Non Profit Company

Incorporation of Section 8 Company (Non-Profit Company)

A Section 8 Company is a type of company registered under the Companies Act, 2013, with the primary objective of promoting charitable or not-for-profit activities, such as education, art, science, sports, social welfare, environmental protection, and similar causes.

Unlike other companies, Section 8 companies are prohibited from distributing profits to their members and must apply all income and profits toward the promotion of their stated objectives.

Non Profit Company

Legal Framework

Section 8 Companies are governed by:

Section 8 of the Companies Act, 2013

Companies (Incorporation) Rules, 2014

Circulars, notifications, and guidelines issued by the Ministry of Corporate Affairs (MCA) and Registrar of Companies (RoC)

Characteristics of a Section 8 Company

Charitable Objective

Formed for promoting commerce, art, science, religion, charity, or any other useful object.

No Profit Distribution

Profits or income cannot be distributed as dividends.

Limited Liability

Members' liability is limited.

Separate Legal Entity

It exists independently of its members.

Tax Benefits

Eligible to apply for tax exemptions under the Income Tax Act, 1961.

Eligibility Criteria

  • A minimum of 2 Directors and 2 Members for a private Section 8 company; 3 Directors and 7 Members for a public Section 8 company.
  • At least one director must be a resident in India.
  • The company must have a registered office in India.
  • The company must have a charitable or not-for-profit objective.

Documents Required for Incorporation

For Directors and Subscribers:
  • PAN Card
  • Identity Proof (Aadhaar / Voter ID / Passport / Driving License)
  • Address Proof (Utility bill or bank statement)
  • Passport-size photographs
  • Digital Signature Certificate (DSC)
For Registered Office:
  • Latest utility bill (electricity / water / property tax receipt)
  • Rent agreement (if applicable)
  • No Objection Certificate (NOC) from the owner

The incorporation of a Section 8 Company involves approval from the Registrar of Companies (RoC) and, in some cases, the Regional Director (RD). The process includes the following steps:

  • Name Reservation using Part A of SPICe+ form (Name should reflect charitable nature)
  • Preparation of Memorandum (MoA) and Articles (AoA) in prescribed format (INC-13)
  • Filing of SPICe+ Part B and linked forms:
  • INC-12 (application for license under Section 8)
  • INC-14 (Declaration by a practicing professional)
  • INC-15 (Declaration by each subscriber)
  • AGILE-PRO-S (PAN, TAN, GST, EPFO, ESIC, Bank Account)
  • Issuance of License by RoC under Section 8
  • Issuance of Certificate of Incorporation upon approval

  • Legal Recognition for NGOs and charitable organizations
  • Separate Legal Identity allows for contracts, legal proceedings, and property ownership
  • Limited Liability protects members from personal liability
  • Exemption from the use of “Private/Public Limited” in the company name
  • Eligibility for 12A and 80G registration under Income Tax Act for tax exemptions

  • Section 8 Companies are subject to both general company law compliance and specific conditions for non-profits:
  • Appointment of Auditor within 30 days of incorporation
  • Conduct of Board Meetings and Annual General Meetings
  • Maintenance of Books of Accounts and Statutory Registers
  • Annual Filing of Financial Statements (AOC-4) and Annual Return (MGT-7)
  • No distribution of profits to members
  • Application of profits strictly toward the objects stated in the MoA
  • Restrictions Applicable
  • Profits cannot be shared among members or directors.
  • Any alteration of MoA or AoA requires prior approval from the Central Government (Regional Director).
  • Use of profits must align strictly with the objectives stated at the time of incorporation.
  • Dissolution proceeds must be transferred to another Section 8 company with similar objects.

Conclusion

A Section 8 Company offers a structured and legally recognized form for carrying out charitable and not-for-profit activities. It provides credibility and transparency to such initiatives and is well-suited for NGOs, educational institutions, charitable trusts, and other social-purpose organizations.

Stakeholders and promoters intending to register a Section 8 Company are advised to refer to the Companies Act, 2013, MCA notifications, and relevant statutory rules for complete compliance and procedural clarity.