Non-profit Organization/Trust (NGO) (Section 8)

Non – Government Organisations (NGOs) also known as Not for Profit Organisations can be registered either as a Trust, a Society or a Company. Trust types of NGOs are registered under the provisions of Indian Trust Act, 1882 with the Office of Sub-Registrar having jurisdiction over the area, where principal office of Trust shall be situated. Societies can be registered with the Registrar of Societies either under the Central law, i.e. Indian Society Registration Act, 1860 or under the State Law of concerned state.

Section 8 Companies are incorporated under the provisions of Companies Act, 2013 and have a license issued by the Regional Director, Ministry of Corporate Affairs, Govt. of India under Section 8 of the Companies Act, 2013 to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other similar object. Section 8 Company can have their area of operations all over India without any territorial limitation. In Section 8 Companies, payment and distribution of dividends / excess profits to the promoters and shareholders of the company are prohibited by Company’s Memorandum and Articles of Association.

Presently, Section 8 Companies are regulated by the Registrar of Companies and governed by the provisions of Companies Act, 2013 Rules and Regulations made thereunder. License under Section 8 is issued by the Office of Regional Director, Ministry of Corporate Affairs, Govt. of India (power delegated to the Registrar of Companies) and registering authority is Central Registration Centre, Ministry of Corporate Affairs. Central Registration Centre has its only office in India at Manesar, Gurugram, State of Haryana in the National Capital Territory of Delhi.

Section 8 companies can be registered as a Private Limited Company or as a Public Limited Company both. For registering it as a Private Limited Company, there should at least two individuals to act as Directors and shareholders of the company. Any legal person such as Company, LLP, Trust, foreign corporation/company can also be a shareholder in a Section 8 company. For Public Limited Companies there should be at least seven persons out of whom three individuals should be Directors of the company. Same persons can act as both Director and Shareholder.

Procedure for registration of Section 8 Company

Obtaining Digital Signature Certificate

Since all incorporation papers are submitted to the Central Registration Centre, Ministry of Corporate Affairs (registering authority to register all types of Companies in India) online, so all the Individual promoters are required to have a Class II type of digital signature certificate issued by any private agency such as SIFY and/or E-Mudhra.

Filing of name application and obtaining name approval from the Central Registration Centre, Ministry of Corporate Affairs.

After obtaining the Digital Signature Certificate and DIN for all the promoters, the next step is to file name application in RUN (Reserve Unique Name) and obtain name approval certificate from the Central Registration Centre, Ministry of Corporate Affairs before preparing the Memorandum and Articles of Association and SPICE. RUN is filed online after logging in on www.mca.gov.in. Two options for the proposed name, in order of preferences, can be submitted. In case the promoters have any registered trademark in India, or elsewhere, and the same is being used in the name of proposed Indian company, a no objection of the Proprietor of the trademark along with trademark registration certificate shall also be necessary to get name approved.

The Central Registration Centre shall provide two opportunities to the applicant, in case the name applied is not available for registration, thereafter a fresh name application in Form RUN shall be filed. MCA fee for filing Form RUN is INR. 1,000/- which is non-refundable.

Once approved, the name shall be available for registration for 20 days and after expiry of 20 days, the approved name shall automatically be withdrawn and a fresh name application shall be filed to get the same name again. In short – incorporation papers must be submitted within 20 days of name approval. Before making name application, one should make sure that the proposed name is not:

Similar / identical to an existing company in India;
Already reserved;
Similar / identical to any registered or applied trademark in India;
general name, e.g. Corporate Consultants, Food Trading Company, etc.

Further, the name of a Section 8 company must include the word – Foundation, Federation, Council, Confederation, Association, Forum, etc. as suffix. Though Section 8 companies are incorporated as a limited liability company, they have been exempted to include suffix – private limited or limited in the names.

Memorandum of Association (MOA) & Articles of Association (AOA)

The main constitutional documents of an Indian company are its Memorandum of Association and Articles of Association. The Memorandum of Association contains the objectives of the company and details of Company’s promoters and their ownership in the company and also their liability in case of liquidation. The Articles of Association is also very crucial document and it contains the rights, duties, obligations of promoters and directors. It defines working relationship of company with its promoters and directors. The company’s Memorandum of Association and Articles of Association have to be very carefully drafted as a company cannot go beyond the provisions of its Memorandum and Articles of Association.

The subscriber page of the Memorandum and Articles of Association shall be signed by promoters and their signatures shall be attested by a witness, who shall be a practicing Company Secretary, Chartered Accountant, Cost Accountant or an Advocate. The practicing professional shall fill-in his/her full name, residential address, occupation, Membership No. or Certificate of Practice Number and sign.

Preparation and filing of License Application

After finalization of Memorandum of Association and Articles of Association, few other documents shall be prepared to file the license application with the Regional Director. The license application is made in eForm INC–12 and this shall be accompanied by:

Memorandum & Articles of Association of the proposed company;
A declaration confirming the application by a Company Secretary in Practice on a Non – Judicial stamp paper of prescribed value;
List of names, descriptions, addresses and occupation of the promoters as well as Board Members of the proposed company;
A statement showing details of assets and liabilities of the company as on date with the application;
An estimate of future annual income and expenditure of the proposed company, specifying the source of income and object of expenditure;
A statement giving brief description of work, if any, already done by the association;
A statement specifying briefly the grounds on which the application is made;
A declaration in prescribed form on non – judicial stamp paper by each person making an application;
A letter of authority;
Payment of prescribed fee.

Once the INC 12 is approved, a license under Section 8 of the Companies Act, 2013 is issued to the promoters, and then applicant is required to incorporation application in SPICe to obtain Certificate of Incorporation. Also, since approved name is valid only for 20 days, therefore, it is extremely important to file eForm INC – 12 and obtain license at the earliest. In case license is not obtained with the period of 20 days, the approved name will get expired and the promoters will have to file name application in Form RUN again.

Preparation and submission of SPICe (Incorporation Papers)

Once Company’s Memorandum and Articles of Association are finalised and executed, an incorporation application shall be prepared in SPICe and submitted online with the Central Registration Centre, Ministry of Corporate Affairs. In order to prepare SPICe, the following information and papers shall be necessary:

Service Request Number of RUN (name application form), in case name is reserved earlier. In case the applicant has not reserved the name earlier, name application can be filed in SPICe as well. However, it is advisable to get the name reserved through RUN to be double sure about name and avoid procedural hurdles in case the proposed name faces rejection from the Central Registration Centre;
Main business activity code of the proposed company;
Particulars of registered office address: In India, every company must have an Indian address to be used as registered office of the company within fifteen days of incorporation. Particulars of registered office address can be submitted in SPICe at the time of incorporation. In case registered office address is not finalised, then particulars of a local communication address has to be provided in SPICe and company can submit the particulars of its registered office in Form INC – 22 within 15 days of incorporation;
Particulars of Authorised and Paid-up share capital of the company: There is no requirement to have minimum paid-up share capital and therefore, paid-up share capital can be as low as INR. 1/-. The authorised share capital or nominal capital is maximum limit of share capital, a company can issue shares. Presently there is no incorporation fee for keeping the authorised share capital up to INR 1 Million and only Stamp Duty has to be paid on authorised share capital. It is advisable to keep the authorised capital INR 1 Million at the beginning. The company’s authorised capital may be increased at later stage after incorporation as per the requirements of capital;
Particulars of Directors / Shareholders: After introduction of SPICe, the application for allotment of DIN (Director Identification Number) is submitted at the time of incorporation itself through SPICe. DIN is a eight digit unique number allotted to all the Directors by the Central Government and is valid for lifetime. To obtain, the Directors/Promoters has to their passport and any document establishing proof of address. The copy of PAN, proof of identity and proof of address must be self-attested. In case these documents are not in English or Hindi language, then a certified translated copy shall also be attached. In SPICe, the names, father’s name, residential address, nationality, residential status, occupation, education qualification, the number of shares to be held by them in the company and amount paid-up, etc. shall be mentioned. Particulars for allotment of PAN and TAN shall also be filled in the SPICe. After filling the necessary details in the SPICe, necessary attachments such as affidavits, consent letters, Memorandum of Association, Articles of Association, Proof of Identity and address of promoters etc. shall be attached. The SPICe has to be digitally signed by the applicant and the same shall be duly certified by a practicing professional such as a practicing Company Secretary, Chartered Accountant or a practicing Cost Accountant.

SPICe shall be submitted on the MCA portal along with Memorandum of Association and Articles of Association and license issued under Section 8 of the Companies Act, 2013.

Clarifications | Additional information requested by the MCA officials

After submitting SPICe online, all the papers are reviewed and scrutinized by the officials at the Central Registration Centre and they may require some additional information and/or clarifications by sending back the form for its re-submission. These clarifications are requested through e-mail through re-submission request. Upon receipt of re-submission request, the applicant has to again prepare SPICe and address the queries raised by Central Registration Centre and re-file the application.

Certificate of Incorporation & Allotment of PAN & TAN

Once all clarifications are provided and officials of Central Registration Centre are satisfied, they approve SPICe and send the same to the Income Tax Department for the allotment of PAN and TAN to the proposed company. PAN and TAN are generally allotted within few hours and after allotment of PAN and TAN by the Income tax department, an electronic Certificate of Incorporation is generated. The electronic Certificate of Incorporation contains company name, an unique CIN, date of incorporation, Company’s registered office address, Company’s PAN and TAN. After incorporation, first Board meeting of the company is to be necessarily held within one month of incorporation, wherein a Board resolution to appoint the first auditors of the company and opening of corporate bank account shall be passed.

After issuance of Certificate of Incorporation, the promoters can initiate the process of bank account opening and remittance of share application money in Company’s bank account. To open a corporate bank account in India, the Directors of the Company will have to be physically present to sign the bank account opening documents as this is general practice adopted by banks in India.

Bank Account Opening and Remittance of Share Application Money

After incorporation, a Bank Account in the name of newly incorporated Section 8 company shall be opened by the Board of Directors and the Subscribers of Memorandum and Articles of Association of the Company shall deposit their subscription money in such bank account to help the company raise initial capital to start its business.

Minimum Requirement for Section 8 Company Registration

Minimum two shareholders;
Minimum two Directors (Directors and shareholders can be same person);
At least one Director shall be resident in India;
No Minimum capital required;
Income-Tax PAN is a mandatory requirement in case of Indian nationals;
Any one of the Identity Proof (Voter ID / Aadhar Card / Driving License / Passport); Passport is a mandatory requirement for proof of identity in case of foreign nationals;
Any one Proof of Residence (Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement);
Registered Office address proof (rent agreement along with latest rent receipt and copy of latest utility bill in the name of landlord and a no objection certificate from the owner of the premises, in case the premises are rented);
In case the premises are owned by a Director and Promoters, any documents establishing the ownership such as Sale Deed / House Tax receipt, etc., along with the No-Objection Certificate.

The Next Step

India’s incorporation process is effectively fast and simple and a company can be incorporated in 2-3 business days only.

We at RM Shah & Co can help with Section 8 company registration in India. In case of any question(s) or clarification(s) required, you can communicate at info@rmshah.in or at +91 9167406373. To know more about us, our practice, please take a look at https://rmshah.in

Non-profit Organization/Trust (NGO) (Section 8)