If so, setting up a Section 8 Company might be the right choice for you!
In India, a Section 8 Company is a legal entity designed for non-profit organizations focused on promoting social causes. Whether you aim to advance education, promote healthcare, or uplift economically weaker sections of society, a Section 8 Company provides the structure you need to achieve your goals effectively. This guide will help you navigate the process of NGO registration, making it easier for you to launch your charitable organization.
What is a Section 8 Company?
A Section 8 Company, under the Companies Act, 2013, is a legal entity established with a charitable objective. Unlike other companies, its primary focus is not profit, but rather the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other similar objectives. These companies do not distribute profits to their members and are similar in many ways to NGOs, trusts, and societies. For those looking to start an NGO, Section 8 Company registration offers a credible and structured pathway.
Key Benefits of a Section 8 Company
Before diving into the setup process, it’s important to understand why a Section 8 Company is often the preferred choice for social entrepreneurs and those interested in community service projects:
1. Tax Exemptions: Section 8 Companies are eligible for significant tax exemptions under the Income Tax Act, which can be beneficial for funding your NGO and ensuring that more resources go directly toward your cause.
2. No Minimum Capital Requirement: Unlike private limited companies, there is no minimum capital requirement, making it easier to start a social enterprise or charitable organization.
3. Credibility: Section 8 Companies are often seen as more credible due to stringent registration processes, making it easier to gain public trust, secure donations, and attract volunteer opportunities.
4. Limited Liability: The liability of the members is limited to their shareholding, protecting personal assets and making it a safer option for those looking to engage in social enterprise activities.
Step-by-Step Guide to Setting Up a Section 8 Company
1. Define Your Mission and Vision
The first step is to clearly define your social objective. This will guide your organizational structure, operations, and future growth. Ensure that your objectives align with the non-profit purposes allowed under the law. Whether you’re planning community service projects or broader social initiatives, clarity in your mission is crucial.
2. Choose a Name
Selecting an appropriate name is crucial. The name should reflect the purpose and values of your organization. It’s important to ensure that the name is unique and not misleading. The name should end with “Foundation,” “Association,” “Forum,” or similar terms, which are often associated with NGOs and charitable organizations.
3. Prepare Documents
You will need to prepare and submit several key documents during the registration process:
- Memorandum of Association (MOA) and Articles of Association (AOA): These documents define your company’s purpose, governance structure, and operational rules.
- Digital Signatures: Obtain Digital Signature Certificates (DSCs) for the proposed directors.
- Director Identification Number (DIN): Apply for a DIN for all proposed directors if they don’t already have one.
4. File Application with the Registrar of Companies (RoC)
Submit your application for name reservation and incorporation through the Ministry of Corporate Affairs (MCA) portal. Along with the application, submit the MOA, AOA, a declaration by professionals (such as a CA, CS, or lawyer), and an estimated income and expenditure statement. This step is crucial for NGO registration.
5. Obtain the License under Section 8
Once your name is approved, you must apply for a license under Section 8. This license authorizes you to operate as a non-profit entity. The application for the license is filed with the RoC, along with supporting documents that substantiate your organization’s objectives, paving the way for your charitable organization to begin its work.
6. Incorporation
After receiving the Section 8 license, you can proceed to incorporate your company. This involves filing incorporation documents, including the MOA, AOA, declarations, and other necessary forms, with the RoC. Once approved, you will receive a Certificate of Incorporation, formally establishing your NGO.
7. PAN and TAN Registration
After incorporation, the next step is to apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the Income Tax Department. This is essential for NGO funding and managing financial transactions.
8. Compliance and Reporting
Section 8 Companies are required to follow various compliances, including annual filings with the RoC, maintaining proper accounting records, and ensuring compliance with the Income Tax Act for continued tax exemptions. Regular board meetings and maintaining minutes are also mandatory, ensuring that your social enterprise or community service projects are always in line with legal requirements.
Starting a Section 8 Company is a great way to contribute to society through a structured and legally compliant organization. Whether you’re looking to set up an NGO, launch community service projects, or create a charitable organization, following these steps will help you establish a strong foundation for your social enterprise. With the right approach, your Section 8 Company can serve as a powerful tool to drive positive change.
How Can Coinshell Help?
Setting up a Section 8 Company involves various legal steps and documentation. Coinshell can assist you in every aspect of this process, from the initial registration to ensuring ongoing compliance with all legal requirements.
Our experts are here to simplify the process and support you in creating a successful and impactful social enterprise. Whether it’s NGO registration, securing NGO funding, or managing volunteer opportunities, Coinshell is your trusted partner.
Contact Coinshell today to get started on your journey toward making a difference.
