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In India, there are mainly the following types of non-profit organizations(NGO's):
1. "Section 8 Company" as per Companies Act, 2013 (Section 25 as per old Companies Act, 1956)
2. "Societies" registered under Section 20 of the Societies Registration Act 1860
3. "Trusts" formed under Indian Trusts Act 1880
Main restrictions
The purpose of section 8 company is same as like other NGO's.The main object may for promoting research, social welfare, religion, charity,commerce, art, science, sports, education, and the protection of the environment or any such other object, provided that the profits, if any, or the other income is applied for promoting only the objects of the company and also, No dividend is paid to its members. Intends to apply its profits, and any other income in promoting its objects only.
Section 8 Company is registered under the Central Government’s “Ministry of Corporate Affairs (MCA)”whereas the Societies and Trusts are registered under the different State Government regulations.However, this has various advantages when it is compared to Trust or Society and it also has higher credibility amongst the donors, Government departments, and other stakeholders.
However, it differs from a company in one very crucial aspect, i.e. it cannot use the words Section 8, private limited or "Limited" in its name. Section 8 Company is most popular form of NGO in India. It is easy to register, run or manage.
Benefits they can also avail
80G Certificate for Section 8 Companies:
12A Registration for Section 8 Companies
Minimum requirements
Minimum 2 Shareholders (for Private Limited NGO),Minimum 2 Directors (for Private Limited Co.)
Minimum 7 Shareholders (for Public Limited NGO),Minimum 3 Directors (for Public Limited Co.)
There is No requirement of Minimum capital
Important Exemptions:
1. A general meeting may be called by giving notice not less than 14 clear days instead of 21 clear days.
2. It shall be enough for a Section 8 Company to hold at least one meeting within every six calendar months instead of holding four meetings a year.
3. Recording of minutes of General Meetings, Board Meeting and other resolutions has been withdrawn. However, the minutes of meetings may be recorded within 30 days of conclusion of the meeting in cases where the company’s articles provide for confirmation by way of circulation of minutes.
4. Conditions requiring and governing appointment of independent directors have also been waived off.
5. Any person can be appointed as Company Secretary even if he/she is not a member of Institute of Company Secretaries of India.
6. The maximum limit of 15 directors and appointment of more than 15 directors by passing special resolution has been withdrawn.
7. The bar on taking up directorship in more than 20 companies has been relaxed.
8. A firm can even be a member of a Section 8 Company.
Restrictions/ Privileges for Section 8 Company
*A firm may be a member of the Section 8 company.
*A Section 8 company shall not alter the provisions of its memorandum or articles except previous approval of the Central Government.
*A Section 8 company may convert itself into company of any other kind only after complying with conditions as per rule 21, of The Companies (Incorporation) Rules, 2014
*The Central government may, by license, allow an existing company registered under the Companies Act, 2013 or under any previous act was formed with the objects- specified in clause (a) of Section 8(1) of the Companies Act, 2013 and with the restrictions & prohibitions as mentioned respectively in clauses (b) & (c) of Section 8 (1), Companies Act, 2013
-if the company applies to the Central Government to be registered under Section 8 of Companies Act, 2013
-it omits the words “limited company” / “private limited” from its name
-subject to such conditions as the Central Government deems fit
*A Section 8 company shall amalgamate only with another Section 8 company and having similar objects.
*Prohibition for declaration of dividend.
| Basis | Trust | Society | Section 8 |
| cost | Lowest | Moderate | High |
| Registration | Not mandatory unless trust owns property | Mandatory | Mandatory |
| National/ State | State Only | State Only | National |
| Members | Min. 2 | Min. 7 | Min. 2 |
/
Documents Required
FAQS
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 includes 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.
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 Company with unlimited liabilities be registered as a Section 8 Company?
No. Rule 20(1) of the Companies (Incorporation) Rules, 2014 provides that only a limited company registered under this Act or under any previous company law shall make an application to the Registrar for issue of license. Therefore, a 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 words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc
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 Section 8 Company alter its Memorandum of Association or Articles of Association by only passing a special resolution?
A Section 8 Company can alter the provisions of its Memorandum or articles by passing a special resolution, however such alteration requires the approval of the Registrar of Companies [vide MCA notification dated 21st May, 2014]. Further, if alteration in Memorandum or Articles results in conversion of Section 8 Company to any other kind of company, prior approval of Central Government is required. Such power is delegated to Regional Director [vide MCA notification dated 21st May, 2014].
Is it mandatory for a Section 8 Company to appoint an Independent Director?
No, Section 8 Companies are exempted from the requirement of appointment of independent director and all the consequential provisions relating to Independent directors under section 149(1) of the Companies Act, 2013 vide exemption notification dated June 05, 2016.
Whether section 8 company is required to appoint Women director?
Yes, Section 8 Company, if covered under limits as prescribed under Rule 3 of Companies (Appointment of Directors) Rules, 2014 is required to appoint women director under second proviso to section 149(1).Also, every existing section 8 company falling under the prescribed criteria should have complied with this provision within one year from the commencement of this provision i.e by March 31, 2015. Also, if Section 8 Company is incorporated under Companies Act, 2013 and falls under second proviso to section 149(1), then, it should comply with the requirement of appointing women director within six months of the incorporation of the company
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