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No. 1 e - Service Plateform in India

Section 8 Company Registration

DigitalCA
Sep 24, 2019

Who can apply for registration of a Section 8 Company?


Any person or an association of persons intending to register
a limited liability company for objects specified below can
opt to apply for registration of Section 8 Company.


The following have to be proved to the satisfaction of the
Central Government that:


(a) its objects include the promotion of commerce, art, science,
sports, education, research, social welfare, religion,
charity, protection of environment or any such other
object;


(b) the company after incorporation intends to apply its
profits, if any, or other income in promoting such objects
only; and


(c) the company intends to prohibit the payment of any
dividend to its members.


Who is authorized to issue a license to Section 8 Companies?


Registrars of Companies of respective jurisdictions are
delegated with the powers of the Central Government to issue
a license to Section 8 Companies. [vide MCA notification dated
21st May 2014 – Annexure D].


What is the meaning of persons or associations of persons
as mentioned in Section 8?


The term “person” is not defined under the Companies Act,
2013.
Section 2(41) of the General Clauses Act, 1897 provides that
“person” shall include any Company, or association or body


Eligibility and Licensing Provisions.

 

Individuals whether incorporated or not. Therefore such
a person can be natural or a legal person.
It is also relevant to note that by virtue of provisions of
section 8(3), even a partnership firm can be a member of
Section 8 Company.


What is the procedure for incorporation of Section 8
Company?


To incorporate a Section 8 Company, an application shall be
made to the Registrar of Companies in Form no. INC.12,
which shall be accompanied, inter alia, by the following
documents:


i. Draft Memorandum of Association (MOA) and Articles of
association (AOA) of the Company in the prescribed format
(Form no. INC – 13) where the photographs of subscribers
are affixed.


ii. A Declaration is to be attached in Form no. INC-14 (on
the stamp paper, duly notarized) by an Advocate, a
Chartered Accountant, Cost Accountant or Company
Secretary in practice, that the draft memorandum and
articles of association have been drawn up in conformity
with the provisions of section 8 and rules made there
under and all the requirements under section 8 have been
complied with.


iii. An estimate of the future annual income and expenditure
of the company for the next three years, specifying the
sources of income and the objects of the expenditure.


iv. A declaration (in Form no. INC-15) on stamp paper duly
notarized by each of the persons making the application
and


v. Form no. INC-9 form each subscriber and first directors,
on appropriate stamp paper of the State and duly
notarized.


Can a Company with unlimited liabilities be registered as
a Section 8 Company?


No. Rule 20(1) of the Companies (Incorporation) Rules, 2014
FAQs on 6 Section 8 Companies
provides that only a limited company registered under this
The act or under any previous company law shall make an
application to the Registrar for the issue of license. Therefore, a
the company with unlimited liabilities cannot be registered as a
Section 8 Company.

 

Is it necessary that Section 8 Companies are to be
incorporated as a limited company with share capital?


Section 8 Company may be incorporated as a company
limited by shares or by Guarantee (with or without share
capital). 

Is it mandatory that the name of section 8 Company shall
include the words like – Foundation, forum, association,
federation, chamber, confederation, Council, electoral trust
etc.?


Yes. As per rule 8(7) of the Companies (Incorporation) Rules,
2014, for the Companies under Section 8 of the Act, the name
shall include the foundation of the words, Forum, Association,
Federation, Chambers, Confederation, council, Electoral trust
and the like etc.

Whether a Section 8 Company can have objects incidental
and ancillary to the attainment of the main objects?


Rule 19(2) of the Companies (Incorporation) Rules, 2014
provides that the memorandum of association of the Section
8 The company shall be in Form No.INC.13. Review of Form INC
13 clarifies that a memorandum of association of Section 8
Company may inter-alia provide for the doing of all such other
lawful things as considered necessary for the furtherance of
the objects for which the company has been incorporated.


Whether an Articles of Association of a Section 8 Company
can have an entrenchment clause?

Yes, an Articles of Association of a Section 8 Company can have
an entrenchment clause in terms of provisions of section 5(3).


Is there any relaxation in stamp duty payment in
the incorporation of a Section 8 Company?


Stamp duty on memorandum & articles of association of a
Company or on any increase in share capital is governed by
Indian Stamp Act, 1899 as adopted by respective state or
stamp act of respective state, as the case may be. Some of
the states provide privileged rates for stamp duty on MOA/
AOA of Section 8 Companies or on increase in authorized
share capital. Summary of the rate of the stamp duty in various states
is placed at Annexure – E.


Is there is any relaxation in Stamp duty payment on
issuance of share certificate by a Section 8 Company?


Stamp duty on the issue of share certificates is governed by Indian
Stamp Act, 1899 as adapted by respective state or stamp
act of respective state, as the case may be. No relaxation of
special rate of stamp duty has been provided by any of the
state in respect of stamp duty payable on issue of share
certificates by Section 8 Company.

Is there is any relaxation in stamp duty payable on the transfer
of shares of Section 8 Company?


Stamp duty on the issue of share certificates is governed by Indian
Stamp Act, 1899 and no relaxation of special rate of stamp
duty has been provided stamp duty payable on the transfer of
shares. However, as in the case of other Companies, no stamp
duty is payable on the transfer of shares of section 8 company
also, if made in Demat mode.


Whether a foreign company can be registered as a Section
8 Company in India?


Section 2(42) of the Companies Act, 2013 defines the term
“Foreign Company” and means any company or body
corporate incorporated outside India which–


(a) has a place of business in India whether by itself or
through an agent, physically or through electronic mode;
and
(b) conducts any business activity in India in any other
manner.


Now since a Company or a body corporate incorporated
outside India for doing not-for-profit activities, which has
opened a branch/liaison office in India, cannot fall in the definition
of a foreign company as a business activity is missing.


Therefore, such a company cannot be termed as a foreign
company. However, subject to compliance of FEMA
regulations, it can open branch/liaison offices.


Such not for profit companies or bodies corporate
incorporated outside India can promote and register a Section
8 Company in India as a distinct entity.
Can a One Person Company (OPC) be incorporated as or
convert into a Section 8 Company?


No. Rule 3 of the Companies (Incorporation) Rules, 2014
prohibits a one-person company to be incorporated as section
8 company or to convert into a Section 8 Company.


Can a one-person company become a member of Section 8
Company?


No, Rule 3(6) of the Companies (Incorporation) Rules, 2014
prohibits one person company to invest in securities of any
body corporate.

Can a partnership firm or A Limited Liability Partnership
become a member of Section 8 Company?


Yes, under the Companies Act, 2013, a Partnership firm or
an LLP can become a member of Section 8 Company. The
provisions of respective Acts need to be complied with by
the partnership firm or LLP as the case may be.


If a Trust can become a member of a Section 8 Company?


There is no restriction in the provisions of the Companies
Act, 2013 for a registered Trust to become a member of
Section 8 Company. In the case of unregistered trusts, provisions
of section 89 would be applicable.


Whether a Co-operative society can become subscriber/
member of a Section 8 Company?


In terms of section 8, any person or an association of persons
intending to register a limited liability company for objects
specified in section 8(1)(a), subject to the restrictions
provided in section 8(1)(b) and (c), can opt to apply for
registration of Section 8 Company.


The term “person” has not been defined in the Companies
Act, 2013. Section 2(41) of the General Clauses Act, 1897
provides that “person” shall include any Company or
association or body of individuals, whether incorporated or
not.
Section 11 of the Indian Contract Act, 1872 provides that
every person is competent to contract who is of the age of
majority according to the law to which he is subject, and
who is sound mind and is not disqualified from contracting
by any law to which he is subject.


Therefore a Co-operative society can be regarded as Person
and thus capable of becoming a subscriber of a company
including Section 8 Company.

Can a company be treated as Section 8 Company as well
as a small company provided that the company has not
exceeded the thresholds prescribed for small companies
under section 2(85)?


No. As per proviso to section 2(85), section 2(85) does not
apply to a Section 8 Company and accordingly, a Section 8
The company cannot be treated as a small company.
Likewise, a small company on conversion to a Section 8
The company shall cease to be a small company.

Can Section 8 Companies receive contributions from
overseas or non-residents?


There are special requirements to be complied with under
the Foreign Contribution and Regulation Act, 2010 before a
Section 8 Company can receive any contributions or
donations from overseas/outside India from non-residents.
The provisions of the said Act are in addition to the provisions
under the Companies Act.


Can a Section 8 Company alter its Memorandum of
Association or Articles of Association by only passing a
A special resolution?


A Section 8 Company can alter the provisions of its
Memorandum or articles by passing a special resolution,
FAQs on 10 Section 8 Companies
however such alteration requires the approval of the
Registrar of Companies [vide MCA notification dated 21st
May 2014].
Further, if the alteration in Memorandum or Articles results in
conversion of Section 8 Company to any other kind of
the company, prior approval of the Central Government is required.
Such power is delegated to Regional Director [vide MCA
notification dated 21st May 2014]

Section 8 Companies are exempted to suffix Limited/
Private Limited with the name of the company. What is
the significance of this exemption? Does it affect their
limited liability?


No, Section 8 Companies enjoy limited liability even
without adding the words “Limited” or “Private Limited”.
No, it does not affect their limited liability.


Can section 8 companies be a holding company of another
company?


Yes, section 8 company can promote another company and
be a holding company of another company.


Whether existing section 25 companies registered under
the Companies Act, 1956 are required to obtain a license
under section 8 of the Companies Act, 2013?


No, the existing section 25 companies are not required to
obtain a license under the Companies Act, 2013.The existing
registrations and licenses issued under the 1956 Act, (upon
repeal) shall be protected under section 465 of the
Companies Act, 2013.