REGISTRATION OF SECTION 8 COMPANIES
A non-profit organization registered under section 8 of companies Act, 2013 as a company corresponding of section 25 of companies' Act,1956. Section 8 companies are incorporated with the objective for the promotion of commerce, art, science, sports, education, research, social welfare or any such other objective. The profits earned by these Companies if any shall be used for fulfilling their objectives and are prohibited for any payment to its members as dividend.
NUMBER OF DIRECTORS REQUIRED
The Section 8 Company can be either registered as Private Limited Company or as a Public Limited Company. Hence, the minimum number of Directors depends on the type of entity being formed.
If a Section-8 Company is formed considering as a Private Limited Company then minimum two Directors shall be required and if formed as a Public Limited Company then minimum three Directors shall be required but it must adhering the maximum limit of twenty directors in one section 8 company.
However, if the entity is formed as a subsidiary of Foreign Company or in which Foreign Nations are involved then as mandated by Section 149(3) of the Act the presence of at least one resident director in such a company
Section 149(1) of the Act exempts section 8 companies from the appointment of an independent director and are also free from all the consequential provisions concerned with independent director.
DOCUMENTS REQUIRED FOR REGISTRATION
- Digital Signature Certificate (DSC).
- Director Identification Number(DIN).
- Memorandum of Association (MOA).
- Article of Association (AOA).
- Proof of Address of Members/Subscribers and Directors (Anyone out of the following)
Valid Passport/Voter ID/Aadhaar Card/Valid Driving License
- Proof of Members/Subscribers and Directors, it Should Not be Older than 2 Months (Anyone out of the following)
Bank Statement/Electricity Bill/Telephone Bill/Mobile Bill
- PAN Card of Indian Residents being the Members and Directors
- Passport size photograph.
- Details of director (when the members are other companies/LLPs).
- Registered Office documents:-
If proposed Registered Office is taken on Lease
- NOC from Landlord
- Lease Agreement
- Utility Bill (Either Electricity Bill or Mobile Bill or Telephone Bill)(Should Not be Older than 2 Months)
If the proposed Registered Office is not taken on Lease
- NOC from the Owner of Property
- Utility Bill (Either Electricity Bill or Mobile Bill or Telephone Bill)(Should Not be Older than 2 Months)
- Property Papers (Title Deed)
PROCEDURE OF REGISTRATION OF SECTION 8 COMPANY
The Ministry of Corporate Affairs in order to simplify the process of registration of a Section 8 company has knocked off the requirement of filling of form INC 12 at the time of Incorporation by amending the companies Rules.
The Section 8 company can be incorporated by reserving the company's name through SPICE+ PART -A and thereafter the incorporation by filling SPICE+ PART -B or can be done directly by filling SPICE+ PART -B.
The LICENSE of the section 8 company is directly to be allotted at the time of incorporation itself.
The following steps should take to incorporating section 8 companies:
Step 1: Application For Name Reservation
The first step is to make an application for reservation of name which shall be reserved by using the web services (SPICe+) available at www.mca.gov.in along with the specified fees. Before Applying for name, kindly check that the name is available on MCA as well as no trademark is there no such name under the Class of work you are going to apply.
The new integrated form consists of two parts i.e. PART A and Part B. The Name(s) of a company can be reserved in Part A of SPICe+. In case the applicant wants to apply for name, incorporation and other integrated services together, he can do so together by filling necessary information in Part A and Part B.
Step 2: Filling of Information in Part B of SPICe+
The second step is to fill the Part B of SPICe+ for registering the Company. The said form contains various sections which allow you to save and modify information if required. While filling the said sections following attachments are required to be attached:-
- Memorandum of Association in Form INC-13
- Articles of Association
- Declaration in INC-14 by any CS/CA/CMA in practice stating that the draft memorandum and articles of association have been drawn up in conformity with the provisions of Section 8 of the Act and Rules made thereunder
- Estimation of the future annual income and expenditure of the company for next 3 years, specifying the sources of the income and the objects of the expenditure
- Brief description of proposed activity
- Statement of assets and liabilities
- Declaration by each of the persons making the application in Form INC-15 i.e. a declaration that draft memorandum and articles of association have been drawn up in conformity with the provisions of Section 8 of the Act and Rules made there under
- List of promoters (name, address, DIN or Income Tax PAN)
- List of proposed directors (name, address, DIN or Income Tax PAN
- Grounds of Application for License
- Consent to act as Director in DIR-2
Step 3: Filling of AGILE-PRO
The fourth step is to fill the form AGILE-PRO, where certain changes have been introduced those are as follows:-
- Mandatory registration of EPFO and ESIC.
- Mandatory opening of Bank account.
- Facility to obtain the GSTIN using the said form.
Step 4: Affixing the DSC's
The third step is to convert the SPICe+ form into PDF form in order to affix the DSC. At this step we have download the forms from the Ministry of Corporate Affairs website and thereafter the DSC's of the Member, Director and the Professional is to be affixed
Step 5: Uploading of Forms on the Ministry of Corporate Affairs
After affixing the DSC on the said forms, the Forms are required to upload on Ministry of Corporate Affairs in accordance with the existing process.
COMPLIANCES
Board Meetings
Other companies that are needed Board Meetings at least 4 times in a year (Section 173). But the Section 8 company, under the company law, can meet in the 6 months in a year i.e. only 2 times. Amendment takes place for the Section 174 which stands for a quorum. And now for Section 8 company, we have either 80% or 25% of total strength whichever is less as quorum subject to the minimum of two members. Powers of the board mainly the borrowing of money, investment of funds, to grant a loan, or to give guarantee could only be exercised in the board meetings. But now for Section 8 Company, it can be done by a circulation only.
Annual General Meeting
The Companies require a notice of 21 days which now reduces to having only 14 days under section 101(1). Also, there is no requirement to follow the Section 96(2) which had rules for time/place/restrictions on Annual General Meeting. But the time, date and place of each AGM are to be decided before-hand by the Board of Directors with the due regard to the directions if any given in this regard by the company in its general meeting. This means an Annual General Meeting can take place at other than the Registered Office, city and place different than the office timing subject to General meeting Directions that can be given.
The Minutes of the Meeting is not necessary to be as per the provisions of Section 118. But with the exception that if the Articles of Association provide that the Minutes are required to be approved by circulation within 30 days requirements of audit reports, financial statements and other documents that are to be sent at least 21 days before the Annual General Meeting is done away with for these companies.
PENALITY
If any company is not following the laid requirements of this section then without prejudice any other action the company is penalized with fine of not less than 10 lakh Rupees to the extent of 10 cr. Rupees and for the directors and officers found in default are penalized with a fine of not less than 25 thousand rupees to the extent of 25 lakh rupees, or with imprisonment of the term to the extent of three years, or both.
If it is proved that the affairs of the company are conducted fraudulently then, every officer of the company shall be liable for action under section 447.
CAclubindia
