INCORPORATION OF SECTION 8 COMPANY

A Non-profit Company or Section 8 Company is a Company which has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other objectIt Intends to apply its profits, if any, or other income in promoting its objects; and Intends to prohibit the payment of any dividend to its members.The fundamental aspect of Section 8 Company is that it is created for the non-profit motive and it forbids the payment of divided. That means income, if any of Section 8 Company must be used for the objects for which Section 8 Company is created

.Henceforth, Section 8 Companies can be incorporated by either reserving names through Run and filing SPICe thereafter or by directly filing SPICe. Licence No for a section 8 company shall henceforth be allotted at the time of incorporation itself In view of the above, all pending INC-12 SRNs for new Companies pending at respective RoCs would be marked as ‘Rejected’ on 15th August 2019. Such applicants may thereafter directly file SPICe for obtaining License Number and for the incorporation of Section 8 Companies Stakeholders who have already obtained License Numbers and are yet to file SPICe form for incorporating Sec 8 companies may do so at their convenience but may please note that the forms shall be processed only after a certain time lag to allow for workflow changes to take effect.

THE MAJOR CHANGES

Earlier, filing of INC-12 was required for the incorporation process of Section 8 Companies. However, now the step of filing this form is eliminated. They can now reserve name through run form and proceed to file SPICe Form or directly file the SPICe Form.

Section 8 Company-Advantages and Disadvantages:

 Companies registered under Section 8, Company Act 2013 has their privileges in the account of their non-profit mode of operations. Certain disadvantages as well. They are listed below. 

Advantages of Section 8 Company Incorporation

1. Exemption from Stamp Duty.
2. Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
3. Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and general public.
4. Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name.
5. A Section 8 Company has more credibility as compared to any other Non-profit organization structure like Trust or Society
6. Tax Exemption. Numerous Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies,
   they can claim the Tax exemption against the donation they made to a Section 8 company.
7. No minimum capital requirement.There is no prescribed limit over section 8 companies for the minimum capital requirement unlike other entities such as public
   limited, but the capital structure can be altered at any stage as the required for the growth of the company.
8. No stamp duty payable  a section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other
   structures such as private limited or a public limited company.
9. Separate Legal entity  a Section 8 Company also holds its own identity like other companies structures, and has its own separate legal standing
   from its member. a Section 8 Company also has a perpetual existence
10. Credible  a Section 8 Company has more credibility as compared to any other Non-profit organization structure be it a Trust orSociety. As it is a licensed by the central government. It has more stringent regulations such as no change inMOA and AOA can be done at any stage or situation in a Section 8 Company. A section 8 company due its strictcompliances as regard to functioning has a more reliable image in comparison to other legal structures.

Disadvantages of section 8 company

1. NO distribution of profits: The members of a Section 8 company cannot share the profits amongst them. The profits get used only for the welfare of the company’s objective, which revolves around the advancement of art, science, commerce, sports, environmental protection and fields of such sort.
2. Amendment in MOA and AOA: Such an entity cannot amend or alter the Memorandum of Association or the Articles of Association without having the approval of the Central Government beforehand.
3. Zero benefits:  The members of a Section 8 company gets zero benefits or any perks out of the company. They can afford to reimburse for their pocket expenses that may have occurred during the course.
4. Limited objective: The central objective of Section 8 companies is to use the income and profits of the company in promoting some particular fields only and not for any other purpose.
5. Multiple rules and regulations: The Central Government imposes many . All the rules and regulations must include in the Memorandum of Association and Articles of Association.