Section 8 Company
A Section 8 Company, previously known as a Section 25 Company under the Companies Act, 1956, is a legal structure in India specifically designed for non-profit organizations (NPOs) or non-governmental organizations (NGOs) that have the primary objective of promoting charitable or social causes. The name “Section 8 Company” is derived from Section 8 of the Companies Act, 2013, which governs the establishment and operations of such entities. These companies are formed to promote art, commerce, science, sports, education, research, social welfare, religion, charity, and other similar activities.
Non-Profit Motive
The primary purpose of a Section 8 Company is to promote charitable or social activities. Its main objective is not to generate profits for its members but to utilize its resources for the betterment of society.
Limited Liability
Just like other limited liability companies, the liability of the members is limited to the extent of their contributions to the company.
No Dividends
The company cannot distribute profits or declare dividends among its members. Any surplus generated from its operations must be utilized for the promotion of its objectives.
Use of Income
All income and profits must be applied towards the promotion of the company's objectives. This ensures that the company remains focused on its charitable or social activities.
No Need for Share Capital
A Section 8 Company can be registered without a minimum share capital requirement. It can operate without issuing shares.
Name Clause
The name of the company should include the words "Section 8" or "Section Eight."
Restrictions on Alteration of MOA and AOA
The memorandum of association (MOA) and articles of association (AOA) of a Section 8 Company cannot be altered without the approval of the Central Government.
How to Register a Section 8 Company
Section 8 company registration process requires at-least two people to start with. Further, there is no limit for initial capital and hence, it may be started with Rs.10,000. Here is a section 8 Company registration procedure
Name Reservation
The first step is to reserve a unique name for the proposed company. The name should comply with the naming guidelines specified by the Registrar of Companies (ROC).
Application for License
The promoters of the company need to apply for a license under Section 8 of the Companies Act, 2013. This application should be submitted to the Registrar of Companies (ROC) along with the required documents.
Memorandum and Articles
The company's memorandum of association (MOA) and articles of association (AOA) should be drafted according to the guidelines specified for Section 8 Companies.
Declaration and Affidavit
The promoters need to submit a declaration and an affidavit confirming their compliance with the requirements of Section 8 and other relevant laws.
License Issuance
If the Registrar of Companies is satisfied with the application and documents, a license will be issued to the company to operate as a Section 8 Company.
Incorporation
Once the license is obtained, the company can proceed with the incorporation process by submitting the necessary forms and documents to the ROC.
Central Government Approval
In some cases, the approval of the Central Government might be required, especially if the proposed company intends to utilize foreign funds.
Important Note
It’s important to note that the process of registering a Section 8 Company can be complex and requires careful adherence to legal and regulatory requirements. It’s advisable to seek professional guidance or legal assistance during the registration process to ensure compliance and smooth establishment.
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