A company incorporated as section 8 company registration is significantly different from the others. The Section 8 Company gets various exemptions in tax liability and other perks from the central government for promoting research, art, commerce, social welfare etc. in the country. This is a way to facilitate good causes and enable more people to take such noble initiatives. All you need to do is convince the registrar that the objective of your company will be the same as mentioned in section 8 of the Companies Act of 2013. You also need to follow the conditions imposed by section 8 and if at any point in time you fail to comply with such conditions, your licence may be revoked. Section 8 provides for the establishment of NGO companies but also ensures that no one can misuse the provision and claim undue benefits.
What is Section 8 Company?
Section 8 Company is a company formed under the Companies Act and is often referred to as an NGO. Section 8 of the Companies Act provides various conditions and if a company satisfies the same, then it can be registered under section 8 and claim the benefits provided to these companies. The conditions prescribed under this section include the compulsory association of the company with social activities, research and promotion of science, art, commerce etc. The same provision was also provided under section 25 of the Companies Act's older version, which was enacted in 1956.
Section 8 Companies are a legal structure of Non-Profit Organisations (NPOs) or Non-Governmental Organisations (NGOs) with the authority to work across the country. It is similar to a Trust or Society but the only difference is the governing authorities. A Section 8 Company is registered and governed under the Central Government's Ministry of Corporate Affairs whereas Trusts and Societies are regulated under State Government regulations. The companies registered under section 8 of the Companies Act are not required to use the words ‘Ltd.’ or ‘Pvt. Ltd.’ as a suffix in their name. Instead, they can add the word ‘Foundation’ or ‘Association’ as suffixes.
Who Can Register the Section 8 Company?
A company can be registered under section 8 only if it satisfies conditions prescribed by the Companies Act of 2013. The eligibility criteria are as follows-
- It must be incorporated solely for charitable purposes as follows-
- Promotion of commerce, art, science, sports education etc.
- Contribution to research for the common good
- Undertaking social welfare or religious activities
- Protection of the environment
- If the company generates any profits, the same shall only be allowed to spend against the promotion of its own objects.
- It should not pay any dividend to its members in any case.
- A Memorandum of Association must be presented to the central government and kept intact. If any changes have to be done in the same, they must be executed only after prior approval of the central government.