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Section 8 Company Registration

Section 8 Company Registration

A Section 8 Company is one that:

  • Is formed to promote commerce, art, science, education, research, sports, charity, social welfare, religion, environmental protection, or any other object.
  • It intends to use all of its profits, income, and other earnings to promote these objectives.
  • Members receive no dividends or income.

These are limited companies registered under the Companies Act, and they will be treated as such without the phrase “limited” added to their name. They could have been registered as “private limited companies” or “public limited companies.”

A previous version is Section 25 Company (under the Companies Act of 1956). Section 8 Companies are a legal designation for “non-profit organisations (NPOs) or non-governmental organisations (NGOs).”

Eligibility Criteria

  • Minimum Two People: Two people are required to become a shareholder /directors of the company. However, the number of shareholders may not exceed 200.
  • No Minimum Capital: There is no minimum capital set; it is based on business requirements. The registration fee is based on the amount of capital.
  • One Resident Director: At least one director must be an Indian.
  • Unique Name: Section 8 The company name must be unique and not identical to any existing company name or trademark.
  • Social or Welfare Object: Section 8 The company aims to promote the protection of :
  1.  Commerce
  2. Science
  3. Sports
  4. Research
  5. Education
  6. Social Welfare
  7. Religion
  8. Charity
  9. Protection of Environment
  • No Profit Distribution: Section 8 A company’s profits should be applied only to the promotion of the goods of the company for which it is made. Members should refuse to pay dividends.

Benefits of Section 8 Company

Being an NGO or a Non-Profit Organization does not mean that the company cannot profit or income. Cannot distribute profit among promoters. All proceeds must be applied to promote the commodity. The company can earn income, but the promoters do not benefit.

Nevertheless, some exemptions and benefits have been provided for NGOs and NPO u/s 8 of the Companies Act 2013. There are many tax exemptions for such companies. Donors contributing to the Section 8 company can claim tax exemption against these donations.

  • Tax Exemption: Section 8 companies are eligible for tax exemption under Section 12A and 80G of the Income Tax Act, 1961. This exemption is available to donors as well, who can claim tax deductions for donations made to the company.
  • Separate Legal Entity: A Section 8 Company is a separate legal entity from its members, which means the company can own property, sue and be sued in its own name.
  • Perpetual Succession: A Section 8 Company has a perpetual existence, which means it continues to exist even if its members change or if there is a change in the management.
  • Limited Liability: The liability of the members is limited to the amount of their share capital in the company.
  • Credibility: A Section 8 Company enjoys greater credibility and trust among the public and potential donors because of its non-profit nature.

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