NGOs (Non-Governmental Organizations) and Section 8 companies are entities created to promote charitable, educational, religious, or social causes. Named after Section 8 of the Companies Act, 2013 in India, these companies operate on a non-profit basis and are granted certain benefits and exemptions due to their focus on public good. This article will explore the structure, benefits, documentation, and process required to establish a Section 8 company.

Understanding the Structure of NGO/Section 8 Companies

A Section 8 company is a legal entity that operates with a charitable purpose. Unlike traditional companies, Section 8 companies cannot distribute profits to their members or shareholders. Instead, all profits must be used to further the company’s charitable objectives. The typical structure includes:

• Board of Directors: A governing body responsible for overseeing the organization’s operations and ensuring compliance with legal requirements.
• Members: Individuals who are part of the organization and support its objectives.
• Advisory Committees: Optional groups that provide guidance on specific aspects of the organization’s mission.

Benefits of Forming a Section 8 Company

Choosing a Section 8 company structure provides several benefits, especially for organizations focused on social impact and charitable work:

1. Tax Exemptions: Section 8 companies may qualify for tax benefits, such as exemptions from income tax, property tax, and other levies.
2. Limited Liability: Like other corporate structures, Section 8 companies offer limited liability protection to directors and members.
3. Legitimacy and Trust: Being recognized as a Section 8 company lends credibility to the organization and helps gain trust from donors and stakeholders.
4. Access to Funding: Section 8 companies can receive donations, grants, and funding from various sources, including individuals, corporations, and government agencies.
5. Legal Benefits: Section 8 companies are often subject to fewer regulatory requirements and compliance issues compared to other business entities.

Documentation Required for a Section 8 Company

To form a Section 8 company, specific documents are needed to establish the company’s legal identity and define its objectives:

1. Memorandum of Association (MOA): Outlines the company’s objectives, scope, and mission. It serves as the company’s foundational document.
2. Articles of Association (AOA): Establishes the internal governance and operational rules for the company, including decision-making processes and director responsibilities.
3. Board Resolutions: Resolutions passed by the board to authorize company formation, appoint key officers, and establish governance policies.
4. Proof of Registered Office: Evidence of the company’s official address, such as a rental agreement or ownership document.
5. Identity Proofs of Directors: Documents like passports or government-issued ID cards that verify the identity of the company’s directors.

The Process of Forming a Section 8 Company

Establishing a Section 8 company involves several key steps, ensuring compliance with legal and regulatory requirements:

1. Name Reservation: Choose a unique name for the Section 8 company and apply for name reservation through the relevant government authority.
2. Drafting MOA and AOA: Prepare the Memorandum of Association and Articles of Association in accordance with the company’s objectives and regulatory guidelines.
3. Filing for Incorporation: Submit the required documentation to the Registrar of Companies (RoC) or relevant government body. This step includes MOA, AOA, identity proofs, and other supporting documents.
4. Obtaining a License: Once approved, the company will receive a license to operate as a Section 8 company, allowing it to function as a non-profit entity.
5. Compliance and Reporting: After incorporation, the company must comply with ongoing regulatory requirements, including submitting annual reports, holding board meetings, and maintaining financial transparency.

Conclusion

NGOs and Section 8 companies play a vital role in promoting social causes, education, and charitable work. With a clear understanding of the structure, benefits, required documentation, and formation process, anyone interested in establishing a Section 8 company can take the necessary steps to create a successful and impactful organization. Whether you’re aiming to start a new charitable venture or formalize an existing one, this guide provides the essential information needed to begin the journey.