The launch of a nonprofit organization signifies a dedicated pursuit of positive, lasting change in society. But before your vision can take flight, your organization needs to be legally registered.
An NGO (Non-Governmental Organization) is a non-profit entity dedicated to charitable purposes. An NGO registered as a Section 8 company under the Companies Act, 2013, operates under the jurisdiction of the Ministry of Corporate Affairs.
The primary goal of establishing a Section 8 company is to foster non-profit objectives, encompassing areas such as:
- Commerce
- Research
- Religion
- Arts
- Social welfare
- Charity
- Sports
- Education
- And any other related aims
- Environmental protection
- Science
Benefits of Section 8 Company
- No Minimum Capital: Unlike some other company structures, there's no mandatory minimum capital requirement for incorporating a Section 8 company. The capital structure can also be easily adjusted as the company grows. This flexibility allows the organization to raise initial funds for operations through donations and subscriptions from members and the public at a later stage.
- Separate Legal Identity: A Section 8 company establishes its own unique legal identity, distinct from that of its members. This allows even registered partnership firms to become members and hold directorships. The company also enjoys perpetual existence, ensuring its operations continue regardless of changes in its membership.
- Exemption for Donors: Donations received by a Section 8 company can qualify for tax exemptions for the donors.
- Limited Liability: Members of a Section 8 company benefit from limited liability, meaning their personal responsibility for the company's losses is restricted to the amount of shares they have subscribed to.
- Enhanced Credibility: Section 8 companies are generally perceived as more credible and reliable compared to other charitable organization forms. Being regulated by the Companies Act, they are subject to mandatory annual audits, and their Memorandum of Association, particularly concerning their non-profit objectives, cannot be altered easily, contributing to their trustworthiness.
Requirements / Checklist for registration of Section 8 company
- Directors: A Section 8 company must have a minimum of two directors.
- Obtain Digital Signature Certificate (DSC): As all registration forms are filed online and require digital signatures, the prospective directors of the company must obtain Digital Signature Certificates (DSCs).
- Capital Requirement: Minimum paid-up capital required is nil.
- Charitable Objects: Section 8 companies are established solely for non-profit objectives.
- Apply for Director Identification Number (DIN): It is mandatory to apply for a Director Identification Number (DIN) for each of the proposed directors of the company.
- Management: A Section 8 company is managed by its Board of Directors.
Need More Insights on Section 8 Company Registration
A Section 8 Company is a not-for-profit legal entity formed with the objective of advancing charitable, social, cultural, educational, or similar purposes. It operates without the intent of distributing profits to its members, and any surplus is reinvested to further its goals.
- Tax exemptions available under Sections 12A and 80G of the Income Tax Act
- Eligibility to receive domestic and international donations and grants
- Greater credibility and public confidence
- Recognition as a separate legal entity
- Memorandum of Association (MoA) and Articles of Association (AoA)
- PAN cards of all directors
- Proof of registered office address
- Valid identity documents for all directors
- Digital Signature Certificates (DSCs) for the directors
A minimum of two directors is mandatory to establish a Section 8 Company, and the maximum allowable number is fifteen.
Profit distribution to members is strictly prohibited. All generated revenue must be directed solely toward achieving the organization’s stated objectives.
- Timely filing of annual returns and audited financial statements
- Conducting annual general meetings in accordance with statutory guidelines
- Maintenance of statutory registers and records
- Adherence to all applicable tax regulations
- Verification that funds are used strictly for charitable or approved purposes
Conversion of a Section 8 Company to another form of business structure is permitted, subject to prior approval from the Central Government and full compliance with applicable legal provisions.