What’s a Section 8 Company, Anyway?
Let’s start simple: a Section 8 Company is a special kind of company set up not to make profit, but to do good — in fields like education, health, environment, arts, social welfare, etc. (Yes, it’s legally a company, but with a heart.)
Unlike typical businesses that aim to return profits to shareholders, in a Section 8 setup, any surplus must be used back into the cause. You can’t just pocket it. That rule actually gives trust — for donors, partners, even foreign funders (if you get FCRA later).
Why Choose This Over Trust or Society?
You might wonder, “Why not just register as a trust or society?” Good question!
Here’s what I liked about Section 8:
- Credibility: When someone sees “Company under Section 8”, they know you’re serious, structured, governed under the Companies Act. It brings weight.
- Separate Legal Entity: It can own property, sign contracts, sue or get sued — in its own name.
- Funding & grants: Many government schemes, CSR funds, international donors prefer bodies with stricter legal oversight.
- No profit distribution: Directors or members can’t siphon off money — that discipline helps trust and sustainability.
Of course, complexities increase — compliance, reporting, audits — but I believe the benefits outweigh.
Who Can Be Part of It?
You don’t need a huge team to begin. Some basics:
- Minimum directors: 2 for a private Section 8; for a public one, 3.
- One Indian resident: At least one director must live in India (be an Indian resident).
- Objectives must be charitable: Your MOA (Memorandum of Association) needs to clearly state non‑profit goals.
- No mandatory capital: You don’t have to deposit a fixed amount just to start.
- Unique name: Name should reflect your mission but not mislead or conflict with other companies.
Example: Suppose your NGO is for rural health awareness. You might pick a name like “Rural Health Care Initiative” or “Rural Aid Foundation”. Avoid names suggesting “Limited” or “Profit”.
Steps to Register — How I Would Do It
Below is a step‑by‑step path I’d take, if I were starting today.
1. Get Digital Signatures (DSC)
Every proposed director signs documents digitally. You’ll need DSCs. Without that, nothing online will work.
2. Get Director Identification Numbers (DIN)
Each director needs a DIN. This is your identity in the corporate world.
3. Choose & Reserve Name
Pick 2–3 names, check if they’re available, and reserve. It’s good to brainstorm names with teammates so you don’t lose time.
4. Draft MOA & AOA
This is critical. MOA contains your “object clauses” — what you will do (education, health, etc.). AOA has rules — how board meetings will be held, how funds are used, etc.
While drafting, stay clear and unambiguous. I usually write in plain language, then legal vetting can polish.
5. Apply for Section 8 License
This is a unique step. You submit an application to the authorities explaining your objectives, financial projections (say next 3 years), declarations, and plans. This license confirms you are allowed to operate under Section 8.
6. File Incorporation Forms
Once license is granted, you file incorporation documents (with MOA, AOA, verified declarations, etc.). If all is in order, you receive the Certificate of Incorporation.
7. Post‑incorporation: PAN, TAN, Bank Account
After incorporation, apply for the company’s PAN (Permanent Account Number), TAN, and open a bank account in its name.
What Documents You Need (Rough List)
- Identity proof of directors (PAN, Aadhaar, passport, etc.)
- Address proof (utility bill, bank statement)
- Photographs of directors
- Proof of registered office (rent agreement, utility bill, NOC)
- Drafted MOA & AOA
- Declarations and affidavits
- Forwarding letters, board resolution drafts
- Financial projections for 3 years
Tip: Maintain one clear folder (physical + digital) for all these. Messing with document versions can waste days.
How Much Time & Cost?
From my experience and what I’ve seen: 10 to 20 business days is a reasonable range (if papers are correct). Delays come mainly from name rejection, incomplete docs, or government backlogs.
Cost? It depends on state, number of directors, complexity. But ballpark: between ₹10,000 to ₹25,000 (including professional help, government fees, notary, etc.). If you do much yourself, the cost can be lower. Always ask for an itemized quote from any consultant.
After You’re Registered — Don’t Relax Too Early
This is where real work begins — keeping everything legal and active.
- Apply for 12A & 80G registrations: So donors can claim tax deductions, and you get income tax exemption.
- Maintain accounts & audits: Even if you’re small, books must be maintained. Once income or turnover crosses a threshold, audit becomes mandatory.
- Annual filings: You must file annual returns, financial statements etc with the MCA (Ministry of Corporate Affairs).
- Board meetings & minutes: Hold regular board meetings, maintain minute books, record decisions.
- FCRA (if foreign funding): If you plan to receive foreign funds, you need FCRA registration. Note: that can only be done after certain conditions, often after 3 years of operation.
- Use the surplus wisely: Any extra money must go back into your mission — not used for personal gains.
If you skip compliance, your company risks penalties or being struck off.
Some Real Questions You May Ask
- Can I convert a society or trust into Section 8?
- Not exactly. You need to form a new Section 8 Company. You can transfer assets/activities carefully (with legal advice).
- Can foreigners be directors?
- Yes, but at least one director must be resident in India.
- Is salary allowed?
- Absolutely. You can pay staff salaries, operational costs. What you can’t do is distribute profit among members.
- Does the license expire?
- No, the license is generally permanent unless revoked for non‑compliance.
- Do I need a lot of money to start?
- Not really. Because there’s no fixed capital requirement. But you will need funds for setup, legal, operational expenses.
Some Tips from My Experience
Don’t rush the name
A rejected name causes major delays. Once, I proposed a name that was close to another NGO, got rejected, and lost nearly a week. Choose a few backup names.
Clarity in objectives
Donors, regulators — all will look at your object clause. If it's vague (“social welfare”), they might push back. Be specific (“improve rural health in X district”).
Keep communication alive with your legal consultant
Don’t assume they’ll track every tiny thing. Ask for a checklist, regular updates.
Document everything
Even informal board decisions should be minuted and recorded. Later, you’ll thank yourself.
Plan for future scale
In your MOA, you might want flexibility to expand to related areas (say from education to women’s empowerment). Don’t box yourself too narrowly.
For more information visit :https://www.psrcompliance.com/section-8-company-registration
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