NGO (Non-Government Organisation) is an organization that works for non-profit/ charitable purposes. An NGO established as a Section 8 company under the Companies Act, 2013 is governed by the Ministry of Corporate Affairs whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government.
The main purpose of establishing a company as a Section 8 company is to promote non-profit objectives [Section 8(1)]. The profits/incomes of the Section 8 company, if any, are applied towards promoting the objectives of the company and are not distributed as dividends to its shareholders.
ELIGIBILITY
- An Individual, HUF is eligible to start a Section 8 company in India.
- Two or more persons who will act as Directors or shareholders should fulfil all the compliances and requirements of incorporation.
- There must be at least one director who should be a resident of India.
REQUIREMENTS
- Directors
A minimum of two and a maximum number of members is 200, in the case of a private limited company, and a minimum of three directors and a maximum with no limit in the case of a public limited company.
- Capital Requirement and Name
There is no requirement of minimum paid-up capital in the case of a Section 8 company incorporation. NGOs established as a Section 8 company need not use the words ‘Limited’ or ‘Private Limited’ in their name.
- Charitable Objects
Section 8 companies are incorporated with non-profit objectives. The MOA and AOA must mention the non-profit objective or purpose for which it is established. Any profits earned by the section 8 company are utilized for the furtherance of the same.
- Management
Section 8 company is managed by the Board of Directors as per the MOA and AOA of the company.
- Regulation under Various Acts
A Section 8 company needs to follow the rules and regulations prescribed under the Companies Act, 2013. Can also be registered under Trust under Indian Trusts Act, 1882 and Society under Societies Registration Act, 1860
- Obtain Digital Signature Certificate (DSC)
Digital signatures of the proposed directors of the company are required as the forms for the registration process are filed online and should be digitally signed. DSC is issued by a government-recognized certifying agency – obtain a Class 3 category DSC.
- Apply for Director Identification Number (DIN)
You have to apply for a DIN for the proposed directors of the company. The application for allotment of DIN has to be made in Form DIR-3 or along with the SPICe+ form for registration.
FORMS
- SPICE+ – Application for Incorporation of Company
- INC 12 – Application for License
- INC 13 – Memorandum of Association
- INC 14 – Declaration from a practising Chartered Accountant
- INC 15 – Declaration from each person making the application
- INC 16 – License to incorporate as Section 8 company
- INC 22 – Situation of Registered Office
- DIR 2 – Consent of Directors
- DIR 3 – Application to ROC to get DIN
- DIR 12 – Appointment of Directors
PROCEDURE
- Obtain a DSC of the proposed Directors of the Section 8 Company. Once a DSC is received, file Form DIR-3 with the ROC for getting a DIN. TheProof of Identity and Address Proof needs to be attached for obtaining DSC.
- Once the DIR-3 is approved, the ROC will allot a DIN to the proposed directors.
- File Form INC-12 with the ROC to apply for a licence for the Section 8 company along with the attachment of the required documents as mentioned above.
- Once the form is approved, a license under section 8 will be issued in Form INC-16.
- After obtaining the license, file the SPICe+ Form with the ROC for incorporation along with the required attachments as mentioned above.
- If the ROC is satisfied with the forms submitted, he issues a Certificate of Incorporation along with a unique Company Identification Number (CIN).
PENALTY FOR NON-COMPLIANCE
If a company defaults in complying with the provisions of the Act, the company will be punishable with a fine not less than Rs.10 lakh and may extend to Rs.1 crore. The Directors and the officers of the company in default of the provisions of the Act will be punishable with a fine not less than Rs.25,000 which may extend to Rs.25 lakh or both. [Section 8 (11)]
ANNUAL COMPLIANCE
- Conduct a minimum of two board meetings in a year
- Maintenance of Books of Accounts
- Preparation of financial statements
- Mandatory audit report
- Income tax return filing
- Filing of financial statements in form AOC 4
- An annual return is to be filed every year with other e- filing forms like MGT 7
- Additional compliances to fulfil the registration like 12AA, 80G, etc
