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Section 8
Section 8 company
A section 8 Company is a not for profit company. In contrast to a regular corporation, a section 8 company is formed with the objective of charitable work, social work or micro finance. Such companies a awarded a license by the Central Government to carry on activities as mentioned in the license. A section 8 company enjoys the same tax and accounting privileges as a society or a charitable trust. A section 8 company can also apply and be granted certificate under 12A, 80G and 35A of Income Tax Act, 1961. Being so, it stands out as the best alternate to trust or a society and also saves from annual approval with the Charity Commissioner’s office.
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FAQ
Section 8 Company may be incorporated as a company limited by shares or by Guarantee (with or without share capital).
Yes. As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc. However, Section 8(1) permits the registration, under a licence granted by the Central Government, of associations not for profit with limited liability without being required to use the word “Limited’ or the words ‘Private Limited” after their names.
No, Rule 3(6) of the Companies (Incorporation) Rules, 2014 prohibits one person company to invest in securities of any body corporate.
There is no restriction in the provisions of the Companies Act, 2013 for a registered Trust to become a member of Section 8 Company. In case of unregistered trusts, provisions of section 89 would be applicable.
Yes, under the Companies Act, 2013, a Partnership firm or an LLP can become the member of Section 8 Company. The provisions of respective Acts need to be complied with by the partnership firm or LLP as the case may be.
No. As per proviso to section 2(85), section 2(85) does not apply to a Section 8 Company and accordingly, a Section 8 Company cannot be treated as a small company. Likewise, a small company on conversion to a Section 8 Company shall cease to be a small company.