REGISTRATION OF A COMPANY UNDER SECTION – 8

Section 8 of the Companies Act,2013 provides for a company whose objective is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives. These companies also use their profits towards the furtherance of their cause and do not pay any dividend to the members of the company.

These companies were previously placed under Section 25 of Companies Act, 1956 and the amended Act has prescribed more objectives that Section 8 companies can have.

A company under Section 8 is registered for charitable or non-profit objectives.

Famous examples of Section 8 companies include the Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industries (CII). The objective of these companies is facilitating the growth of trade and commerce and India.

The registration of these companies is governed by the ministry of corporate affairs while the registration of trusts is governed by the registrar under the state government.

Features of a company registered under section 8:

• Section 8 companies do not aim to make profits but aim purely towards charitable objectives like environment protection etc.
• A company incorporated under section 8 does not require a prescribed minimum paid-up share capital.
• Members of these companies can only have limited liability unlike others which can also have unlimited liability.
• Such companies can function only on the license given by the Central Government. The Government also has the power to revoke this license.
• Since these companies possess charitable objectives, the Companies Act has accorded several benefits and exemptions to them.

The Procedure of Incorporation of Section 8 Company

1. The first step is to obtain the digital signature of all the directors and promoters which can be done by applying to the certifying authority.
2. Then the directors are supposed to obtain the Directors Identification Number [DIN].
3. Thirdly an application has to be filed under Form INC-1 to the Registrar of companies (ROC) and the name of the company has to be approved. It is required for the companies to include words such as foundation, association, forum, council, chambers, etc. in accordance with the company, incorporation Rules 2014.
4. After the name has been approved the company has to prepare its Memorandum of Association and Articles of Association which has to be filed in form INC 12.
5. Application for License has to be filed. The license of the company can be revoked if the company contravenes any provisions of section 8 or violated the terms of the license or when its conduct is fraudulent.
6. Then the Incorporation Application is filed.
7. The registrar, if satisfied with the documents, shall issue the certificate of incorporation along with the unique Company Identification Number.

Advantages of a company incorporated under section 8

The advantage of forming a company under section 8 is that these companies have limited liability, so the personal assets of the members will not be used up in paying the debts of the company. Also there is no prerequisite of a minimum capital required for the same. These companies get several tax exemptions and the stamp duties are not to paid for the registration. They have perpetual existence and separate legal status similar to the other companies incorporated in the companies act, 2013. Also they are considered More credible than compared to NGOs, societies, and trusts because they are recognized by the Central Government’s license.

Winding up

If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to [Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.[1]

Punishment

If a company makes any default in complying with any of the requirements laid down in section 8 , the company shall be punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees and the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than twenty-five thousand rupees but which may extend to twenty-five lakh rupees, or with both when it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447.[2]

[Aurthor’s Profile : Deeksha Chugh]

[1] sub section 9 of section 8

[2] sub section 11 of section 8