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Formation of Company with Charitable Object (Section 8 Companies)

Section 8 companies are those companies that are formed to promote the charitable objects of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment etc. Such a company intends to apply its profit in promoting its objects and prohibiting the payment of any dividend to its members.


    Who Can Incorporate Section 8 Company

    Any Person or Association of Persons can Incorporate a section 8 Company if it is intended to form for the below-mentioned objectives

    The Company is Formed to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment etc

    When the company intends to apply its profits in Promoting objectives

    When the company does not intend to pay any dividend to its members.

    Advantages Of Section 8 Company

    1) Tax Benefits

    Section 8 companies are formed for Charitable purposes thus there are certain exemptions and Deductions are provided under sections 10,11,12,12A, 12AA,13 and 80G of the Income-tax Act, 1961.

    2) Relaxation in Stamp Duty Payable

    Stamp duty on memorandum & articles of association of Company or any increase in share capital is governed by Indian Stamp Act, 1899 as adopted by respective state or stamp act of respective state, as the case may be. Some of the states provide privileged rates for stamp duty on MOA/ AOA of Section 8 Companies or an increase in authorized share capital.

    3) No Requirement of Minimal share capital

    Unlike the other limited companies like public, private, or one person, a Section 8 company do not need much share capital to set up the entity. The members can directly use the funds from their subscriptions or donations.

    4) No Requirement of Minimum number of Independent Directors

    The requirement of the minimum number of independent directors etc. does not apply to the Section 8 Company.

    5) Lesser Compliances

    A Section enjoys the Same Privileges as a Private Limited Company with lesser Compliances. Under the Companies Act, 2013. Various exemptions are provided to section 8 Companies.

    6) Separate Legal Entity

    Section 8 company has a distinct legal entity which means the company’s existence is different from its members. The company has a perpetual existence along with greater flexibility.

    Documents Required for Directors (Foreign Nationals)

    Foreign nationals are required to submit the following documents for incorporating a company in India:

    Passport – Directors of Foreign nationals are required to submit a passport and Identity Proof. If the document is in a foreign language, it must be translated into English by an official translator.

    Address Proof – A foreign national’s address proof must be notarized or apostilled. This document could be in the form of a

    1. driving license,
    2. bank statement, and other government-issued documents with the address.

    Documents Required for Directors (Indian Nationals)

    The following documents are required for Indian nationals to incorporate a Section 8 company:

    PAN Card –Directors of Indian nationality are required to submit their PAN during the incorporation process.

    Proof of Address – The proof of address to be submitted by a Director must include his/her name as mentioned in the PAN Card.

    This document could be of following

    • Passport,
    • Election Card/Voter Identity Card,
    • Ration Card,
    • Driving License,
    • Electricity Bill,
    • Telephone Bill and Aadhar Card.

    Residential Proof – While an address proof forms a part of most documentary essentials, incorporating a company requires residential proof to validate the address of the Director.

    This document could be in the form of a bank statement, electricity bill, telephone bill and mobile bill.

    Registered Office Proof

    Any of the following documents must be furnished as registered office proof during registration or within thirty days of the company’s incorporation:

    1. Registered document of the title of the premises of the registered office in the name of the company.
    2. The notarized copy of the lease/rental agreement in the name of the company, supported with a copy of the rent paid receipt not older than one month.

    Further to this, the following documents are required:

    1. An authorization from the landlord.
    2. Proof of evidence of any utility service.

    Documents for Shareholders

    The identity and address proof of all the shareholders must be furnished on behalf of all the shareholders of the company. If such a shareholder is a corporate entity or Association of Persons (AOP), a Certificate of Incorporation of the Body Corporate must be attached along with the resolution passed by the Body corporate to subscribe to the shares of the company under incorporation.


    Memorandum and Articles of Association

    Memorandum and Articles and Association forms the crux of any incorporation, be it a private/public limited company or Section 8 company. The MOA for Section 8 companies must be filed in INC 13; no specific format has been laid out for the formulation of AOA.
    These significant documents must be signed by each subscriber to the memorandum by mentioning their name, address, description and occupation before at least one observer. These observers must attest their signatures on these documents and mention their basic details in them

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