Section 8 company is defined as a company that is licensed under Section 8 of the Companies Act, 2013. It is a legal form of a Non-Profit Organization (NPO) or Non-Governmental Organization (NGO), established to promote sports, education, arts, science, commerce, research, etc.
These companies are registered for charity, social welfare, and meeting the organizational goal that benefits society as a whole. A section 8 Company is authorized to work anywhere in the country.
Such companies pay no dividends to any of their members and instead use their profits to further their cause.
A Section 8 Company is the same as Section 25 of the former Companies Act of 1956. Section 25 has now become Section 8 in the 2013 Companies Act. However, the new Act has expanded the set of available objectives for Section 8 companies.
The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII) are well-known examples of Section 8 Companies in India. These organizations work to encourage the expansion of trade and commerce in India.
A non-profit organization in India can be constituted under Section 8 of the Companies Act, 2013, as a non-profit company, or under the Registrar of Societies.
The following distinctive characteristics of a Section 8 company are lacking from the majority of other kinds of companies:
|1||Charitable objectives||Section 8 companies do not aim at making profits. These companies are registered for charity, social welfare, and meeting the organizational goal that benefits society as a whole|
|2||No minimum share capital is needed.||Section 8 companies do not need a minimum amount of paid-up share capital.|
|3||Limited Liability||Members of Section 8 Company can only have limited liability.|
|4||Government license needed.||Such companies can operate only if they have a valid license approved by the Central government.|
|5||Benefits and exemptions||Because of their philanthropic objectives, many benefits and exemptions have been accorded to such companies by the Companies Act.|
|6||Firms as members||Section 8 also allows firms to become members of such companies.|
Section 8 companies need to obtain a valid license from the Central Government for their functioning. Additionally, all such licenses are revocable for the reasons listed below:
Under certain conditions, the government may even order the company to be dissolved or merged with another business of a similar nature. The government has to hear the company’s stance before passing such orders.
Within a period of one year from its incorporation, every Nidhi needs to ensure that it has:
Yes. In accordance with Rule 8 of the Companies (Incorporation) Rules, 2014, the name of a company created in accordance with Section 8 of the Act must contain the terms "foundation," "forum," "association," "federation," "chambers," "confederation," "council," "electoral trust," and similar terms.
Yes. A partnership firm may become a member of the Section 8 Company in accordance with the provisions of section 8(3).
Yes, A body corporate or company may become a member of a Section 8 Company.
No, Such companies pay no dividends to any of their members and instead use their profits to further their societal cause.
Yes, A partnership firm or LLP may join Section 8 Company as its members.
Section 8 companies do not need a minimum amount of paid-up share capital for their registration.
As per Rule 3 of the Companies (Incorporation) Rules, 2014, Any one-person company cannot be incorporated or converted into a Section 8 company.
Yes, Section 8 Companies are permitted to engage in microfinance activities as long as they follow the relevant provisions of the RBI Act, guidelines, and directives. According to the Companies Act of 2013 Section 8(1)(a), microfinance activities should be used to promote activities.
The company's properties are held in its name and may be sold in accordance with the regulations outlined in the Companies Act, 2013 ( For instance, an approval from the BOD(Board of Directors), expressed in the form of a resolution).
Yes, Foreign contributions are only permitted after registration under the 1976 Foreign Contribution Regulation Act (FCRA). Only three years following the registration date can an FCRA license be applied for. But you can ask the commissioner for permission in advance if you need some truly urgent international donations.