Procedure, Checklist and Formats of Section 8 Company Incorporation By CS Tanuj Saxena



A company is referred to as Section 8 Company when it registered as a Not For Profit Organization (NPO) i.e. when it has motive of promoting arts, commerce, education, charity, protection of environment, sports, science, research, social welfare, religion and intends to use its profits (if any) or other income for promoting these objectives.

The income of NPO cannot be used for paying out dividends to the company’s members and has to be for the promotion of charitable objectives. Such companies obtain an incorporation certificate from the central government and are liable to adhere to the rules specified by the government.

According to the rules, failure to comply with the responsibilities stated by the Central Government may lead to the winding up of the company on the orders of government. Besides, strict legal action will be taken against all the members of the company if the objectives laid down by the company proves to be bogus.

Its manner of carrying out the operation is similar to any other limited company and even the right & duties of a limited company and NPO are alike.

However, the title of “Section 8” and “Limited” cannot be interchanged.

Eligibility to Apply for Section 8 Company

  • An individual or an association of individuals are eligible to be registered as Section 8 Company if it holds below-mentioned intentions or objectives. The objectives have to be confirmed to the satisfaction of the Central Government.

  • When the company intends to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment or alike other objectives;

  • When the company holds an intention to invest all the profits (if any) or any other income generated after incorporation in the promotion of such objects only;

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

New & Simple Process of Incorporation of Section 8 Companies

Companies (Incorporation) Sixth  Amendment Rules 2019 dated 7th June 2019 to ease the Incorporation process has knocked off the need for filing Form no. INC 12, which was initially needed.

This amendment has made the Process of Incorporation of Section 8 Companies as easy & simple as that of other companies.

Section 8 Companies can be incorporated by reserving names in part A of Spice+ followed part B of Spice+ form or by directly filing Spice+. License No. shall be given to section 8 company during the incorporation.

When the Company Already Have the License Number

Stakeholders having License Numbers already before the filing of SPICe form may file the form as per their ease. However, one thing should be noted that form processing takes time to let the workflow changes to be effective.

Documents Requirement for the Registration of Section 8 Company

  • Digital Signature Certificate

  • Memorandum of Association

  • Articles of Association

  • Passport Size Photographs

  • Members’ Id Proof such as Aadhar Card, Passport, Voter Id

  • Details of Directors (When the Members Are Other Companies/LLPs)

  • Address Proof (Rent Agreement/Sale Deed with Updated Utility Bill/Electricity Bill

  • Director Identification Number

Number of Directors in a Section 8 Company

Section 149(1) of the Companies Act 2013 – prescribed minimum of 3 & 2 directors for public limited & private limited company respectively and a maximum of 15 directors.

But there is no minimum or maximum prescription for section 8 company.

The second proviso to section 149(1) – prescribes a woman director in a specified class of companies.

Section 149(3) of the Companies Act 2013 – prescribes resident director in every company.

Section 165 of the Companies Act, 2013 – says Directorship in Section 8 Companies will not be summed up when the total number of directorships will be calculated i.e. it will not be counting while adhering to the maximum limit of twenty Directorship as prescribed in the Act.

Section 149(1) of the Companies Act, 2013 – vide exemption notification dated June 05, 2016 stated that Section 8 Companies are not under obligation to appoint an independent director and are free from all the consequential provisions concerned with Independent directors.

Under Section 149(3) – Section 8 company must have a minimum of one Resident Director i.e. a director who has resided in India at least for a total period of 182 days (one hundred and eighty-two days) or more within the previous calendar year.

Total Number of Board Meetings and its Quorum

As per the exemption notification read with section 173(1) and 174(1), Section 8 companies must have at least one meeting within a period of 6 calendar months and the quorum for its board meetings is 8 directors or 1/4th of its total strength, whichever is less, respectively. However, the quorum should have a minimum of at least two members.

CHECKLIST FOR SECTION 8 COMPANY:-

List of documents required:-

1. For application of DSC, Self Attested Copy of:-

  • Photo ID – PAN/Voter ID/Driving License

  • Address Proof- Voter ID, Bank Statement, Utility Bill.(Bank Statement and Utility bills should not be older than last 2 months)

  • Photo’s of the applicant (JPG not more than 100 KB)

2. For Name Availability

  • Proposed name (Use of word Foundation, Association etc. is mandatory for Section 8 company.)

  • Main Objects of the company.

3. For SPICE+ form– Application for Incorporation Certificate

  • Memorandum of Association

  • Articles of Association

  • PAN of the subscribers to the Memorandum(1stDirectors of the company)

  • Proof of ID and Address of the subscribers to the Memorandum.

  • Notarized Rent Agreement of the Registered Office.

  • NOC from the owner to use the premises

  • Utility bill of the premises, not older than last 2 months

  • Declaration under form INC 15, from all the directors

  • Declaration under Form INC 14 by the Chartered Accountant

  • Estimated Income and Expenditure for the next 3 years in the Prescribed Format.

4. For AgilePro

  • Name of the Bank, where company is willing to open the Bank Account.

  • Specimen Signature for EPFO

  • NOC for opening a bank account

  • Declaration of Authorised signatory for GSTN

Step 2:

1. Check the NAME availability by RUN utility,

2. Login to MCA website and go to:

MCA services>RUN (You cannot access the RUN without Login)

3. Fill in the form online, attach the object clause and Submit.(it is advisable to attach the detailed object clause in the attachment option)

Most Important: The validity of the approved name is for 20 days, so once the Name is approved, SPICE+ needs to be filled within 20 days from the date of name Approval.

Step 3:

Filling of Web Form Spice +

Once the name is approved, the Spice forms will be enables for further process.

As per the recent amendments in incorporation procedures, pdf forms are replaced with the Web Forms, which are filled online and downloaded only for the purpose of affixing DSC.

Procedure to fill the Web Form:-

SECTION 8 COMPANY:-

1. Login to MCA website

2. Go to MCA services > Spice +

3. Select Existing Application

4. Fill in the complete form and keep saving the form on continuous basis.(As it is a web form, the session gets expired in every 10-15 mins)

5. Attach all the documents in the Attachments section, each attachment should be attested by the directors and Must have Date and Place mentioned. (There are chances of Rejection in the absence of the above details).

6. Once the form is complete with all the attachments, prescrutinise the form and Submit.

7. Along with Spice , also fill the INC9 and Agile Form.( Agile Form is again a web form, while INC9, is to be filled offline).

8. After Submission, the download option is enabled, download the forms for verification and affixing DSC.

9. Submit all the 3 Forms as LINKED Forms at MCA website, with the required fees.

10. Once the SPICE and AGILE is approved, License No. and Incorporation Certificate is granted which will have Date of Incorporation, Company Identification No. (CIN), PAN and TAN of the company.

Points to remember to avoid resubmission:

1. If any wrong information is given, it will Pop up while filling/submitting the form itself, so the chances of resubmission is mainly on the part of attachments.

2. Check the supporting documents carefully before attaching.

3. Some common reasons of Rejection:

Utility bill / Bank statement is older than 2 months.

Address Proof is not as per the address mentioned in the application.

Suggestion: If the current and permanent address are different , then make sure that the proof of address is on the current address.

Provide an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure as per Rule 19(3)(c) of Companies (Incorporation).

There is no separate line item mentioned in the attachment section of Spice + form for attaching the Income and Expenditure statement, so attach it in others. Secondly, the Estimate should be as per the Rule 19(3)(c) of Companies (Incorporation).

For Section 8 company the Memorandum and Articles are required to be attached separately unlike other incorporation where it is to be filled as a web form, so check the documents carefully before submitting. Even the absence of Date and Place at the bottom of the document can call for rejection.

Most importantly, it is not necessary that the reason mentioned during 1strejection are complete, there is a possibility of multiple rejection for different reasons, so check the form minutely before resubmitting and if you feel that any information is incomplete or incorrect, change that even if it is not a reason for rejection as it may call for the rejection later.

PAN of the subscribers is Mandatory,(if not having DIN),to be attached in the others section. It is just the 20 days process if done within the timeline, if delayed it may take unlimited time and cost to get the process complete.

Annexures / Formats

      Income and Expenditure Statement

COMPANY NAME
PROJECTED INCOME AND EXPENDITURE ACCOUNT

Expenditure

31.0 3.2021

31.0 3.2022

31.0 3.2023

Income

31.0 3.2021

31.0 3.2022

31.0 3.2023

Rent & Utilities

     

Subscriptions

Printing & Stationery

             

Repair & Maintenance

             

Salary & Staff Welfare

             

Office Expenses

             

Depreciation

             

Excess of Income over Expenditure

             
               

Total

 


(Promoter and Director)

(Promoter and Director)

NOC for EPF Account

Date: – ……….

---------------------------------------------------------------------------------------------------------------------------------------

To,

The Registrar of Companies

………….

Subject: No Objection Letter for EPFO.

1. I, …..Name of the Subscriber…,S/o ………., permanent residing at ………..do solemnly declare that Registration of EPFO by me on Behalf of the Company. I do hereby confirm that I have no objection for Taking Registration of EPFO of the Company proposed to be incorporated under the name and style of ……Name of the Company….. which in also approved by All Directors.

Thanking You

Yours faithfully Name:

Authorised Signatory

Director

NOC for Opening of Bank Account

Date : – ………

---------------------------------------------------------------------------------------------------------------------------------------

To

The Registrar of Companies

………

Subject: No Objection Letter opening of Bank Account.

Ref:

I, …Name of Subscriber…………. ,S/o ………….., permanent residing at …………………, do solemnly declare that Opening of Bank Account by me on Behalf of the Company. I do hereby confirm that I have no objection for opening of Bank Account in……Name of the Bank……… of the Company proposed to be incorporated under the name and style of …Name of the Company……… which in also approved by All Directors.

Thanking You

Yours faithfully Name:

Authorised Signatory

Director

Director

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                                                                Form No. INC-14

                                                                     Declaration

                      [Pursuant to section 7(1)(b) and rule 19 (3)(b) of the Companies

                                     (Incorporation and Incidental) Rules, 2014]

Name of the Company:

I ,………………….,

                an advocate who is engaged in the formation of the

                   company

                a Chartered Accountant in India who is engaged in the

                   formation of the company

                a Cost Accountant in India who is engaged in the

                    formation of the company

                a Company Secretary in practice in India who is engaged

                    in the formation of the company

 

                   declare that all the requirements of Companies Act, 2013 and

                   the rules made thereunder relating to registration of the

                   company under section 8 of the Act and matters precedent or

                   incidental thereto have been complied with.

 

Date:                                                                                                       Signature:

Place:                                                                                                  Membership No.:

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                                                      Form No. INC-15

                                                          Declaration

            [Pursuant to rule 19 (3)(d) of the Companies (Incorporation and

                                             Incidental) Rules, 2014]

        In connection with the application of …………. [name of a person

        or an association of persons or a company] for a licence under

        section 8 of the Companies Act, 2013, I …………………………., an

        Advocate/ Chartered Accountant/Cost Accountant/Company

       Secretary in practice, a member of …………………(Bar

        Council/ICAI/ICMAI/ICSI) with membership number ……………

        do hereby declare that —

       (a) the draft memorandum and articles of association have

             been drawn up in conformity with the provisions of

             section 8 and rules made thereunder; and

      (b) all the requirements of the Act and the rules made

            thereunder relating to registration of the company

            under section 8 and matters incidental or supplemental

            thereto have been complied with;

            and I make this solemn declaration conscientiously believing

            the same to be true.

Place:                                                                                                   Signature:

 Date:                                                                                                     Name:

                                                                                                      Professional Address:

Lex comply

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