Section 8 of the Company Act 2013 provides for the formation of companies with non-
profit objectives. Section 8 companies are started with the main objective of the welfare
of the society. Companies Act 2013 introduces the concept of Section 8 companies
which are formed with a charitable objective. Such companies promote commerce, art,
science, sports, education, research, social welfare, religion, charity, protection of the
environment, or any other object.
Examples of Section 8 companies are Reliance Foundation, Infosys Foundation, TATA
Foundation, Confederation of Indian Industries (CII), Federation of Indian Chambers of
Commerce and Industry (FICCI), etc.
What are the features of a Section 8 company?
● Such companies are incorporated with the primary objective of social welfare,
social promotion, not to earn profits.
● They are licensed by the Central Government under section 8 Company Act 2013.
● These companies do not issue dividends to their stakeholders and the members
of these companies are regarded as separate entities with limited liability.
● Section 8 company shall not be treated as a small company.
● It cannot be converted to a one-person company.
Mandatory compliances of a Section 8 Company
● Section 8 companies need to prepare their financial records annually. It contains
a profit and loss account, trading account and balance sheet. These reports are
produced to the registrar.
● Registers are maintained to check the activity of the company on a yearly basis.
It contains details of members, charges, investments, and loans.
● The auditor is appointed within the first 30 days from the date of its
incorporation. The auditor checks financial filings of the company.
● The company needs to file income tax on or before 30th September of the next
financial year.
● Director’s report is prepared to explain to shareholders the financial position of
the company and the scope of business. Director’s report is to be filled in form
AOC-4 u/s 134 of company act, 2013.
● Hold board meetings of the board of directors of each company must be held
twice a year in the case of small companies. The interval between the two
meetings shall not be more than 90 days.
● Annual General Meeting is to be held every year on or before 30th September.
● All the members, directors, auditors must be informed by giving not less than 21
days’ notice.
● The report of the Annual General Meeting must be submitted within 30 days of
the Annual General Meeting on Form MGT- 15.
● Annual returns to be filled in form MGT-7. It should be filled within sixty days
from the day on which the annual general meeting has been held.
● Financial statement to be filled with the registrar. It should be filled within thirty
days from the day on which the annual general meeting has been held.
● The last date of filling ITR i.e., ITR-6 by 30 th September for section 8 company.
Section 8 companies use their profits to meet company objectives and are prohibited
from the payment of dividends to their stakeholders. These companies can be
registered without the use of suffixes like ‘Limited’ or ‘Private Limited’. Section 8
companies are similar to Trusts or Societies. The only difference is that Section 8
companies are regulated only by the Central Government. There are several other
benefits of a Section 8 company as given below,
- Credibility
Section 8 companies have more credibility as compared to any Trust or Societies. It has
more stringent regulations as it is licensed by the Central Government. Better credibility
attracts donors, government departments, and other stakeholders. - Tax Exemption
Donors of a Section 8 company can avail of numerous tax exemptions. Section 8
companies can get tax benefits if it is registered under section 80G and 12AA of the
Income Tax Act. - No Minimum Capital Required
Unlike other companies such as public limited, Section 8 companies do not require
minimum capital. Also, the capital can be altered later on for the growth of the
company. - Identify remains distinct
Section 8 company is a legal entity established under the law. The members of such
companies have limited liability for their debts. The company and its people are distinct
entities in the eyes of the law.
- Less Stamp Duty
The government gives privileges to Section 8 companies, hence charging less stamp
duty at registration as compared to other private limited or private limited companies. - Better Flexibility
Compared to a public company, Section 8 companies are not required to perform
many legal formalities. It enjoyed special exemptions and privileges under the law.
The Central Government offers many benefits to the incorporation of Section 8
company as stated above. Failure to comply with the responsibilities stated by the
Central Government can lead to the closing of the company. If the company’s objective is misused by the members, strict legal actions are taken.
