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A Section 8 company, commonly known as a charitable company, is registered with the objective of promoting activities such as arts, commerce, science, education, sports, environmental protection, religion, charity, and more. While the company is allowed to generate profit, it is prohibited from distributing those profits among its members. Instead, all income or profits must be reinvested towards the charitable purpose for which the company is registered.
This type of company is governed by Section 8 of the Companies Act, 2013, and enjoys special status due to its charitable objectives. Compared to other company types, a Section 8 company benefits from various exemptions and relaxations.
A Section 8 company, registered under the Companies Act, gains special status distinct from other types of entities. Not only does the company benefit from tax exemptions, but donors can also claim tax deductions for donations made to the company under Income Tax laws. In addition to these tax advantages, the company is exempt from many compliance-related provisions, making it a favorable structure for charitable organizations.
As a registered company, a Section 8 entity has a distinct legal identity separate from its members. This allows it to own assets, incur liabilities, and hold rights and obligations in its own name, independent of its members. Changes in the composition of members or directors do not impact its existence, assets, liabilities, or legal rights and obligations.
A Section 8 company provides limited liability to its members, meaning their liability is restricted to the amount of capital they have subscribed to and not yet paid. The company’s losses or obligations do not affect the personal assets of its members or directors. This structure allows promoters to manage the non-profit organization without personal financial risk.
While a Section 8 company enjoys the advantages of a corporate entity, it is not required to use the typical “Private Limited” or “Limited” suffix in its name. This exemption allows the focus to remain on the company’s charitable purpose, rather than giving the impression that it is a profit-making organization.
To register a Section 8 company, the promoters must ensure the following requirements:
The company’s main objective must be focused on charitable activities, as prescribed by law.
A minimum of 2 members who will subscribe to the capital during incorporation.
At least 2 directors, with one being an Indian citizen and a resident of India.
The company must have a registered office located within India.
There is no minimum capital requirement for a charitable company. The promoters can introduce an amount that is sufficient to commence and operate the business.
The company name must comply with the prescribed naming guidelines. To reserve a name, the application is made through the “RUN” web-form, where up to 2 unique names can be submitted. If the suggested names do not meet the requirements, the registrar may request the promoters to provide alternative names.
The promoters must submit an application in e-form INC-12 to seek approval from the Central Government. Along with the form, the promoters must provide the MoA, AoA of the company, declarations, and an estimated statement of income and expenditure for the next three years. If the application is approved, the approval letter will be issued in form INC-16.
No, the entire registration process is conducted online, so the physical presence of the promoters is not necessary. All documents and information can be submitted via email or uploaded directly to our portal.
Yes, an NRI or foreign national can be a director in a Section 8 company, provided they obtain a Director Identification Number (DIN). However, at least one director on the board must be an Indian citizen and a resident of India.
A Section 8 company is commonly referred to as an NGO. However, NGOs can also be registered under other structures such as trusts, societies, or foundations, depending on the nature and objectives of the organization.
A Section 8 or Charitable Company is prohibited from paying dividends to its members. Instead, any surplus income must be reinvested to further the company’s objectives and promote its charitable purposes.
Once incorporated, the company remains active and in existence as long as it fulfills its annual compliance requirements or until it is voluntarily dissolved.
