How to Register as NGO – Section 8 Company in India

NGO (Non-Government Organisation) is an organization that works for non-profit/ charitable purposes. An NGO established as Section 8 company under the Companies Act, 2013 (‘Act’) is governed by the Ministry of Corporate Affairs (‘MCA’) whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government.

Section 8 company registration has more benefits in comparison to trust and society. This type of company has more credibility among government departments, donors, and other stakeholders. In this article, we will explain how to register as an NGO in the form of Section 8 Company, under the Companies Act, 2013.

Laws in India applicable to an NGO

NGOs can be registered in India under any of the following laws: 

• Trust under Indian Trusts Act, 1882
• Society under Societies Registration Act, 1860
• Section 8 of Companies Act, 2013

Purpose of NGO – Section 8 Company Meaning

The main purpose of establishing a  company as a Section 8 company is to promote non-profit objectives such as the following:

• Commerce
•  Art 
• Science 
• Sports 
• Education 
• Research 
• Social welfare 
• Religion 
• Charity 
• Protection of environment 
• Any such other object related to the above objects

When the Central Government is satisfied that a person or association of persons propose to establish a limited company having the above-mentioned objectives, it shall grant a license to register as a Section 8 company under the Companies Act, 2013 (‘Act’). 

The profits/incomes of the Section 8 company, if any, are applied towards promoting the objectives of the company and are not distributed as dividends to its shareholders.

Section 8 Company Benefits

There are many advantages of registering an NGO under Section 8 of the Companies Act, 2013, which are as follows:

No minimum capital: There is no minimum capital requirement for a Section 8 company incorporation and the capital structure of Section 8 can be altered at any time as per the growth requirement of the company. Thus, the funds required for carrying the business operations can be brought in later, through donations and subscriptions from members and the general public.

Tax Benefits: The Company Auditor’s Report Order (CARO) does not apply to the Section 8 company. A Section 8 company enjoys tax benefits under 80G of the Income Tax Act, 1961. 

No Stamp Duty: There is no stamp duty imposed for Section 8 company incorporation in India. The Section 8 company need not pay the stamp duty imposed on the Memorandum of Association (MOA) or Articles of Association (AOA) of a private or public limited company.

Separate Legal Identity: Section 8 Company registration acquires a distinct legal identity from its members. A registered partnership firm can also become a member in its individual capacity and obtain Directorship of Section 8 company. It has perpetual existence and thus, the entry or exit of any member will not affect the operation of the Section 8 company.

Limited liability: The members of the Section 8 company have limited liability as per their share subscribed. They are not personally liable for the losses of the company.

Credibility: Section 8 companies are more credible and reliable than any other form of a charitable organisation. It is regulated under the provisions of the Act, thus they need to have mandatory audits every year and the Memorandum of Association cannot be altered relating to the non-profits objectives of the company.

Exemption to the donors: The tax exemption is granted to the donations received by the section 8 company under Section 12A and 80G of the Income Tax Act, 1961. 

Section 8 Company Registration Eligibility

• An Individual, HUF is eligible to start a Section 8 company in India.
• Two or more persons who will act as Directors or shareholders should fulfil all the compliances and requirements of the Section 8 company incorporation under the Act.
• There must be at least one director who should be a resident of India in the Section 8 company. 
• The objective must be one or more of the following – promotion of sports, social welfare, the advancement of science and art, education and financial assistance to lower-income groups.
• Founders, directors, members directors of the company cannot draw any remuneration in any form of cash or kind.
• No profit should be distributed among the members and directors of the company directly or indirectly.

Section 8 Company Incorporation Requirement

Directors 

A minimum of two directors is required if the Section 8 company is to be incorporated as a private limited company, and a minimum of three directors in case of incorporation as a public limited company. The maximum number of members is 200 in the case of a private limited company, whereas for a public limited company, there is no such limit.

Capital Requirement and Name

There is no requirement of minimum paid-up capital in the case of a Section 8 company incorporation. NGOs established as a Section 8 company need not use the words ‘Limited’ or ‘Private Limited’ in their name.

Charitable Objects

Section 8 companies are incorporated with non-profit objectives. The MOA and AOA must mention the non-profit objective or purpose for which it is established. Any profits earned by the section 8 company is utilised for the furtherance of its main objectives, i.e. charitable purposes or reinvested in the company. The profits will not be distributed among its members.

Management

Section 8 company is managed by the Board of Directors as per the MOA and AOA of the company, unlike other trusts that are managed by the Trustees as per the Trust Deed.

Regulation under Various Acts

A Section 8 company needs to follow the rules and regulations prescribed under the Companies Act, 2013. It needs to maintain books of account, and file returns with the Registrar of Companies. Section 8 company cannot make any changes to the provisions of MoA and AoA without the prior approval of the Central Government. It also needs to follow the provisions of the Income Tax Act and GST Law. 
 

 Obtain DSC  (Digital Signature Certificate) 

Digital signatures of the proposed directors of the company are required as the forms for the registration process are filed online and should be digitally signed. Digital signature certificates (DSC) are issued by a government recognized certifying agencies. The list of such certified agencies can be accessed here. The cost of obtaining a DSC varies depending upon the certifying agency. You must obtain a Class 3 category  DSC. 

Apply for Director Identification Number (DIN)

You have to apply for a  DIN for the proposed directors of the company. The application for allotment of DIN has to be made in Form DIR-3 or along with the SPICe+ form for registration. You have to attach the scanned copy of the necessary documents such as a self-attested copy of PAN, Identity and Address proof of directors along with the form and submit it online on the MCA Portal. The form must be attested by a practising professional who can be a chartered accountant, a company secretary, or a cost accountant.

Forms Required for Section 8 Company Registration

Purpose of the Section 8 Company Forms

Form INC-12 

Form INC-12 is filed for the grant of the license to operate as a Section 8 company. Along with this form, applicants are required to attach a draft copy of the Memorandum of Association (MOA) and Articles of Association (AOA).

There is a prescribed format for Memorandum of Association of a Section 8 company in Form INC 13. The subscription pages of the MOA and AOA shall be signed by each subscriber along with their name, address, description, and occupation, in the presence of at least one witness. 
 

Form INC 12 is to be submitted along with the following attachments : 

• INC-13 – Memorandum of Association
• Draft Articles of Association
• INC-15 for the declaration by each subscriber to MOA that the draft memorandum and articles of association have been drawn up in conformity with the provisions of Section 8
• Estimated statement of Income & Expenditure for the next three years
• List of proposed Promoters and Directors of the Company

The following forms are required to be filed after the issuance of the license to the company 

Form SPICe+  

The SPICe+ form is the application for the incorporation of the company. The company can be reserved in the first part of the SPICe+ plus form. However, only one name can be declared for approval in this form. Thus, it is recommended that applicants access the free name search facility of existing companies available on the MCA portal before choosing the name. The system will provide a list of closely resembling names of the existing companies based on the search criteria. This will help you avoid choosing a name similar to that of an existing company. 

The following documents must be attached along with SPICe+ Form: 

• Memorandum and articles of the company duly signed by all the subscribers
• Declaration from each of the subscribers and first directors that they are not guilty of any offence or misfeasance
• Declaration in Form INC 14 and Form INC 15 from a Chartered Accountant and each person making the application respectively
• Address of correspondence till the registered office is official
• Address and Identity proofs of all the subscribers to MOA and first directors of the company
• Passport size photograph of all the directors and shareholders
   
• Copy of the rental agreement, in case the company registered office, is on a rented property 

Form INC 22 

Form INC 22 is filed for providing notice of the address of the company’s registered office. It needs to be filed within 30 days of the incorporation of the company. 

Form DIR 12 

Form DIR 12 is filed for the appointment of the directors of the company. It must be filed within 30 days from the date of the appointment of the directors.

Procedure for incorporation of a 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 needs to be attached for obtaining 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 licence 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).  

Penalty for Non-Compliance under Companies Act

The Central Government will revoke the Section 8 company license if it fails to comply with the legal provisions of the Act. If the objectives of the company are conducted fraudulently or in violation of the objectives for which it is established, the license can be revoked.

If a company defaults in complying with the provisions of the Act, the company will be punishable with a fine not less than Rs.10 lakh and may extend to Rs.1 crore. The Directors and the officers of the company in default of the provisions of the Act will be punishable with a fine not less than Rs.25,000 which may extend to Rs.25 lakh or both.

Annual Compliances of Section 8 Company

The annual compliances of section 8 company are just like the other companies.

• Conduct a minimum of two board meetings in a year
• Maintenance of Books of Accounts
• Preparation of financial statements
• Mandatory audit report
• Income tax return filing
• Filing of financial statements in form AOC 4
• An annual return is to be filed every year with other e- filing forms like MGT 7
• Additional compliances to fulfil the registration like 12AA, 80G, etc

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
 

Related Articles

Which One Should You Choose: A Society, Trust, or Section 8 Company?

Charitable Trusts and NGO – Income tax benefits

Society Registration in India

Get an expert at affordable price

For ITR, GST returns, Company Registration, Trademark Registration, GST Registration

Get an Expert