A Non Profit making Company is a Company which:
- Has in its objects, the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, and protection of environment or any other such objects.
- Intends to apply its profits or any other income in promoting its objects.
- Intends to prohibit the payment of any dividend to its members.
Therefore, Section 8 Company is a company registered for charitable or not-for-profit purposes.
Section 8 Company is similar to a Trust or Society; with the only difference that a Section 8 Company is registered under the Central Government’s “Ministry of Corporate Affairs (MCA)”whereas the Trusts and Societies are registered under State Government regulations.
Further, the key feature of a Section 8 Company is that name of the Company can be incorporated without using the word “Limited” or “Private Limited” as the case may be.
Who can form a Sec 8 Company
- Any person or association of persons (including a partnership firm).
- Any existing company
- One Person Company cannot be a Sec 8 Company
Relaxation in compliance norms for Section 8 companies (Not for profit companies)
The government has made life easier for section 8 companies by way of a notification dated June 5, 2015 offering them relaxation in several compliance. A brief discussion of such concessions follows:
- Section 8 companies need not appoint a qualified professional as its company secretary.
- Since the requirement of having a minimum paid-up share capital for incorporating a private or a public company has been done away with by way of the Companies (Amendment) Act, 2015, a Section 8 company also need not comply with the same.
- Shorter notice period for AGMs.
- No need to record minutes of meetings, unless required.
Only two directors required.
- Section 8 companies can appoint more than fifteen directors without passing a special resolution. A Section 8 company need not appoint an independent director.
- No meetings required for certain decisions.
- Less documentation for small related party transactions.
- Business setup in india
TAX RELATED COMPLIANCES
PERMANENT ACCOUNT NUMBER (PAN): After incorporation, the Company must obtain its PAN. For this purpose, an application needs to be filed with the Income Tax Department in Form 49A with the necessary documents. PAN is mandatory for opening of Bank Account, filling of Income Tax returns and various other financial transactions including making and receiving the payments..
TAX DEDUCTION ACCOUNT NUMBER (TAN): After incorporation, the Company must also obtain a TAN. For this purpose, an application needs to be filed with the Income Tax Department in Form 49B with necessary documents. TAN is required for depositing of TDS/TCS.
RBI RELATED COMPLIANCES
- In case receipt of money for investment in shares from foreigner:
Within 30 days of receipt of money from the foreign investor, the Indian company will report to the Regional Office of RBI under whose jurisdiction its Registered Office is located, a report containing details such as:
- Name and address of the foreign investors,
- Date of receipt of funds and their rupee equivalent,
- Name and address of the authorized dealer through whom the funds have been received, and
- Details of the Government approval, if any;
- Filing of FC-GPR form – On issue of shares to Foreign Investor, a report in Form FC-GPR together with the following documents should be filed with the Regional Office of RBI within a period of 30 days from the date of issue of shares:
- Certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that:
- All the requirements of the Companies Act, 1956 have been complied with;
- Terms and conditions of the Government approval, if any, have been complied with;
- The company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration;
- Certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at.
Incorporation of a Non Profit making Company in India shall include the following activities/steps
| Steps | Course | Particulars |
| Step 1 | DIGITAL SIGNATURES CERTIFICATE | The First stage of Incorporation is to make application for Digital Signature certificate for all the directors of the proposed company. Note:1. The digital signature shall be valid for 2 years. There is no limit in number for signing the E-Form (s).2. After two years, minimum one director must renew their digital signature. |
| Step2 | OBTAINING DIRECTORS IDENTIFICATION NUMBER (DIN) | The Second stage of Incorporation of Non Profit Making Company is to apply for Director Identification Number (DIN) for the proposed Directors of the Company. Each individual has to apply for DIN separately in E-Form DIR-3. The DIR-3 form has to be signed by practicing professional. Note:1. As per Companies Act, 2013, minimum Two Directors are required to form a non profit making company; out of them one must be resident in India in the previous year.2. Only Individual can be appointed as Director. |
| Step 3 | APPLICATION FOR NAME APPROVAL OF THE PROPOSED COMPANY WITH THE ROC | The third stage of Incorporation of Non Profit Making Company is the name approval of the proposed Company. E-Form INC-1 has to be filed with Registrar of Companies (ROC) for name approval of the Company.E-Form INC-1 has to be digitally signed by applicant.Note: 1. Maximum six names in order of preference may be given in the E-Form INC-1.2. Significance of Name(s) must be given3. The name will be valid for a period of 60 Days from the date on which the application for Reservation was made.4. Whether the proposed name(s) are based on a registered trade mark or is the subject matter of an application pending for registration under the Trademarks Act. If yes, furnish particulars of trade mark or application5. If the name of company would contain any word/expression which is a part of name of any other body corporate then a No-objection Certificate (“NOC”) by way of Board resolution for use of such name would be required. |
| Step 4 | DRAFTING AND STAMPING OF MEMORANDUM & ARTICLES OF ASSOCIATION (“MOA AND AOA”) | The next step after name approval of the proposed Company is to prepare Memorandum of Association (MOA), Article of Association (AOA), Power of attorney (POA) in favour of practicing professional& Declaration in prescribed format by Practicing Professional and other related documents. Note: Minimum two people required for registration of Section 8 Company. |
| Step5 | APPLICATION FOR OBTAINING LICENSE | Post approval of name from the concerned Registrar of Companies (Regional Director), file Form INC-12for obtaining License under Section 8 of Companies Act, 2013.Form INC-12 filed with the following documents:1. Draft Memorandum of Association of the proposed company in Form INC-13.2. Draft Articles of Association of the proposed company.3. Declaration by Practicing Professional in Form INC-14.4. Declaration from each person making application in Form INC-15.5. An estimate of future income & expenditure of the Company for next 3 years, specifying the sources of the income and the objects of the expenditure. |
| Step5 | INCORPORATION DOCUMENTS TO BE FILED WITH THE ROC | After obtaining the license, following forms need to be submitted with prescribed attachments.1) E-Form INC-7 for filing MOA, AOA POA & Declaration from Practicing Professional with ROC, 2) E-Form INC-22 for intimating the registered address of the Company and3) E-Form DIR-12 for (Intimating the proposed Directors of the Company with ROC. All these documents are required to be digitally signed by one proposed Director and practicing professional. |
| Step6 | CERTIFICATE OF INCORPORATION | After filing the documents as mentioned in stage 5, the Registrar will review and issue Certificate of incorporation of the Company. |
Also Read : Foreign Contribution Amendment Act, 2020,
External Commercial Borrowings (ECB) in case of Foreign Loan
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