Formation of Section 8 Company(Non Profit) - Registration under Companies Act, 2013
A non profit organisation (NGO) can be formed by registration of company under Section 8 of the Companies Act, 2013, commonly known as Section 8 Company.
The procedure for incorporation of a Section 8 company is same to that of a private or public company. However, Section 8 company need to obtain licence from ROC by applying and submitting the following documents online.
Key Attributes
Purpose:-To promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment or alike other objectives
Profits :-To invest all the profits (if any) or any other income generated after incorporation in the promotion of such objects only
Dividend:-The members of the company do not receive any dividend.
Privileges:-Section 8 company enjoys certain exemptions and privileges under Companies Act 2013 and Income Tax Act
Advantages of section 8 company:
- Personal liability of the members is limited
- separate legal entity from its shareholders and directors
- continued or uninterrupted existence until it is legally dissolved
- Section 8 company enjoys certain exemptions and privileges under Companies Act 2013 and Income Tax Act
Disadvantages of section 8 company:
- Privacy is compromised being a charitable trust
- Alteration of MOA and AOA is difficult
- Cancellation of the license is possible at several grounds.
Procedural Aspects :
- Choose and apply name of the company
- Apply for licence of Section 8
- Submit requisite forms & documents (including MOA AOA)with ROC and obtain Certificate of Incorporation
- Open a bank account
- Apply for registrations like GST, MSME etc
A non profit organisation(NGO) can be formed in the form of a trust.
Key Attributes
Purpose:-The purpose of the trust should be charitable/ not for profit
Privileges:-Trust enjoys certain exemptions and privileges under Income Tax Act
Donations:-Trusts attracts government grants due to their charitable purpose and voluntary donations because of the Income Tax exemptions,
Advantages of trust:
- More acceptance because being a charitable trust
- Trusts attracts government grants due to their charitable purpose
- People give voluntary donations because of the Income Tax exemptions
Advantages of trust:
- Privacy is compromised being a charitable trust
- Income tax registrations can be a tedious task in some cases
Procedural Aspects :
- main documents in forming a trust is the trust deed
- Trust Deed is to be filed with other documents like the Registrar
- Registrar scrutinises all the documents submitted and issues registration certificate after verifying that all information/documents submitted are fine
A non profit organisation(NGO) can be formed in the form of a society.
A society can be formed with minimum of seven members for charitable or any such purpose.
Purpose:-The purpose of the trust should be charitable/ not for profit
Privileges:-Trust enjoys certain exemptions and privileges under Income Tax Act
Donations:-Trusts attracts government grants due to their charitable purpose and voluntary donations because of the Income Tax exemptions,
Advantages of trust:
- Society gains a status of a legal entity
- Society attracts government grants due to their charitable purpose
- People give voluntary donations because of the Income Tax exemptions
Advantages of trust:
- Income tax registrations can be a tedious task in some cases
- Privacy and individual freedom is compromised
Procedural Aspects :
- Choose name of the society and draft the memorandum of association(MOA) and rules and regulations
- Submit requisite forms & documents including MOA and Rules & Regulations with Registrar and obtain Certificate of Incorporation
- Registrar scrutinises all the documents submitted and issues registration certificate after verifying that all information/documents submitted are fine
