About section 8 company

A Section 8 Company is licensed under section 8 of companies Act 2013 as a Non-Profit Organization (NPO) formed with the objective to promote social welfare, charitable activities, religion, environmental protection, arts, science, commerce, sports, education, research, etc. and meeting objectives of the organization towards the society at large.

Types of NPOs

In India, there are mainly the following types of non-profit organizations i.e.

 — Section 8 Companies (earlier Section 25).

 — Societies registered under section 20 of the Societies Registration Act 1860.

— Trusts formed under Indian Trusts Act 1882

Being an NPO does not mean that the company cannot generate revenue and make profit. The company can earn income but the same shall be applied towards the furtherance of the cause of the company and no dividend is paid to any of the members or promoters.

Some of the advantages of Section 8 Companies are:

Distinct Legal Identity: Section 8 Company is distinct from its members as a separate legal entity and has a well-organized operations.

No Minimum Capital Requirement: There is no minimum capital requirement for a section 8 company. Additionally, the capital structure can be changed at any time to meet the needs of the company's expansion. It means Section 8 Company may be established without any share capital. Later, the funds required for carrying out company’s activities may be brought in the form of donations, grants and/or subscriptions from members or general public.

Name: Rule 8 (7) of companies act describe the words which should be included in section 8 company.

1. Forums. It is for social knowledge or social discussion etc.
2. Foundations: Mostly suitable for microfinance company, social welfare organization
3. Federation: It is mostly used for schools, clubs, university etc.
4. Association: Labour association, Trade association etc.
5. Chambers: For promotion of science, arts and trade
6. Confederation: welfare work.

Section 8 Companies are exempted to suffix Limited/Private Limited with the name of the company without affecting their limited liability.

Tax Benefits: Many tax benefits are granted to Section 8 Companies

Trustworthiness: Section 8 Companies are more trustworthy than all other kinds of nonprofits. They are subject to stringent regulation and are governed by the Companies Act. For instance, the "MOA and AOA" cannot be changed at any point or circumstance, nor is there a requirement for a necessary annual audit. These businesses are reliable because of the regulations governing how the company manages its profits and losses.