Avil Rakshith Salins — ACS A48442, Practising Company SecretarySalins & Co.
E6

Engagement

Section 8 Company Registration in Bengaluru

A not-for-profit company, incorporated with its section 8 licence through SPICe+.

Overview

A section 8 company is formed to promote objects such as commerce, art, science, sports, education, research, social welfare, religion, charity or protection of the environment. Section 8(1) of the Companies Act, 2013 requires it to apply its profits and other income only to promoting those objects and to prohibit the payment of any dividend to its members. It can be a private or a public company, and its name does not carry 'Limited' or 'Private Limited'.

The licence and the incorporation are applied for together in SPICe+ (INC-32) under rule 19 of the Companies (Incorporation) Rules, 2014. The memorandum follows Form INC-13, and the application carries an estimate of the company's income and expenditure for the next three years. The name includes a word such as Foundation, Forum, Association, Federation, Chambers, Confederation or Council.

A section 8 company files the same annual returns as other companies: AOC-4 and MGT-7, since a section 8 company is never a small company under section 2(85). It must hold at least one board meeting in every six calendar months (notification G.S.R. 466(E) dated 5 June 2015). Its licence carries conditions, including that it may amalgamate only with another section 8 company having similar objects, and the licence can be revoked for contravening section 8. Registration with the Income-tax Department for exemption, and for donors to claim a deduction, is a separate application made after incorporation.

Key Deliverables

  • Structuring advice: private or public, share capital or guarantee, and membership
  • Name check and SPICe+ name reservation
  • Memorandum in Form INC-13 and Articles drafted for the objects
  • Three-year income and expenditure estimate prepared with the founders
  • SPICe+ filing with the section 8 licence application
  • First board meeting and the post-incorporation compliance calendar

Documents & E-Forms

  • SPICe+ (INC-32)
  • INC-13
  • AGILE-PRO-S
  • Sec. 8
  • AOC-4

When to Engage

Once the objects, the founding members and the first directors are settled, since the objects clause and the licence conditions are difficult to change after incorporation.

Typical turnaround: Scoped in the engagement letter.

Frequently Asked

About this engagement

The Companies Act, 2013 does not prescribe a minimum paid-up capital for a section 8 company. It can be formed as a company with share capital or as a company limited by guarantee.

No dividend, bonus or other distribution of profit can be paid to members (section 8(1)(c)). The memorandum in Form INC-13 also bars remuneration or other benefits to members, subject to the limited exceptions set out in that form, such as reimbursement of out-of-pocket expenses.

As for other companies: a private section 8 company needs at least two directors and two members, and a public one at least three directors and seven members (sections 149(1) and 3(1)).

Yes, by special resolution and with the approval of the Regional Director under rules 21 and 22 of the Companies (Incorporation) Rules, 2014. It gives up the privileges of section 8 status, and its unutilised income is transferred to the Investor Education and Protection Fund within 30 days of the approval.

No. Incorporation under section 8 does not by itself give income-tax exemption. The company applies separately to the Income-tax Department for registration as a charitable institution and, where donors are to claim a deduction, for approval of donations.

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