All That You Should Know About Setting Up a Section 8 Company

Posted by Nurturelabz on July 24th, 2019

Under the Companies Act of 2013, a Section 8 Company refers to an organisation that has been set up with the objective of promoting art, education, research, social welfare, charity, protection of environment or other similar projects. In order to qualify as a Section 8 company, all profits from the company must go into promoting the objective of the company.

Company registration in India is a complicated process. Some of the important requirements for setting up a Section 8 company are:

1. The company must have at least two Shareholders and two Directors with one of them being a resident of India
2. The company must have an Income-tax PAN
3. Passport, voter ID or DL as an identity proof of the Directors
4. Bank statement, electricity bill or phone bill as proof of residence
5. Proof of address for the registered office along with a No Objection Certificate (NOC) from the landlord in cases or rented spaces
6. Documents showing proof of ownership and a NOC in cases where the Director owns the property
7. A profile of the promoters and a projection of company finances
8. The name of the company cannot end with Private Limited or Limited and must instead end with words such as Foundation, Association, Federation, Confederation, Council, Electoral Trust or other such terms.

Benefits of a Section 8 Company

With a Section 8 Company, there are limitations in terms of how the profits of the company can be spent or what alterations can be made to the Memorandum of Association. However, there are also numerous benefits.

• Tax Benefits: On getting 12A registration, the organisation does not have to pay tax on surplus income. The company is also given numerous deductions and tax benefits.
• No Minimum Capital: Companies registered as Section 8 companies do not have a prescribed minimum capital. They can directly be funded by donations made to the company.
• Credibility: Gaining Section 8 licence gives a company much more credibility when compared to an NGO without the licence.
• Transfer of Ownership: There are no restrictions or hurdles when it comes to transferring ownership or title in the company.

Nurture Labz is a Lean Startup Assistant that helps entrepreneurs who are looking to start a business in India. We offer end-to-end registration services and have experience in incorporating over a thousand businesses in various different sectors. Contact Nurture Labz and set up your own Section 8 Company.