The Companies Act, 2013 in India provides an avenue for societies that aim to promote charitable objectives to register as Section 8 companies. A Section 8 company is a non-profit organization, created primarily for social or charitable purposes, such as promoting commerce, art, science, education, or environmental protection. Societies looking to gain more legal credibility, access to funding, and tax benefits often consider conversion into a Section 8 company.
In this article, we explore the process, benefits, and important steps involved in converting a society into a Section 8 company under the Companies Act, 2013.
Why Convert a Society into a Section 8 Company?
A Section 8 company is a preferred choice for entities focused on social welfare for a few key reasons:
- Enhanced Credibility: Section 8 companies are registered under the Ministry of Corporate Affairs (MCA), giving them more formal legal recognition compared to societies.
- Tax Benefits: Section 8 companies can apply for income tax exemptions under Sections 12AA and 80G, making them eligible for funding and donations.
- Structured Governance: Section 8 companies have a more organized governance structure, with regulated board meetings, audits, and annual compliance under the Companies Act, 2013.
- Access to Government Schemes and Foreign Funding: Being a registered Section 8 company enables access to government grants, CSR funding, and foreign donations under the FCRA.
Key Steps for Converting Society into a Section 8 Company
The conversion process requires following specific steps to ensure compliance with both society and company laws. Here’s a step-by-step guide for the conversion:
- Pass a Resolution for Conversion
The first step is to obtain approval from the society’s members. A special resolution should be passed in a general meeting of the society, agreeing to the conversion into a Section 8 company. This resolution should clearly state the intent to convert and authorize designated members to proceed with the required filings and paperwork.
- Apply for Name Approval
To register as a Section 8 company, apply for name approval through the RUN (Reserve Unique Name) service on the MCA portal. Choose a name that reflects the charitable objectives and purpose of the organization. The name should end with the words “Foundation,” “Association,” “Federation,” “Institute,” or similar terms instead of “Private Limited” or “Limited,” as Section 8 companies are not permitted to use these commercial terms.
- Draft Memorandum and Articles of Association (MOA and AOA)
Prepare the Memorandum of Association (MOA) and Articles of Association (AOA), which outline the objectives and rules of the proposed Section 8 company.
- MOA: This document details the charitable or social objectives of the company and its operational scope.
- AOA: This document contains the internal rules, governance structure, and roles of directors.
These documents must adhere to Section 8 company guidelines, clearly defining the non-profit objectives, and should align with the principles under the Companies Act, 2013.
- Apply for Incorporation via SPICe+ Form
Once the name is approved, proceed to file the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form available on the MCA portal. This form covers various registrations under one application, such as:
- Company Incorporation
- PAN and TAN registration
- Professional Tax and GST registration (if required)
You will need to attach supporting documents, including the society’s registration certificate, MOA and AOA, and ID and address proofs of the proposed directors.
- Attach Necessary Documents
the following documents are required to complete the conversion process:
- Resolution of the society consenting to conversion.
- Certificate of Registration of the society.
- MOA and AOA drafted specifically for the new Section 8 company.
- List of proposed directors and their consent forms.
- Proof of the society’s registered office address. Learn More
