MCA Introduces Two-Tier Review for Section 8 Licenses

In a bid to enhance scrutiny and ensure the integrity of charitable organizations, the Ministry of Corporate Affairs (MCA) has rolled out a two-tier review system for granting Section 8 licenses under the Companies Act, 2013. This new framework introduces an additional layer of evaluation before approval, aiming to curb misuse and reinforce public trust in the non-profit registration process.

Under the revised mechanism, all applications for incorporating a Section 8 company will undergo preliminary scrutiny by the Registrar of Companies (RoC), followed by a secondary review at the Central Registration Centre (CRC). The first level will focus on verifying the completeness and accuracy of documents, including the Memorandum of Association (MOA), Articles of Association (AOA), declarations, and digital signatures.

The second-tier review, conducted at the CRC, will assess the authenticity of objectives, the proposed use of funds, and whether the application aligns with the criteria laid out for charitable and non-profit status. This includes evaluating whether the stated goals fall within permitted domains like education, health, social welfare, environmental protection, or art and culture.

Officials emphasized that this layered review will help weed out fraudulent or shell entities and ensure that only genuine organizations with a clear public benefit purpose receive Section 8 status. It also responds to concerns about the growing number of improperly vetted applications and potential misuse of tax exemptions and CSR partnerships.

Stakeholders in the legal and non-profit sectors have largely welcomed the two-tier approach, calling it a necessary safeguard to uphold the credibility of India’s non-profit framework. While the new process may slightly lengthen approval times, it is expected to deliver long-term benefits by strengthening compliance and governance in the social impact space.