Section 8 Company

Section-8 Company, also known as Non-Profit Organization (NPO), is a type of company established under Section 8 of the Companies Act in India. These companies are formed to promote arts, science, commerce, sports, education, research, social welfare, religion, charity, protection of the environment, or any other similar object. The main characteristic of a Section 8 company is that it is operated for charitable purposes, with any profits or income being used only to promote its objectives. This type of company cannot distribute dividends to its members, ensuring that all funds are used for the stated goals of the company.

Some Key Features of a Section 8 Company:

  • Non-Profit Motive: A Section 8 Company must have an exclusive objective of promoting social welfare, and it should not distribute profits to its members. All the income generated by the company should be utilized for achieving its objectives.
  • No Dividend Distribution: Unlike other companies, a Section 8 Company cannot issue dividends to its members. Any surplus generated must be used for the company’s objectives and cannot be distributed as profits.
  • Limited Liability: Members of a Section 8 Company enjoy limited liability, which means their personal assets are not at risk in case of any liabilities or losses incurred by the company.
  • No Share Capital: Section 8 Companies do not have a share capital. Instead, they have members and may have directors who are responsible for managing the affairs of the company.
  • Name Restrictions: The name of a Section 8 Company must include the words “Section 8” or “Foundation” or “Association” or “Society” at the end to indicate its nonprofit nature.
  • Registration Process: To establish a Section 8 Company, one must apply to the Registrar of Companies (RoC) with the necessary documents and information, including a memorandum of association and articles of association. The RoC reviews the application and, if satisfied, grants the necessary approval.
  • Tax Benefits: Section 8 Companies may be eligible for various tax benefits and exemptions under the Income Tax Act, such as tax exemption on the income generated for charitable purposes and donations made to the company.
  • Compliance Requirements: Section 8 Companies need to comply with certain regulations, including filing annual financial statements, conducting regular board meetings, and maintaining proper books of accounts.

Benefits of Section-8 Company

  • Tax Exemptions: Section-8 companies themselves and those who donate to them can enjoy tax benefits. This frees up more funds for the company’s charitable activities.
  • Minimal Capital Requirement: Unlike some other company structures, there’s no minimum capital requirement to form a Section-8 company.
  • No Stamp Duty: You won’t have to pay any stamp duty on the Memorandum of Association, which is a document that outlines the company’s purpose and structure.
  • Separate Legal Entity: A Section-8 company is a separate legal entity from its members. This means the members’ personal assets are protected if the company faces financial difficulties.
  • Improved Credibility: The legal structure and regulations surrounding Sectiaon-8 companies lend them an air of credibility, which can be helpful when attracting donors and partners.
  • Eligibility for Grants: Section-8 companies may be eligible for grants from the government or other organizations, providing additional funding for their social initiatives.

Required Documents

  • For the Directors and Shareholders:
    – Proof of Identity: This could be a Passport, Voter ID card, Aadhaar card, or Driving License.
    – Proof of Address: Similar to identity documents, this could be a Passport, Utility bill (electricity, phone etc.), Bank statement (not older than 2 months), or Aadhaar card.
    – PAN Card: This is a unique identification number issued by the Income Tax department in India.
  • Company Documents:
    – Memorandum of Association (MOA): This document outlines the company’s objectives, purpose, and the activities it can undertake.
    – Articles of Association (AOA): This document details the internal rules and regulations that govern the company’s operations.
  • Registered Office Address:
    – Proof of Address for Registered Office: This can be a No Objection Certificate (NOC) if it’s rented, a copy of the lease agreement with a recent rent receipt, or documents related to the property title.
  • Additional Documents:
    – Digital Signature Certificate (DSC): This electronic signature is used to authenticate documents filed online.
    – Director Identification Number (DIN): This unique number identifies company directors.
Scroll to Top