The concept of Non- profit organisation is quite old in India. Earlier in Companies Act, 1956 it was governed under Section 25. And now in Companies Act, 2013 it is given under section 8 and know as “Section 8 companies”.
A limited company with the object of promotion of art, sports, science, commerce, education, research, religion, charity, social welfare, protection of environment etc and can be registered under Section 8 company.
Section 8 prohibits companies to distribute dividend to its members.
Methods to be registered as a Non-profit organisation:
- Registered as Section-8 company under Companies Act, 2013
- Registered as Trust by making a trust deed
- Registered as Society under the registrar of societies.
PROCEDURE TO INCORPORATE SECTION 8 COMPANY: Section 8 of companies act, 2013 read with Rule 19 and 20 of Companies( incorporation) Rules, 2014
- Minimum two Individual Promoters/ Directors are required for incorporation of a Section 8 company.
- Form Spice-32
Documents Required for incorporation of section-8 Company:
1. Details of Directors (promoter)
- Copy of PAN and Aadhar card
- Permanent address of the Directors
- Present residential address ( Duration of stay at present address)
- Identity proof (Voter ID/ passport/ Driving licence)
- Proof of Residence (Bank Statement/ Electricity bill/ Telephone bill/ Mobile bill)- not older than 2 months
- Education Qualification of Directors
- Mobile Number
- Email Id
- Place of birth
- Passport size photograph
- Specimen signature in Form INC-10
2. Proposed Name of Company (Two names)
3. Registered address of the company.
4. Proof of Registered office address ( conveyance, lease deed, Rent agreement along with rent receipt).
5. Copy of utility bill
6. E-mail Id of the company
7. Capital structure of the Company.
8. Main business activity of the company.
Documents need to be prepared by Professionals:
- INC-9 Affidavit / declaration by first subscriber(s) and director(s) (on duly authorized Stamp Papers).
- DIR-2 declaration from first Directors along with Copy of Proof of Identity and residential address.
- NOC from the owner of the property.
- Proof of Office address (Conveyance! Lease deed! Rent Agreement etc. along with rent receipts);
- Copy of the utility bills (not older than two months)
- In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers
- All the Subscribers should have Digital Signature.
FEATURES OF SECTION 8 COMPANY:
- These companies are incorporated with object of promotion of art, commerce, science, sports, education, charity, social welfare, research, protection of environment or any such other object. And it is companies obligation to prove central government that company will incorporate only for the object mentioned in their object clause.
- After verification and satisfaction, Central Government may issue license with such conditions as it deems fit and allow incorporation of Company.
- The Central Government delegate its power to Roc, having jurisdiction over the area where the registered office of company is proposed to be situated.
- The section 8 companies are not required to add suffix “Limited or Private limited” in their name. But they must use suffix Foundation, Forum, Association, Federation, Chambers, confederation, Council, Electoral trust etc in their name.
DISADVANTAGES OF SECTION- 8 COMPANY:
Section-8 companies has various advantages as compared to other types of companies, but still there are some disadvantages of section-8 company.
- Profit of section-8 companies are not allowed to distributed as dividend to its members. It shall be reinvest for promotion of its main object.
- Alteration of memorandum and Article are not allowed, previous approval of central government is required for Alteration.
- No any tax benefits given to section-8 companies. It is registered as a company under companies Act, 2013 so, normal rate of taxation is applicable to it.
- No remuneration shall be paid to any members( only reimbursement of out of pocket expenses, reasonable rent of the premises is allowed).