Section 8 Company: Companies Act, 2013

Section 8 company, also known as a non-profit organization, is a type of company registered under Section 8 of the Companies Act, 2013. This type of company is formed for the promotion of commerce, arts, science, education, religion, charity, or any other useful object, provided that the profits, if any, or other income derived from such objects shall be applied for promoting the objects of the company, and not distributed to its members.

Here is a comprehensive guide to the Companies Act, 2013, as it pertains to Section 8 companies, including their sub-sections and document requirements.

1. Minimum Requirements: To form a Section 8 company, there must be at least two shareholders and two directors. The directors and shareholders can be the same persons.

2. Name Reservation: The process of name reservation for a Section 8 company is the same as that for other types of companies.

3. Incorporation: The incorporation process for a Section 8 company is similar to that for other types of companies, with some additional requirements. The promoters of a Section 8 company must apply for a license under Section 8 of the Companies Act, 2013, from the Registrar of Companies (ROC).

4. Memorandum and Articles of Association: The memorandum and articles of association of a Section 8 company are similar to those of other types of companies, but must include specific clauses related to the objectives of the company and the restriction on the distribution of profits.

5. Authorized and Paid-up Capital: There is no minimum authorized or paid-up capital requirement for a Section 8 company.

6. Annual Compliance: The annual compliance requirements for a Section 8 company are similar to those for other types of companies.

7. Meetings: A Section 8 company is required to hold at least one board meeting and one general meeting each year.

8. Shares and Shareholders: A Section 8 company can issue both equity and preference shares to its shareholders. The shares can be freely transferred, subject to any restrictions mentioned in the Articles of Association. The shareholders have limited liability, meaning that their liability is limited to the amount of their investment in the company.

9. Directors: The directors of a Section 8 company must be natural persons and residents of India. They must also have a DIN (Director Identification Number) and must be eligible under the Companies Act, 2013.

10. Sub-sections: The Companies Act, 2013, provides for two sub-sections of Section 8 companies: one with income up to Rs. 10 lakhs, and the other with income above Rs. 10 lakhs.

11. Document Requirements: The documents required for the registration of a Section 8 company include the memorandum and articles of association, a declaration by the directors, a statement of assets and liabilities, and the identity and address proof of the directors and shareholders.

Section 8 companies are given certain exemptions and privileges by the Companies Act, 2013. They are exempted from paying stamp duty on the memorandum and articles of association, and they are not required to use the word “Limited” or “Private Limited” in their name. They are also allowed to alter their objects clause without shareholder approval and are not required to maintain a minimum paid-up capital.

However, Section 8 companies are subject to strict regulations related to the use of their profits. The profits generated by a Section 8 company can only be used for the promotion of its objects, and cannot be distributed to its members. The directors of a Section 8 company are also subject to strict regulations related to their remuneration, which must be approved by the company's members.

In conclusion, Section 8 companies are an important part of the Indian corporate landscape. They are registered under Section 8 of the Companies Act, 2013, and are formed for the promotion of commerce, arts, science, education, religion, charity, or any other useful object, provided that the profits, if any, or other income derived from such objects shall be applied for promoting the objects of the company, and not distributed to its members. Section 8 companies play a vital role in the promotion of social welfare activities and are often used to set up charitable institutions, schools, hospitals, and other non-profit organizations. The Companies Act, 2013, has provided a conducive environment for the growth of Section 8 companies by giving them certain exemptions and privileges. However, they are also subject to strict regulations related to the use of their profits and remuneration of directors. Overall, Section 8 companies have helped to create a positive impact on society by promoting various social welfare activities and advancing the country's development.