If you’re an entrepreneur or part of a startup that is driven by a mission to contribute to social welfare, converting your existing organization into a Section 8 company can be an excellent step. A Section 8 company, as per the Companies Act, 2013 in India, is a not-for-profit entity established to promote arts, commerce, science, sports, education, social welfare, and environmental protection. These companies enjoy several benefits, including tax exemptions and credibility.
In this blog, we’ll guide you through the process of converting your existing organization into a Section 8 company. We’ll keep the steps straightforward and aligned with Indian guidelines while ensuring that you grasp the key details.
What is a Section 8 Company?
A Section 8 Company is a type of NGO (Non-Governmental Organization) that operates with a charitable or non-profit purpose. Unlike other companies, it cannot distribute profits to its members and must reinvest any earnings back into its objectives. If you’re exploring Section 8 Company Registration online or considering how to register an NGO in India, this guide is for you.
Why Convert to a Section 8 Company?
If your existing organization shares a mission to serve the community or work towards non-commercial goals, converting it into a Section 8 company offers numerous benefits:
- Credibility: Section 8 companies are highly credible compared to other forms of NGOs.
- Tax Benefits: These companies can claim exemptions under the Income Tax Act.
- Grant Opportunities: Section 8 status attracts funding and grants from both government and private institutions.
- No Minimum Share Capital: Unlike other entities, there is no mandatory requirement for a minimum share capital.
The Procedure to Convert an Existing Organization into a Section 8 Company
Converting your existing organization into a Section 8 company involves several steps. Let’s break them down:
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Understand the Legal Framework
The conversion process is governed by the Companies Act, 2013, and requires approval from the Registrar of Companies (RoC) and the Central Government. Ensure that your organization’s objectives align with the requirements of a Section 8 company.
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Prepare Necessary Documents
You’ll need to prepare a set of documents for the conversion process, which include:
- Memorandum of Association (MOA) and Articles of Association (AOA) drafted as per Section 8 guidelines.
- A declaration from directors affirming that the company will abide by Section 8 provisions.
- Financial statements and audit reports for the past two years.
- A detailed project report explaining the activities and objectives of the organization.
- Identity and address proofs of directors and shareholders.
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Pass a Board Resolution
The existing organization must pass a board resolution to approve the decision to convert into a Section 8 company. This resolution should also authorize a director or professional to proceed with the application.
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Apply for Name Approval
Apply for name approval through the RUN (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) portal. The name should indicate the non-profit nature of the organization, and it must include “Foundation,” “Association,” or similar terms.
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File Form INC-12
Submit Form INC-12 to the RoC along with the required documents to obtain a license under Section 8. The form should include:
- MOA and AOA
- Declaration by professionals (Form INC-14 and INC-15)
- Estimated income and expenditure for the next three years
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Obtain Approval from RoC and the Central Government
Once the application is submitted, the RoC and Central Government will review it. They may request additional documents or clarifications. Upon satisfaction, they will issue a license under Section 8.
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Incorporate as a Section 8 Company
After obtaining the license, you’ll need to file the SPICe+ Form (Simplified Proforma for Incorporating Company Electronically) along with the necessary documents. This step completes the registration process, and your organization will officially be a Section 8 company.
Key Considerations for Section 8 Company Registration
- The profits or income of the company must only be utilized for promoting its objectives.
- Members cannot claim dividends or profit distributions.
- Ensure that your organization complies with all legal and tax requirements post-conversion.
Why Choose Us for Section 8 Company Registration?
Our team specializes in assisting businesses and NGOs with Section 8 Company registration online and offline. From document preparation to navigating complex legal procedures, we handle everything for you. Our expertise ensures a smooth conversion process so you can focus on your mission.
FAQs
- What is the difference between a Section 8 company and a trust?
A Section 8 company is registered under the Companies Act, 2013, and enjoys higher credibility, structured management, and better tax benefits. A trust is governed by state-specific laws and may have fewer regulatory requirements.
- Is there a fee for converting an organization into a Section 8 company?
Yes, there are government fees associated with the conversion process, including name approval, form filings, and license issuance. Additional costs may include professional fees for legal assistance.
- Can a Section 8 company apply for FCRA registration?
Yes, a Section 8 company can apply for FCRA (Foreign Contribution Regulation Act) registration to receive foreign funding, provided it fulfills the eligibility criteria.
Converting your organization into a Section 8 company can significantly enhance its credibility and open doors to new opportunities. If you’re ready to take the next step, reach out to us for expert guidance on NGO Registration, understanding the NGO Procedure for Registration, and the complete process of how to register an NGO in India seamlessly. Together, let’s make a difference!
