What Are the Section 8 Company Benefits?

In the extensive arena of business forms, Section 8 Companies distinguish themselves with their inherent not-for-profit character. By comprehending the benefits of Section 8 company registration, organisations desiring to promote societal welfare across various sectors can obtain a game-changing edge. This article will enhance your knowledge regarding Section 8 company benefits and eligibility.

What is a Section 8 Company?

To kickstart, let's illuminate the concept of a Section 8 Company.

A Section 8 Company is established to promote a diverse range of sectors, including commerce, art, science, education, research, sports, charity, social welfare, religion, and environmental protection. The crucial distinguishing feature of these companies is that they reinvest all their profits, income, and other earnings to further these objectives, providing no dividends or income to their members.

Section 8 Companies, the modern successors to Section 25 Companies under the Companies Act of 1956, function as non-profit organisations (NPOs) or non-governmental organisations (NGOs). One of the significant Section 8 company benefits is that these entities are authorised to operate across the country, providing them with a wider arena to affect their philanthropic activities.

Eligibility for Section 8 Company Registration

For a successful Section 8 company registration, entities must meet several criteria:

Act of Registration: The entity must register under the Companies Act, 2013.

Licence Application: A licence must be applied to the Ministry of Corporate Affairs (MCA), a crucial step in Section 8 company registration.

Directors: The company should have at least two directors for a private limited company and three for a public limited company.

Indian Residency: At least one director must be an Indian resident, as stipulated under Section 149(3), meaning they must spend at least 182 days in India in the previous year.

MoA Subscribers: The Memorandum of Association (MoA) must have at least two or three subscribers for incorporation as a private or public company.

MoA & AoA Determinations: Entities should outline their objectives, registered office address, number of directors and promoters, authorised capital, and the number of shares each promoter will subscribe to in their Memorandum of Association & Articles of Association (MoA & AoA).

Initial Capital: The proposed initial capital for the incorporation of the company should be invested within two months.

Property Management: The rules outlined in the Companies Act govern property management. For instance, the Board of Directors' approval in the form of a resolution is necessary for property sales.

Dissolution: In case of winding up, after settling all debts and liabilities, the remaining funds and property would be given to or transferred to another Section 8 Company with a similar objective.

Annual Compliance: As part of Section 8 annual compliance, the company must file annual accounts, statements, and returns with the ROC(Registrar of Companies).

Documents: Each Director must have a valid Director’s Identification Number (DIN) and Digital Signature Certificate (DSC).

Compliance with these regulations makes Section 8 company registration a comprehensive process, ensuring only genuine entities achieve this designation.

Section 8 Company benefits

As non-profit organisations, Section 8 companies hold a unique position within the business ecosystem, leveraging several privileges that allow them to carry out their objectives more effectively. Let's examine these section 8 company benefits in detail.

Enjoying Tax Privileges

As non-profit organisations, Section 8 companies enjoy exemption from paying income tax. Moreover, they can claim several other tax benefits under Section 80G of the Income Tax Act 1961. Individuals and corporations making donations to Section 8 companies can also enjoy tax exemptions, making their contributions doubly beneficial. In addition, the charity organisations under Section 8 should get registered under Sections 12A and 80G of the Income Tax Act, 1961, to avail of these exemptions and deductions. 

Zero Stamp Duty Payable

Another highlight among the Section 8 company benefits is the exemption from paying stamp duty during registration, a financial obligation to which other public and private limited companies are subject.

Unrestricted Transfer of Ownership

Another Section 8 company benefit that enhances its operational flexibility is the unrestricted transfer of the title and ownership of movable and immovable properties. This is a considerable advantage over other entities like Limited Liability Partnership companies that face restrictions.

No Minimum Paid Share Capital Required

Section 8 companies, being primarily oriented towards charitable acts or research activities, are not required to have a minimum share capital. This contrasts with the stipulations for public limited companies and offers financial flexibility. However, the company can raise capital as per its requirements.

Unique Legal Identity and Capacity to Own Property

Section 8 companies, like other companies under the Companies Act, 2013, enjoy a unique legal identity, which is vital among the Section 8 company benefits. Being a separate legal entity, a Section 8 company can independently own or alienate tangible or intangible property. The properties could range from residential spaces to non-residential ones like training centres, research institutes, schools, and galleries. These assets belong to the company, and no member or shareholder can claim them.

Perpetual Succession

Section 8 companies demonstrate perpetual existence, much like private limited companies. Regardless of the death or departure of any of its members, the company continues to exist, maintaining the stability of its operations.

Credibility and Limited Liability

Section 8 companies exhibit higher credibility as compared to Trusts or Societies. They are licensed by the Central Government, and the stringent restrictions, such as not being able to alter the MoA (Memorandum of Association) and AoA (Articles of Association) post-registration, further enhance their reliable image. This credibility is a fundamental part of Section 8 company benefits.

Absence of Mandatory Titles

Unlike other entities under the Companies Act that require titles like 'private limited company' or 'public limited company,' Section 8 companies do not have such stipulations. This gives them flexibility in representing their identity, adding to the attractive suite of Section 8 company benefits.

Section 8 Companies hold a unique and impactful role within our society, and their multitude of benefits play a vital part in their operations. These companies are the bridge that connects the corporate world to the community.

FAQs

Q1: How long does the Section 8 company registration process take?
Typically 2-3 months, but delays can happen due to documentation or MCA approvals. Lawgical India ensures quick, error-free submissions to speed up your registration.

Q2: What documents do I need to provide for registration?
You’ll need MoA, AoA, DINs, DSCs, and address proofs. Lawgical India handles document preparation and verification to simplify the process.

Q3: Can Lawgical India help with Section 12A and 80G tax registrations too?
Yes! We provide end-to-end assistance, including income tax exemptions and 80G certifications to maximize your tax benefits.

Q4: Is there any compliance assistance after registration?
Absolutely. We offer complete annual compliance services — filings, returns, license renewals — so you stay fully compliant with MCA.

Q5: What if I need to amend MoA or AoA post-registration?
Section 8 companies have strict rules on amendments. Our legal experts will guide you on what’s possible and handle the entire process seamlessly.

Q6: Can Lawgical India help set up a Section 8 company with foreign directors?
Yes. We ensure your company complies with Indian residency requirements and help with all necessary filings for foreign directors.

Q7: How can Lawgical India ensure my Section 8 company gains maximum credibility?
Our expert drafting and adherence to all legal formalities help you get licensed smoothly and build trust with donors and stakeholders.

Q8: How much does Section 8 company registration cost with Lawgical India?
We offer competitive, transparent pricing tailored to your specific needs. Contact us for a free, no-obligation quote.

Q9: Can Lawgical India help if my Section 8 company’s registration gets delayed or rejected?
Yes, we specialize in troubleshooting and resolving MCA queries or objections to ensure your registration gets approved smoothly.

Q10: Does Lawgical India provide ongoing legal advice after company formation?
Definitely. We offer continuous legal and compliance support so your Section 8 company remains in good standing and focused on its mission.