The concept of non-profit making company is quite old in India. In erstwhile Companies Act, 1956 it was regulated by Section 25 and that is why it was popular as Section 25 Company. However in Companies Act 2013 provisions related to non-profit making company are given in Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014. Under Indian law, 3 legal forms exist for NGO or Non-Profit Organizations Trusts, Societies, Section 8 Companies. Due to better laws, Section 8 Companies have the most reliable strongest organizational structure Indian Trusts have no central law, Indian Societies have different legal and institutional frameworks from state to state. Indian Companies including Section 8, have one uniform law across the country Companies Act, 2013. It is this robust Act that regulates the formation, management and accountability of a Section 8 company, thus making it more closely regulated and monitored than trusts and societies, and recognized all over the world.
Section 8 Company or a Non-Profit organization (NPO) is a Company established for promoting commerce, art, science, religion, charity or any other useful object, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.
These companies incorporated only for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. Non- Small Company: As per Section 2 (85) Proviso (B) – Section-8 Company will not treated as Small Company. It is duty of Company to prove to Central Government that it will incorporate for above mentioned purpose only. Firm as a member of Non-Profit making Company: As per section 8(3) a partnership firm may become a member of the non-profit making company registered under section 8 Membership of such firm shall cease upon dissolution of the firm.
• Many privileges and exemptions under Company Law.
• Exemption of Stamp duty for registration.
• Registered partnership firm can be a member in its own capacity.
• Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
Without Share Capital
These companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations , subscriptions from members and general public.
Not Required To Add The Suffix
Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name.. This helps the company to enjoy limited liability without disclosing to the public the nature of liability of its members
Easy Transferable Ownership
The shares and other interest of any member in the Company shall be a movable property and can be transferable in the manner provided by the Articles, which is otherwise not easily possible in other business forms. Therefore, it is easier to become or leave the membership of the Company or otherwise it is easier to transfer the ownership.
Minimum 2 directors for private Ltd. NGO & 3 directors for Public Ltd. NGO
Minimum 2 shareholders for Private Ltd. NGO & 7 shareholders for Public Ltd. NGO
Director and Shareholder may or may not be the same persons
Minimum capital requirement is Nil
DIN of the directors (if available)
Digital Signature of shareholder and directors
1. PAN Card
2. Voter Id / Aadhaar Card
3. Driving License / Passport
4. Latest Bank Statement / Mobile Bill
5. Passport Size Photograph
1. Rental Agreement (In English)
2. No Objection Certificate
3. Electricity Bill
4. Sale Deed / Property Deed
5. Tax Paid Receipt ( In case of own property )
Non-application of Companies Auditor’s Report Order (CARO)
Exemption from requirement of minimum paid up capital
No stamp duty
No stamp duty charges on registration which makes its registration cost effective
Section-8 companies can be registered for taking benefits u/s 12A and 80G of Income Tax Act
It has a separate legal entity apart from its members which empowers it to acquire and hold assets in its own name
Liability of its members
The liability of its members is limited to the extent of capital subscribed by them remaining unpaid. The members cannot be called upon to pay company’s liabilities out of their personal assets
Application for Digital Signature Certificate
1. Checking Name availability
2. Application for Name Reservation under “RUN”
3. Reservation of Name
1. Drafting of MOA, AOA& other required documents
2. Payment of Stamp Duty
3. Notarization of required documents
1. Application to grant a license in form INC-12
2. Government processing time for approval
3. License under section 8 in form INC-16
1. Filing application for company registration
2. Application for DIN Allotment
3. Application for PAN and TAN of company
1. Government processing time
2. Certificate of Incorporation
• DSC for Directors
• DIN for Directors
• Memorandum Of Association (MOA)
• Articles Of Association (AOA)
• Company Incorporation Certificate
• Company PAN & TAN
• Mainly it builds the company brand and preferably be a coined word
• Second part of name should suggest the business activity of the company
• Its name must include suffix like Foundation, Forum, Federation, Chambers, Association, Council, etc.
• The name does not require to add any suffix like “Private Limited” or “Limited”