a few additional requirements such as the Memorandum of Association and Articles of Association which must include certain clauses related to the objectives and activities of the company. Also, the name of the company must end with the words 'Foundation', 'Association', 'Society', 'Council', 'Club', 'Charity', 'Institute', 'Organization', 'Federation', 'Chamber of Commerce', or any other word that indicates the non-profit nature of the organization.
Some Basic Conditions that Need to be Met for the Incorporation of a Section 8 Company in India: -
1. Minimum number of members: A minimum of two members is required to form a Section 8 Company. There is no upper limit on the number of members.
2. Minimum number of directors: A minimum of two directors is required to form a Section 8 Company, and at least one of them should be a resident of India.
3. Name: The name of the company should end with the words 'Foundation', 'Association', 'Society', 'Council', 'Club', 'Charity', 'Institute', 'Organization', 'Federation', 'Chamber of Commerce', or any other word that indicates the non-profit nature of the organization.
4. Memorandum of Association: The Memorandum of Association should include the objectives and activities of the company. It should also state that the company is being formed to promote charitable or not-for-profit activities.
5. Articles of Association: The Articles of Association should specify the rules and regulations governing the management and operations of the company.
6. License: A license from the Central Government is required to form a Section 8 Company. The application for the license should be made along with Incorporation.
7. No profit distribution: The profits earned by the company should be utilized for the promotion of the objectives and activities of the company. No dividends should be paid to the members.
8. Dissolution: In case of dissolution of the company, the assets of the company should be transferred to another Section 8 Company or a charitable organization with similar objectives.
9. Conversion: The Section 8 Company can convert into any other form of company, subject to the approval of the Central Government.
10. AGM: A Section 8 Company is not required to hold an Annual General Meeting (AGM) if it has no share capital. Instead, it can hold a general meeting of its members once a year to discuss its affairs.
11. Fund: A Section 8 Company can raise funds from the general public or any other entity for charitable purposes.
Frequently Asked Questions
Q. Is it required to use the word Pvt/ Limited in the Name of Section 8 Company NGO?
NO, the words "Limited" or "Private Limited" need not be added to the name of a Section 8 company. Instead, the name of the company should end with words like foundation, association, society, council, etc.
Q. Firm can be a member of a Section 8 company?
No, a firm cannot be a member of a Section 8 company. As per Section 8(3) of the Companies Act, 2013, only individuals can become members of a Section 8 company, and not any other type of entity such as a firm, HUF, or company.
Q. How Section 8 NGO Registration is different from Trust Registration?
Both Section 8 companies and trusts are popular options for setting up non-profit organizations in India.
However, there are some advantages that Section 8 companies offer over trusts:
1. Greater recognition and credibility: Section 8 companies are registered under the Companies Act, which provides them with greater recognition and credibility than trusts. Being registered under the Companies Act means that a Section 8 company has to follow the legal formalities and regulations, which can provide greater transparency and accountability.
2. Greater flexibility: Section 8 companies offer greater flexibility in terms of management and governance, as the board of directors has greater control over the organization. This can be beneficial for organizations that have a larger scope of operations and require a more structured approach.
3. Ease of fundraising: Section 8 companies are allowed to raise funds through equity or debt financing, which can make it easier to raise funds for the organization. Trusts, on the other hand, can only raise funds through donations or grants.
4. Tax benefits: Section 8 companies are eligible for tax exemptions under the Income Tax Act, which can help save money for the organization. Trusts are also eligible for tax exemptions, but the process for obtaining these exemptions is often more complicated and time-consuming.
Q. Section-8 Company can distribute Dividends just like a Private Limited Company?
All the privileges and obligations of a limited company apply to a Section 8 company, except the provision related to dividend distribution.
Q. What are the forms required to file for the Section 8 company registration process through MCA?
The incorporation forms covered in the Section 8 company registration process with MCA are:
- SPICe+ PART A
- SPICe+ PART B
- INC-13
- INC-31
- INC-9
- AGILE PRO-S
Note: INC-33 and INC-34 are not required for Section 8 company incorporation.
AGILE-PRO is required for GST, ESIC, and EPFO registration.
These forms are required to be filled and submitted to the Registrar CRC for incorporation of a Section 8 company in India.
Q. What is the Quick process for Registration of Section 8 Company online?
1. Obtain DSC: All directors/Subscribers of the proposed Section 8 company need to obtain their Digital Signature Certificate (DSC)
2. Name Approval: SPICe+ Part A: Fill and submit the SPICe+ Part A form with the Registrar of Companies (ROC) for reserving the company name. Once the name is approved, it will be valid for 20 days. Which can be further extended subject to additional payment of legal fees.
3. Apply for name availability through the Spice Part-B form directly. We can also file the Name along with Incorporation without going through the approval of Part-A.
4. SPICe+ Part B: Fill and submit the SPICe+ Part B form with the ROC along with the required documents, the web-based memorandum of association, and articles of association.
5. AGILE PRO-S: File the AGILE PRO-S form with the ROC to apply for registration under GST, ESIC, EPFO, and professional tax.
6. INC-9: File the INC-9 form with the ROC, which is a declaration by a director stating that all the requirements of the Companies Act, 2013 have been complied with.
7. INC-13 and INC-31: File the INC-13 and INC-31 forms with the ROC for the issuance of the license under Section 8 of the Companies Act, 2013.
Once all the forms are submitted and the necessary fees are paid, the CRC will review the application and issue a certificate of incorporation if everything is in order.
Q. How to Choose Name for Section 8 Company in India?
Choosing a suitable name for a Section 8 company in India is an important step in the incorporation process. Here are some guidelines for selecting a name for Section 8 Company:
- The name should not be identical or too similar to the name of any existing company or trademark.
- The name should not violate any provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950.
- The name should not be offensive or objectionable in any way.
- The name should reflect the nature of the activities or objectives of the Section 8 company.
- The name should not contain any prohibited or restricted words, as specified by the Ministry of Corporate Affairs.
To check the availability of a name for a Section 8 company registration, applicants can use the name search facility provided by the Ministry of Corporate Affairs (MCA) on its website.
