Section 8 Company – Charitable Objects etc.
Pursuant to section 8 of the Companies Act 2013 (the Act), where it is proved to the satisfaction of the Central Government authority i.e. the jurisdictional Registrar of Companies (ROC), that a person or an association of persons, intends to promote certain prescribed objects (see below) and apply its profits/income in the prescribed manner (see below), the ROC may by ‘licence’ and on such conditions as it deems fit, allow such Company to be registered as a Section 8 Limited Company.
Charitable Objects etc.
Section 8 Company must be engaged in the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
Application of Profits/Income and Non-Distribution of Dividends
- Intends to apply its profits, if any, or other income in promoting its objects
- Intends to prohibit the payment of any dividend to its members
Income Tax Benefits
Charitable etc. Section 8 Companies may be potentially entitled to income tax benefits including complete/partial exemption from income tax obligations and liabilities on any income earned, donations received etc. and/or may be allowed to pass on certain benefits to financial donors, where such Company applies to and is approved for the same by the relevant Income Tax authorities in accordance with the Income Tax Act 1961.
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Core Features of Section 8 Companies
- The name of the Company as approved, would be without the addition of the word “Limited” or “Private Limited” (as the case may be).
- A (partnership) ‘firm’ may become a Member of such Company with no maximum limit of Members.
- Alteration of the provisions of the Memorandum of Association (MoA) or Articles of Association (AoA) can take place with the previous approval of the Central Government.
- The Company may convert itself into a Company of any other kind only after complying with prescribed terms and conditions under relevant Rules.
- A previously registered Limited Company, formed with any of the above said prescribed objects and restrictions/prohibitions, may by licence be allowed to be registered as a Section 8 Company (subject to such conditions as the Central Government deems fit etc).
- No minimum paid-up Share Capital and to enjoy all the privileges and is subject to all the obligations of Limited Companies (unless excluded).
- Minimum of 1 Board Meeting (of Directors) within every 6 months.
- No minimum/maximum number of Directors nor any necessity for ‘Independent’ or ‘Woman’ Director.
- No compulsion of Nomination or Remuneration Committee.
- Potential exemptions or benefits from income tax under the Income Tax Act 1961 (subsequent to prescribed conditions and procedures thereunder) and indirect taxation under GST laws (to be enacted).
Registration/Incorporation Forms and General Procedure
After obtaining a ‘Licence’ from the concerned ROC, registration thereafter of a Section 8 Company with the ROC shall be via MCA SPICe Form INC-32 and in the prescribed manner for such purposes.
> Application for Grant of Licence under Section 8 (MCA eForm INC-12)
> Registration/Incorporation of Section 8 Company (MCA SPICe Form INC-32)
> File written/typed Memorandum of Association (MoA) and Articles of Association (AoA) as additional attachments to SPICe Form INC-32
> FAQs on SPICe Forms
Revocation of Licence and Status change
The Central Government may by order, revoke the licence granted to a Section 8 Company (the Company) registered in the following cases —
- Contravention of any of the requirements of section 8 of the Act or any of the conditions subject to which such licence was issued; or
- Affairs of the Company are conducted fraudulently or in a manner that is violative of the objects of the Company or prejudicial to public interest.
Without prejudice to any other action against such Company, the Central Government may direct such Company to convert its status and change its name to add the word “Limited” or the words “Private Limited” (as the case may be) thereto and be registered accordingly with the ROC.
No such order revoking such licence etc. can be made unless the concerned Company is given a reasonable opportunity of being heard on the matter.
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