Who can start a Section 8 company in India? Learn eligibility, rules, and requirements for nonprofit registration and start your organisation today.
Most people in India want to start an organisation that is for education, charity, healthcare, or any social cause. There is one thing that people often find confusing. That is who can start a Section 8 company in India?
It is thought that only big organisations can start a non-profit company in India. Some people think that only a few rich people can start a Section 8 company in India.
Actually, any type of person or organisation can start a Section 8 company in India. But the person or organisation must follow the eligibility criteria.
This guide will tell you who can start a Section 8 company in India.
What Is a Section 8 Company?
A Section 8 company is a non-profit company registered under the Companies Act, 2013.
The main objective of a Section 8 company is to promote social, charitable, and other similar activities.
Unlike other companies, the profits of a Section 8 company are not distributed among the members.
Objectives of a Section 8 company:
- Education
- Social welfare
- Environmental protection
- Charity
- Research
- Arts and culture
Because of the above-mentioned features, many NGOs operate as Section 8 companies in India.
Who Can Start a Section 8 Company in India?
Now, let’s move to the most important query of all: Who can start a Section 8 Company in India?
According to the law, several individuals or persons can form a Section 8 Company.
Individuals
Any individual who is either an Indian citizen or a foreign national can form a Section 8 Company.
However, the individual needs to fulfil the following requirements:
- Minimum age of 18 years
- No legal disability to become a Director
Group of Individuals
A group of people with a common social objective in mind can also form a Section 8 company.
For example:
- Social workers
- Educators
- Environmental activists
- Community leaders
When people work in a group, they can create a stronger organisation with a greater impact.
Existing Companies
A registered company can also promote a Section 8 company to carry out corporate social responsibility.
Many companies are using this type of organisation to carry out their social responsibilities in various sectors,
such as:
- Education
- Community development
- Healthcare etc
Associations or Societies
Existing cooperative societies can be converted into a Section 8 company.
This type of organisation can be adopted by many due to the following reasons:
- Better credibility
- Better governance norms
- National recognition
Minimum Members Required to Start a Section 8 Company
Another common query is the minimum number of members required to form a company.
It depends on the type of company.
Private Section 8 Company
A private Section 8 company must have:
- Minimum 2 directors
- Minimum 2 members/shareholders
Most often, directors and members will be the same.
Public Section 8 Company
A public Section 8 company must have:
- Minimum 3 directors
- Minimum 7 members
Large non-profit organisations usually adopt this type of company.
Eligibility Criteria for Section 8 Company Registration
Along with the fact that any person can start a Section 8 company in India, the organization must also satisfy certain criteria of eligibility.
Charitable or Social Purpose
The organisation must be for :
- Charity
- Education
- Social welfare
- Environment protection
- Promotion of art and science
A license is granted by the government only if the purpose is clear.
Profit Must Not Be Distributed
The Section 8 company cannot distribute any kind of profit to its members/directors.
All the profit must be directed towards the cause.
Transparent Governance
The company must follow the proper compliance procedures:
- Financial records must be maintained.
- Annual returns must be filed.
- Board meetings must be conducted.
These rules help to ensure accountability.
Key Benefits of Starting a Section 8 Company
There are many reasons why many organisations choose this type of company formation. The main reasons are:
Strong Legal Recognition
A Section 8 company is registered with the Ministry of Corporate Affairs. Thus, they enjoy more credibility compared to non-registered societies or organisations.
Tax Benefits
A Section 8 company can enjoy tax exemption under the Income Tax Act.
However, they have to apply separately for:
- Registration under 12A
- Certification under 80G
Better Funding Opportunities
Donors and investors have more trust in Section 8 companies due to the compliance norms. Thus, they are more likely to get funding for their projects.
Limited Liability Protection
In a Section 8 company, the members of the company have limited liabilities.
Documents Required to Start a Section 8 Company
Before starting the registration process, certain documents need to be aranged.
These include:
- PAN cards of the directors
- Aadhaar cards or passports
- Address proofs
- Passport-size photographs
- Proof of address of the registered office
- Memorandum of Association (MOA)
- Articles of Association (AOA)
Proper documentation is necessary to prevent delays in the approval process.
Cost of Starting a Section 8 Company in India
Starting a Section 8 company registration in India involves minimal costs. The costs include government filing fees, digital signatures of directors, and professional fees.
| Expense Type | Estimated Cost (₹) | Description |
| Digital Signature Certificate (DSC) | ₹1,000 – ₹2,000 per director | Required for electronically signing documents during company registration. |
| Director Identification Number (DIN) | Included with incorporation | Unique identification number required for each director. |
| Name Reservation (RUN / SPICe+) | ₹1,000 | Fee paid to the Ministry of Corporate Affairs to reserve the company name. |
| Incorporation Filing Fees | ₹1,000 – ₹8,000 | Fees paid to register the company and obtain the Certificate of Incorporation. |
| Professional / Legal Fees | ₹5,000 – ₹10,000 | Charges for professionals who prepare documents and handle the filing process. |
However, if you wish to establish a non-profit organisation, it is advisable to seek professional advice to avoid any mistakes in the process.
Basic Steps to Register a Section 8 Company
Understanding the registration process will help us understand who can form a Section 8 company in India.
Step 1: Obtain Digital Signature Certificate
All the directors of the company must obtain a Digital Signature Certificate (DSC).
Step 2: Name Approval
The proposed company name has to be approved by the Ministry of Corporate Affairs. Name can be filed in form Spice+ Part A. Name and incorporation can also be filed in single form. (form Spice + Part A and B)
Step 3: Apply for Incorporation
After the name approval, the next step is to file the incorporation application with the Ministry of Corporate Affairs through SPICe+ Part B along with the required documents. This includes details of directors, registered office address, and the company’s MOA and AOA.
Once the application is verified and approved, the Certificate of Incorporation (COI) is issued, and the company becomes a legally recognised entity.
Common Mistakes When Starting a Section 8 Company
There have been many delays in the incorporation of the company due to various mistakes that the applicants have made.
Some of the common mistakes that have been made by the applicants are:
- Choosing a company name that is similar to another company
- Incorrect documentation
- Lack of clarity in the objectives of the charitable company
- Incorrect classification of the company type
Proper planning helps avoid these problems.
Conclusion
So, who can form a Section 8 company in India? Well, the answer is quite simple. Anyone, be it individuals, groups, companies, or associations, can form a Section 8 company if they fulfil the legal criteria.
The basic purpose of a Section 8 company is not to make profits but to serve society. This makes the company quite significant in society’s development.
If you have plans of starting a non-profit business, then the formation of a Section 8 company can provide your non-profit business with legal recognition and credibility.
The next step in the formation of a Section 8 company in India is the preparation of the documents and the registration process.
Ready to start your non-profit organisation? MY LEGAL BUSINESS LLP can guide you through the smooth and swift registration of your Section 8 company. Reach out to us today for the registration of your Section 8 company.
Frequently Asked Questions
Can a single person incorporate a Section 8 company?
No. At least two members must be there for a section 8 company registration. A single person cannot incorporate a section 8 company.
Can foreigners incorporate a Section 8 company in India?
Yes. Foreigners can be directors or members of the company. They must follow the provisions of the Companies Act while doing so.
What is the minimum capital that must be present for a Section 8 company?
No minimum capital is required. This provision has been removed by the government in order to encourage social organisations.
Is a Section 8 company better than a trust?
Yes. Many organisations prefer section 8 companies because they provide better governance and credibility, and better opportunities for funding.
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