What is Section 8 Company?
Popularly known as Section 8 company is a company registered with charitable objects such as the promotion of Arts, commerce, science, education, sports, protection of the environment, religion, charity, etc. By promoting it as a not-for-profit organization, the Act does not bar the company from profit creation but rather prohibits distributing profit among members. This says that all the income or profit from any activity of the company must be utilized towards charitable purpose for which it is registered.
The charitable company is registered under Section 8 of the Companies Act, 2013, which provides it special status due to its objects. Compared to other types of companies, Section 8 company enjoys various exemptions and relaxations.
Documents Required For Section 8 Company Registration
- Digital Signature Certificate (if you already have it)
- Director Identification Number (if you already have it)
- Memorandum of Association
- Articles of Association
- ID proof for members:(Aadhar Card, Passport, Voter ID)
- Passport size Photographs
- Director’s details (if Members are other Companies/LLPs)
- Address Proof
Eligibility for Section 8 Company Registration
- Object must be Charitable or to promote arts, science, commerce etc
- Intends to apply all its profit in promoting the objectives
- Assures the prohibiting of the payment of dividends to any of its members
Benefits of incorporation of Section 8 Company
Tax and compliance exemptions
With its registration under Section 8 of Companies Act, it obtains a special status – distinct from other entities. Not only the company enjoys tax exemptions, but also the donors can claim an exemption for the donation made (under Income Tax). Apart from tax exemption, the company is also exempted from the applicability of many compliance-related provisions.
Separate legal identity
Being registered as a company, it obtains a separate identity apart from its members. Therefore, it can own and hold the assets and liabilities in its own name irrespective of the connection with the members. The change in members or the directors neither affects its existence or the assets & liabilities or rights & obligations.
A company registered under Section 8 ensures limited liability to its members. The liability of the members is limited only to the extent of the capital subscribed and unpaid. The losses and obligations do not create a charge over the personal properties of members or directors. This helps the promoters to freely run the non-profit organizations.
No corporate title
Although the company enjoys the benefit of the corporate entity, it is not labelled as the corporate entity. The company does not need to add the suffix “Private Limited” or “Limited” after its name. This exemption is provided so that third parties offer their attention to the company’s purpose and not its status assuming it is profit making organization.