EnglishA Section 8 Company is a specific form of Company which:
Is incorporated for the promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of the environment or any other object.
It intends to apply all its profits, income, or other earnings, in promoting these objects.
Pays no dividend or income to its members.
These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name. They may have been registered either as “private limited or public limited companies”.
Section 25 Company (under the Companies Act, 1956) is a prior version. Section 8 Companies are a legal form of “Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs)”. A Section 8 Company has the authority to work anywhere in the country.
The Advantages of Section 8 Company are given below:-
A separate legal identity
Section 8 Company is a distinct legal entity from its members. The company exists in perpetuity in addition to having more organised operations and greater flexibility.
No stamp duty
A Section 8 Company is exempt from paying stamp duty on the Memorandum of Association (MoA) and Articles of Association (AoA) of a private or public limited company, which is required for the registration of other types of company structures.
No minimum capital requirement
There is no minimum capital requirement for a Section 8 company in India. Also, the capital structure can be changed at any time to meet the company’s growing needs.
This means that it can be formed without the need for any share capital. The funds required to run the business can later be raised through charitable contributions and/or subscriptions from both members and the general public.
Name
Suffixes such as “Public Limited or Private Limited” are not required next to a Section 8 company’s legal name.
These companies can be registered with names such as “Society, Association, Council, Charities, Club, Foundation, Institute, Academy, Federation, and Organisation”.
Need for CARO
Requirements of Companies Auditor’s Report Order (CARO) do not apply to Section 8 Companies.
Tax benefits
Many tax benefits are available to Section 8 Companies in India.
Credibility
Section 8 Companies are more trustworthy than any other type of charitable organisation. They are bound by the Companies Act and are strictly regulated. Such as the necessity of a mandatory annual audit, which cannot be changed at any stage or situation.
The rules for managing the company’s profits and losses make these companies credible.
Exemption to donors
Donors who contribute to a Section 8 company are qualified for tax exemptions under sections 12A and 80G of the Income Tax Act.
Membership
A registered partnership firm can join as an individual member and gain directorship.
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