Section 8 Company is named Section 8 of the Companies Act, 2013, which pertains to a established 'for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object', provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. Therefore, Section 8 Company or Section 25 Company is a company registered under the Companies Act, 2013 for charitable or not-for-profit purposes.
A Section 8 Company is similar to a Trust or Society; expect, a section 8 Company is registered under the Central Government's Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations. A section 8 company has various advantages when compared to Trust or Society like improved recognition and better legal standing. Section 8 company also has higher credibility amongst donors, Government departments and other stakeholders.
Section 8 Company Registration Process
Frequently Ask Questions (FAQs)
Advantages Of Section 8 Company Registration
Separate Legal Entity:
A section 8 company is a legal entity and a juristic person established under the Act. Therefore, a section 8 company has wide legal capacity and can own property and also incur debts. The members (Directors) of a section 8 company have no liability to the creditors of a section 8 company.
A section 8 company has 'perpetual succession', that is continued or uninterrupted existence until it is legally dissolved. A section 8 company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
A section 8 company enjoys better credibility when compared to Trusts and Societies. Section 8 companies are registered and monitored by the Central Government. Trusts and Societies are on the other hand registered and monitored by State Governments.
The Board of Management of a section 8 company can be easily changed by filing simple forms with the Registrar of Companies. The Board of Management of a section 8 company controls all the activities of the section 8 company.
A section 8 company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No member can make any claim upon the property of the section 8 company or use it for personal or for-profit purposes.
Limited Liability means the status of being legally responsible only to a limited amount for liabilities of the section 8 company. In a Section 8 Company, the members are not held personally responsible for the liabilities of the section 8 company.
Capacity to sue and be sued:
To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person's name, a section 8 company being an independent legal entity can sue and also be sued in its own name.
A section 8 company has a structured incorporation process and required annual compliances. Hence, it is easier for a section 8 company to obtain other registrations like FCRA registration, as it is better valued and recognized by other Government Departments.