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:
- Promoting research,
- Social welfare,
- Religion,
- Charity,
- Commerce,
- Art,
- Science,
- Sports,
- Education, etc
Laws applicable to an NGO in India
In India, you can register an NGO under any of the following Acts:
- Trust under Indian Trusts Act, 1882
- It is not mandatory for a Charitable Trust to obtain registration.
- Unless the Trust wants to claim income tax exemptions or is based in a state that is governed by the Public Trusts Act.
- Society under Societies Registration Act 1860
- A group of seven or more people can form a society.
- Further, its formation is more complicated than that of trust. But it has more flexibility in terms of regulations.
- Section 8 Company under Companies Act, 2013
- Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any such other object.
- However, it cannot pay dividends to its members.
- Further, these companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.
Who Can Form Section 8 Company?
- Any two or more persons or association of persons (including a partnership firm)
- Any existing company
- However One Person Company cannot be a Section 8 Company as per Rule 3(5) of Company Incorporation Rules.
Benefits of Section 8 Company
- It enjoys exemption from stamp duty for registration
- Further, donors of the company can avail Tax deduction.
- Section 8 Companies can be formed with or without share capital. Thus the funds are brought in the form of donation
- Shareholders can transfer their shares easily.
- In addition these companies are exempt from keeping any titles or suffix.
FAQs
a Section 8 Company?
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.
Hello @Heer_Mandaliya
In order to incorporate a Section-8 Company, following forms are required:
You can read more about provisions governing a Section-8 Company here:
Hope this helps!