It is true that one of the purposes of creating a company to do commerce and make profit. But not all the companies have the objective of making profit by doing business they primarily have charitable and nonprofit objectives. Such companies are called Section 8 companies under Indian Companies Act 2013.
The act has three different condition or restriction for a company to be qualified as. Section 8 company.
- The objective shall include activities for promotion of commerce, art, science, education, research, social welfare, religion, charity, protection of environment or any such other object.
- The company intends to apply its profits, if any, or other income in promoting its objects, and,
- The company intends to prohibit the payment of any dividend to its members.
If a company want to register itself as a company for such objective they also need to apply to central Government for a licence. After getting the licence the company can be incorporated under Section 8 without the addition to its name the word Private Limited or limited.
Companies Incorporation Rules 2014, under Rules 8, 12 and 19 and section 8 of the Companies Act explain the process of registering a company with charitable objects.
Following compliances should be ensured:
- If the company is private company there should be two directors and if it is a public company then three directors minimum.
- Minimum number of members for private company is two and public company seven. It is important to note that a partnership firm can be member of a section 8 company.
- Now the format is decided, the company need to apply for the name. The name shall be undesirable if
- If attracts provisions of section 3 of Emblems Act 195o
- If includes a trademark registered unless the consent is obtained.
- If include any offensive words to any section of the people.
- Identical or too resemble with the name of company or LLP.
- Apply for name through RUN form through MCA portal. Usually the name of Section 8 companies includes the words like foundation, forum, association, council etc.
- Once approved the name will be available for 20 days.
- After the name of the company is approved an application in for INC 12 to be filed with Registrar of Companies for licence under Section 8 by the promoters of the company. Following documents need to be accompanies INC 12.
- Draft memorandum and articles of association with declaration by practicing professional, that it is drawn according to the provisions of Section 8, Form INC 14.
- Estimated annual expenditure and income of the company for the next three years, including source of income and objectives of expenditure.
- Grounds of application and description of activity
- Statement of assets and liabilities.
- Declaration by each person’s making the application in Form INC 15. INC 15 says that the Memorandum and Articles are drawn up to Section 8.
- List of promoters, proposed directors, key managerial persons (name, address, DIN, PAN)
- Registrar of Companies will grant the licence.
- Apply for incorporation with SPICe form, INC 32. Documents to be attached with INC 32 are
- MOA and AOA
- Consent to act as a director-Form DIR 2
- Declaration by first directors and subscribers – Form INC 9
- Declaration by practicing professional – INC 8
- Proof of registered office address, identity and residential proof of every subscriber.
- Also attach Form Agile- INC 35 for registration under GST, ESI, EPFO.
- If the forms are all ok, the certificate of incorporation along with PAN and TAN will be issued.
- Now the first board meeting can be called for either at a place or by resolution by circulation, the manner of opening of bank account in the name of company can be decided. The subscribers can deposit their subscription money into this account,
- Companies other than limited by guarantee or unlimited company cannot commence business without obtaining certificate of commencement of business. Section 10 A of the act says that the director of a company needs to file INC 20A with ROC stating that every subscriber to MOA have paid the value of shares agreed to be taken. A bank statement also needs to attached. The form needs to be filed within 180 days of incorporation. If found ok the Registrar will issue Certificate of Commencement of Business.
The process mentioned is according to the act and rules. In actual situations based on requirement and on availability of documents there may little variations.