A Section 8 Company is a non-profit organization incorporated under Section 8 of the Companies Act, 2013, with the primary objective of promoting social welfare, education, art, science, religion, charity, and other philanthropic activities. These companies prioritize social impact over financial returns and operate without the intent of distributing profits to their members.

In simpler terms, a Section 8 Company is a legal entity formed for not-for-profit purposes while enjoying several regulatory and tax benefits.

 

DOCUMENTS REQUIRED FOR REGISTRATION OF A SECTION 8 COMPANY

To register a Section 8 Company, the following documents and details are required:

 

Company Details

• Proposed Name of the Company

• Main Object of the Company (defining its purpose and activities)

• Registered Office Address Proof (not older than 2 months) – e.g., Electricity Bill or Telephone Bill

• Phone Number and Email ID of the Company

• Authorized Share Capital and Paid-Up Capital

• Name of the Bank for Opening the Current Account

 

Director Details

• Number of Directors

• Passport-size color photograph of each director

• Contact Details: Phone Number and Email ID of each director

• Self-attested KYC Documents:

  • Aadhaar Card

  • PAN Card

  • Latest Address Proof (Bank Statement / Mobile Bill / Telephone Bill / Electricity Bill – not older than 2 months)

• Digital Signature Certificate (DSC) of all directors/shareholders

 

ADVANTAGES OF A SECTION 8 COMPANY

1. Tax Benefits

   • Exempt from paying income tax on surplus income.

   • Donations made to Section 8 Companies are eligible for deductions under Section 80G of the Income Tax Act.

2. Exemption from the Use of “Limited” or “Private Limited”

   • These companies are not required to use “Limited” or “Private Limited” in their name.

   • Instead, they can use suffixes like “Foundation,” “Association,” “Society,” or “Forum”, indicating their non-profit nature.

3. High Credibility and Trust

   • Due to their charitable objectives, Section 8 Companies often enjoy greater public trust and credibility among donors, volunteers, institutions, and the general public.

4. Zero Stamp Duty

   • They are exempt from stamp duty on the Memorandum of Association (MOA) and Articles of Association (AOA), reducing registration costs.

5. Eligibility for Foreign Funding

• • Section 8 Companies can receive foreign donations if registered under the Foreign Contribution Regulation Act (FCRA).

 

DISADVANTAGES OF A SECTION 8 COMPANY

1. No Profit Distribution

   • Section 8 Companies are prohibited from distributing dividends or profits to their members or shareholders.

2. Profit Cannot Be a Primary Objective

   • Any surplus generated must be reinvested in the company’s core objectives (e.g., promotion of education, science, art, etc.). Profits cannot be used for personal gains by directors or members.

3. Restriction on Member Appointments

   • Members cannot be appointed as officers of the company to prevent misuse of funds or conflict of interest.

4. No Amendments Without Approval

• • The Memorandum of Association (MOA) and Articles of Association (AOA) cannot be amended without prior approval from the Central Government, limiting flexibility.