Section 8 Company is a Company Licensed u/s 8 of the Companies Act, 2013. The main purpose of establishing a section 8 company is to promote non-profit objectives. Many of these companies primarily have charitable and non-profit objectives. As a result, it is similar to a Trust or Society. In addition, it intends to apply its profits, if any, or other income in promoting its objects.
Therefore the main objectives of Company registered u/s 8 are:
In India, you can register an NGO under any of the following Acts:
No. Rule 20(1) of the Companies (Incorporation) Rules, 2014
provides that only a limited company registered under this Act or under any previous company law shall make an application to the Registrar for the issue of license. Therefore, a company with unlimited liabilities cannot be registered as a Company u/s 8.
There is restriction in section 8(1) for distribution of profits and payment of any dividend to its members. Therefore the company cannot issue redeemable preference shares.
The cost factor involved in trusts are critically low as compared to a company registered u/s 8 of the Company’s Act. However the transparency in working is very low in trusts as compared to a Company u/s 8. As a result the grant of subsidies to trust is very less as compared to the company registered u/s 8.