NGO Registration – Section 8 Company in India

Updated on : Feb. 11, 2023 - 5 p.m. 17 min read.

What are Section 8 Company and NGO?

The Section 8 Company is a type of non-profit organization (NGO) that is registered in India under the 2013 Companies Act. This kind of business is organised to advance the arts, commerce, education, charitable causes, research, science, athletics, or any other similar goals. It can't give its members any profits or dividends because it is a non-profit organization. A board of directors that regulates a Section 8 Company, whose goal is to serve the public good, is responsible for the company's management and administration.

An NGO, or non-governmental organization, is a category of social welfare organisation created with the purpose of advancing and enhancing the standard of living for those in need. This could take the form of offering social services, healthcare, or education. Without any thought of financial gain or profit, an NGO's main objective is to work for social welfare. NGO registration options include trust, society or section 8 companies.

Requirement for Section 8 Company Incorporation

Directors

A Section 8 Company must have a minimum of two directors in order to be incorporated under Indian law. They must live in India and be citizens of India in order to qualify as these directors. They must also be of sound mind and able to enter into a contract. The directors of a Section 8 Company are in charge of managing and supervising the company's operations, ensuring that the company's goals are achieved, and rendering significant decisions on the company's behalf. The goals and objectives of the company, as well as the pertinent rules and laws that apply to it, must be crystal clear to them. It is important to give careful thought to the appointment of directors, which is a crucial step in the incorporation process.

Capital Requirement and Name

In order to incorporate a Section 8 Company in India, there is no specific requirement for the minimum capital. However, it is necessary that the name of the company end with the words “Section 8 Company Limited." This is to distinguish it from other forms of companies and to reflect its status as a company that has been incorporated under Section 8 of the Companies Act, 2013. The name of the company should also be unique and not similar to any existing company or trademark. The company can choose to have a paid-up capital of any amount, but it is recommended to have a sufficient amount of capital to meet its operational and administrative expenses.

Charitable Objects

The Memorandum of Association (MOA) and the Articles of Association (AOA) must express the charitable objectives that the company seeks to advance in order for it to be registered as a Section 8 company. The goals should not involve any unlawful or forbidden activities and should be in accordance with the 2013 Companies Act's provisions. It is crucial that the company be established to advance goals of general public benefit rather than for the personal gain of its members or the financial gain of its directors.

Management

The board of directors is in charge of making decisions, overseeing the business's finances and operations, and making sure that its goals are being attained. Additionally, they are in charge of selecting the CEO and CFO, among other executives, who are in charge of running the business on a daily basis. The board must hold regular meetings to discuss and decide on the operations and long-term goals of the business.

A regulation under Various Acts

The Companies Act, 2013 lays down the rules and regulations for the incorporation and functioning of companies in India. Section 8 companies being a type of company, are also bound by the provisions of this act. The Ministry of Corporate Affairs is the regulatory body that oversees the functioning of companies in India, including Section 8 companies. The Ministry lays down guidelines and regulations for the formation and operation of Section 8 companies and ensures that they comply with the provisions of the Companies Act, 2013.

Obtain DSC (Digital Signature Certificate)

The digital signature certificate ensures the authenticity and security of electronic transactions. It is obtained from a licensed Certifying Authority (CA) and is linked to the director's name, address and other personal details. The process of obtaining a DSC involves online registration, submission of identity proof and address proof, and payment of a fee. After obtaining a DSC, it must be linked to the director's DIN for the process of company incorporation to proceed smoothly. The DSC helps in the e-filing of forms and documents with the Ministry of Corporate Affairs and also helps in reducing the time and effort involved in manual filing.

Apply for Director Identification Number (DIN)

Every director of a company must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs. The DIN is a unique identification number that is used to keep track of all directors appointed by a company.

Laws in India applicable to an NGO

NGOs (Non-Governmental Organizations) in India are governed by various laws and regulations. The main laws applicable to NGOs in India are:

The Indian Trusts Act, 1882: This act governs the creation of trusts and lays down the rules and procedures for the administration of trusts in India. It applies to all types of trusts, including charitable trusts and religious trusts, which are commonly established as NGOs in India.
The Societies Registration Act, 1860: In India, this law controls society registration and regulation. Because they are relatively simple to create and manage, societies are a common type of NGO in India.
The Companies Act, 2013 (the "Companies Act"): This act regulates the formation and operation of Indian corporations, including Section 8 Companies, a category of a corporation that can be used to establish an NGO in India.
The Foreign Contribution (Regulation) Act, 2010: It is a piece of legislation that governs how foreign contributions are received by Indian NGOs. NGOs that accept donations from abroad must register with the Ministry of Home Affairs and abide by the act's rules.
The Income Tax Act, 1961: This law establishes the tax regulations that NGOs in India must abide by. NGOs must abide by the act's rules in order to keep their tax-exempt status, and they are exempt from income tax in certain circumstances.
The Foreign Exchange Management Act of 1999: It is a piece of legislation that controls NGOs' foreign exchange dealings in India. NGOs that accept donations from abroad are required to abide by the act's rules in order to make sure that their foreign exchange transactions are legal under Indian law.
The Environmental Protection Act of 1986: This law establishes the environmental protection regulations that apply to NGOs in India. In order to ensure that their operations are environmentally sustainable, NGOs that engage in activities that have an impact on the environment are required to abide by the act's provisions.

Documents Required for Registration Section 8 Company Registration

The following documents are typically required for registering a Section 8 Company in India:

PAN card of the proposed directors
Address proof of the proposed directors
Memorandum of Association (MOA)
Article of Association (AOA)
Proof of registered office address
Consent to act as a Director
Declaration by first subscribers
NOC (No Objection Certificate) from the owner of the registered office
Affidavit by the first subscribers and directors
E-MoA & E-AoA (in electronic format)
Proof of identity and address of the authorized signatory
Digital Signature Certificates (DSC) of the authorized signatory.

Note: The requirements may vary slightly based on the jurisdiction in which the company is being registered.

Forms Required for Section 8 Company Registration

Procedure for Registration of NGO under Section 8 Company

Step 1 – Obtain a DSC of the proposed Directors of the Section 8 Company. Once a DSC is received, file Form DIR-3 with the ROC for getting a DIN. The Proof of Identity and Address Proof need to be attached to obtain DSC.

Step 2 – Once the DIR-3 is approved, the ROC will allot a DIN to the proposed directors.

Step 3 – File Form INC-12 with the ROC to apply for a license for the Section 8 company along with the attachment of the required documents as mentioned above.

Step 4 – Once the form is approved, a license under Section 8 will be issued in Form INC-16.

Step 5 – After obtaining the license, file the SPICe+ Form with the ROC for incorporation along with the required attachments as mentioned above.

If the ROC is satisfied with the forms submitted, he issues a Certificate of Incorporation along with a unique Company Identification Number (CIN).

What are the advantages of Section 8 Company?

Tax Benefits: Section 8 Companies are eligible for tax exemptions under section 80G of the Income Tax Act, 1961. This means that any donation made to a Section 8 Company is eligible for tax deductions.
Legal Recognition: A Section 8 Company is a legal entity that is recognized under the Companies Act, 2013. This gives the company a separate legal identity, making it easier to enter into contracts, sue or be sued, and own property.
Reputation and Credibility: Incorporating a Section 8 Company provides a level of credibility and reputation to an organization. This can make it easier to attract volunteers, supporters, and donors.
Easy to Raise Funds: As a Section 8 Company is eligible for tax exemptions, it makes it easier to raise funds from individuals and institutions.
Separate Legal Identity: Section 8 Companies have a separate legal identity, which means that the directors and members are not personally liable for the company's debts.
Easier to Manage: A Section 8 Company is governed by a board of directors, who are elected by the members. This makes it easier to manage and make decisions for the company.

By Amit Pawar

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