How to Register a Section 8 Company in India: A Step-by-Step Guide

In India, non-profit organizations (NPOs) can be registered as Section 8 companies, trusts, or societies, depending on the objectives and operational structure. Section 8 company registration is one of the most popular options for those looking to engage in charitable activities, social work, and non-profit ventures. These companies enjoy certain benefits, such as tax exemptions and limited liability. In this article, we will explore how to register a Section 8 company in India, followed by a comparison between Section 8 company registration and trust registration.

What is a Section 8 Company?

A Section 8 company is registered under the Companies Act, 2013 for promoting commerce, art, science, education, research, social welfare, religion, charity, or environmental protection. Unlike other companies, the profits of a Section 8 company cannot be distributed as dividends to its members. Instead, the income is reinvested into achieving the company’s charitable objectives.

Steps to Register a Section 8 Company in India

Here is a step-by-step guide to Section 8 company registration in India:

1. Obtain Digital Signature Certificate (DSC)

The first step in the Section 8 company registration process is to acquire a Digital Signature Certificate (DSC) for the proposed directors. The DSC is required for submitting the online forms and documents to the Ministry of Corporate Affairs (MCA). You can obtain a DSC from government-approved certifying agencies.

2. Apply for Director Identification Number (DIN)

Once the DSC is in place, the next step is to apply for a Director Identification Number (DIN) for the proposed directors of the Section 8 company. You can apply for the DIN online using the SPICe+ form provided by the MCA.

3. Choose a Company Name

The next step is to choose a unique name for the Section 8 company. The name should not be identical or similar to any existing company or LLP. You can check the availability of your desired name through the RUN (Reserve Unique Name) service on the MCA portal.

4. Prepare Documents

To proceed with Section 8 company registration, you will need to prepare the following documents:

• Memorandum of Association (MOA): This document outlines the objectives and activities of the company.
• Articles of Association (AOA): This document defines the internal governance and operational structure of the company.
• Declaration by directors in Form INC-9
• Affidavit from each director stating they are not involved in any fraudulent activities.

5. Filing SPICe+ Form

The SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form is an integrated web form that enables the incorporation of a company, application for DIN, and PAN/TAN issuance all in one go. Complete and file this form with the necessary documents.

6. Obtain Section 8 License

Once the documents and SPICe+ form are submitted, the Registrar of Companies (ROC) will review the application. If satisfied, the ROC will issue a license under Section 8, confirming the company’s registration as a non-profit entity.

7. Certificate of Incorporation

After the Section 8 license is issued, the final step is to receive the Certificate of Incorporation from the ROC. Once this certificate is obtained, your Section 8 company is officially registered and can commence its charitable activities.

Tax Benefits and Compliance for Section 8 Companies

After completing the Section 8 company registration, the company must obtain the 12A and 80G registration under the Income Tax Act, which offers tax exemptions to both the organization and its donors. Additionally, Section 8 companies are required to maintain proper accounts and submit annual returns to ensure compliance with legal regulations.

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Difference Between Section 8 Company Registration and Trust Registration

While both Section 8 company registration and trust registration serve charitable purposes, there are distinct differences in terms of structure, legal obligations, and flexibility. Let’s explore these differences:

1. Governing Law

• Section 8 Company: A Section 8 company is governed by the Companies Act, 2013 and falls under the jurisdiction of the Registrar of Companies (ROC). It follows corporate-like compliance structures, including annual filings, board meetings, and audits.
• Trust: A trust is registered under the Indian Trusts Act, 1882 for private trusts, or the Charitable and Religious Trusts Act, 1920 for public charitable trusts. Trusts do not have as many legal compliances compared to Section 8 companies.

2. Legal Status

• Section 8 Company: Being a registered company, a Section 8 company has a distinct legal identity separate from its members. It enjoys corporate-like benefits, such as limited liability protection for its members.
• Trust: A trust also has a legal identity but does not offer limited liability protection to its trustees. The trustees are personally liable for any legal or financial obligations of the trust.

3. Registration Certificate

• Section 8 Company Registration: After completing the registration process, a Section 8 company receives a Certificate of Incorporation, along with a Section 8 license.
• Trust Registration Certificate: A trust receives a trust registration certificate after completing the registration process with the sub-registrar’s office. This certificate confirms the legal existence of the trust and allows it to function for charitable purposes.

4. Tax Benefits

• Section 8 Company: Section 8 companies can apply for 12A and 80G certificates under the Income Tax Act, which allow the company to claim tax exemptions and enable donors to receive tax benefits on their contributions.
• Trust: Public charitable trusts can also apply for 12A and 80G registration, but compliance requirements may vary based on the state and type of trust.

5. Management Structure

• Section 8 Company: A Section 8 company is managed by a board of directors. Directors can be appointed or removed based on the provisions in the Articles of Association (AOA), providing flexibility in management.
• Trust: A trust is managed by a board of trustees. Trustees have life-long positions unless provisions for removal are mentioned in the trust deed. This often makes trusts less flexible compared to Section 8 companies.

6. Flexibility in Operations

• Section 8 Company: Offers more flexibility in terms of governance, fundraising, and management due to its corporate structure. It can raise funds, accept grants, and have foreign collaborations.
• Trust: Trusts have a more rigid structure and are often used for long-term charitable objectives, like running educational institutions, orphanages, or religious programs. Their funding options are also more limited compared to Section 8 companies.

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Conclusion

Both Section 8 company registration and trust registration are suitable for charitable organizations, but the choice between the two depends on the nature and objectives of the organization. Section 8 companies are ideal for those looking for a corporate-like structure with greater flexibility and governance, whereas trusts are more suited for traditional, long-term charitable purposes.

Understanding the differences between Section 8 company registration and trust registration certificates is crucial when starting a non-profit organization in India. Choosing the right structure will ensure that your organization operates effectively and remains compliant with legal regulations while achieving its social goals.

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