In India, a non-profit organization can be registered as a Trust, by making a Trust deed or as a Section 8 Company, under the Companies Act, 2013. According Indian Companies Act, 2013, a section-8 company can be established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object, provided the profits, if any, or other income is applied for promoting only the objectives of the company and no dividend is paid to its members.
Procedure for formation of section 8 company is listed below:
1. Digital Signature Certificate (DSC) & Directors Identification Number (DIN): The only secure and authentic way that a document can be submitted electronically is DSC. All filings of e-forms on MCA Portal are required to be filed with the use of DSC of the authorized signatory. Further, DIN for all the proposed Directors of the Company must be obtained. For obtaining DIN an application in Form No. DIR – 3 should be filed on MCA Portal with documents attested by a practicing professional.
2. Name approval: By submitting an application in Form – INC 1, applicant can obtain approval for selected names from the Registrar of Companies (RoC). The Applicant can give maximum six names in order of preference. The name once approved by the authority is valid for sixty days. The name once approved by the authority is valid for 3 months. Name approval generally takes 1-2 business days.
3. Main instrument: After obtaining name approval, constitutional documents i.e. Memorandum of Association (MOA) and Articles of Association (AOA) is to be drafted and subsequently filed with the RoC along with the forms and other necessary documents stated below:
- Consent Letters
- Certificate of Compliance from a practicing professionals
- Subscription pages of MOA & AOA– Both documents shall be signed by each subscriber who shall mention his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation, if any. The witness shall be a practicing professional
- Issuance of license with registration fee: For Section 8 company license, promoter has to file E-Form INC 12 accompanied by:
- MOA and AOA
- A declaration confirming the application by a practicing Company Secretary
- Names, addresses, occupation and descriptions of the promoters as well as Board Members
- A statement showing details of assets & liabilities as on date with the application
- Estimated future annual income and expenditure, specifying the source of income and object of expenditure
- A statement giving brief description of work, if any, already done by the association
- A statement specifying briefly the grounds on which the application is made
- A declaration in prescribed form on non – judicial stamp paper by each person making an application
- A letter of authority with payment of prescribed fee
- Other requirement: Following forms are to be filed with the RoC after issuance of license:
- Form INC – 7 for declaration of compliance with the requirements of the Act on application for registration of a company;
- Form INC – 22 for notice of situation of registered office;
- Form DIR – 12 for appointment of directors of the company; and
- Subscribers and proposed directors may delegate their authority to a person(s) to carry out appropriate change(s) as suggested by the RoC in any of the incorporation papers that have been filed.
6. Clarifications / additional Information required by ROC: Documents submitted for the purpose of incorporation are thoroughly reviewed by the RoC. RoC may require certain clarifications, if required. The person authorized shall present clarifications with Roc as needed.
7. Certificate of Incorporation: After providing clarifications, the Certificate of Incorporation is issued by the RoC along with a unique Company Identification Number (CIN) and the Company is deemed to be incorporated from the date of certificate issued. Consecutively, company may apply for other tax and regulatory registration as may be required to run the business smoothly like PAN, TAN, Bank account, etc.
8. Subscription money: A new bank account solely at the name of the company newly incorporated shall be opened by the Board of Directors and the Subscribers. Further to that, they shall deposit their subscription money in bank account to help the company raise initial capital to start its business.
Minimum Requirements for Section 8 Company:
1. At least 2 shareholder and 2 Director (both can be the same person)
2. At least one Director shall be resident in India
3. No Minimum capital required
4. PAN is a mandatory requirement in case of Indian nationals
5. Identity Proof (Voter ID/Aadhar Card/Driving License/Passport); Passport is mandatory requirement for proof of identity in case of foreign nationals
6. Proof of Residence
7. Registered utility proof that is any office address proof
8. Any documents establishing the ownership such as sale deed / house tax receipt along with no objection certificate, in case the premises are owned by a Director and Promoters
We, a Chartered Accountant firm, serve a number of clients who need assistance for various regulatory compliances including setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. If you require any guidance for the any professional service, please contact AJSH & Co LLP.
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