What are the Features of Section 8 Company?

Features of Section 8 Company
Japsanjam Kaur Wadhera
| Updated: Jan 08, 2021 | Category: Section 8 Company

The Companies Act, 2013 defines Section 8 Company as one whose objective is to promote fields of commerce, arts, science, education, research, social welfare, charity, sports, environment protection, religion or other similar objectives. And such companies invest their profits towards the furtherance of their cause and do not pay any dividend to its members. The section 8 Companies can be formed either as LLP, Public or Private Limited. It is formed with an objective of charitable and social welfare without the intention to earn profits or dividend. This article will specifically talk about what are the features of Section 8 Company.

The features of Section 8 Company is a legal entity for non-profit or non-government organizations. And a company is referred to as Section 8 Company when it is registered as a Non- Profit Organization (NPO).

What is the objective of Section 8 Company?

The main purpose of the formation of Section 8 Company is to protect the human rights, promote the social welfare of the people and protection of the environment and any other such objective. Section 8 Company registration is done with the Central Government under the Ministry of Corporate Affairs.

Formation of Section 8 Company

To form a Section 8 Company, a person or an association of persons can submit an application to the Registrar of Companies using requisite forms for charitable objectives under Section 8 of Companies Act. Upon the satisfaction of the Central Government, the application shall be accepted according to the terms and conditions imposed under the license granted by it. Further the Registrar of the companies will register the company after the payment of the requisite fees.

The companies that can register itself under the Section 8 of the Companies Act can only be “Limited Companies”. All the obligations and privileges of limited companies apply in this case.  Where the existence of such companies is based on the license that is granted to them, the memorandum or articles of association cannot be ever altered by them without the prior approval or permission from the Central Government. And nothing can be done beyond the permissibility of the license.

What is the Section 8 Company registration procedure?

For the purpose of simplifying the process of registration of Section 8 Companies, on the 7th June 2019 the requirement of filing of INC-12 has been abolished vide the Companies (Incorporation) Sixth Amendment Rules, 2019.

The procedure for Section 8 Company Registration is as follows:

Apply for name availability in SPICe+ Form

The applicant is required to apply for name availability in SPICe+ Form facility. It is mandatory for Section 8 Companies to use words like Forum, Chambers, Foundation, Federation, Electoral Trust, Confederation, and Council in its name.  And two names can be given by the applicant at a time and can make only one resubmission in the SPICe+ Form.

Prepare Memorandum of Association (MOA) and Articles of Association (AOA)

The MOA works as a charter of the company and states or specifies the realm of the activities of the company. The AOA states the internal management of the company. The applicant is required to use Form INCE- 13 to file Memorandum of Association of a Section 8 Company and there is no prescribed format for filing Articles of Association of a Section 8 Company.

Every subscriber is required to sign a memorandum and article of association and is required to provide the name, description, address and occupation in the presence of one witness who affirms the signature and in support of it sign and add his name, description, address and occupation.

Filling of SPICe+ Form

Once the approval of the Central Government is obtained, the next step is to File the SPICe+ Form.

Attachment of SPICe+ Form

  1. Memorandum of Association in Form INC-13.
  2. Articles of Association does not have any prescribed format.
  3. Consent and declaration by first Directors in Form DIR-2.
  4. Affidavit by first subscriber in Form INC-9.
  5. PAN Card of the subscribers and directors.
  6. Aadhar Card of the subscribers and directors.
  7. Registered Office proof, that is, lease deed, sale deed, rent agreement etc.
  8. Registered Office utility bill, electricity bill.
  9. No Objection Certificate (NOC) of the owner/director if the registered office is on rent or lease.
  10. The license issued in Form INC- 16.

Documents Required for Section 8 Company Registration

  • Aadhar Card of all the members.
  • PAN Card of all the members.
  • Latest Bank Statement of all the members and the company.
  • Electricity bill or Telephone bill.
  • Passport.
  • Voters Id.
  • Passport size photograph of all the members.
  • Driving license.
  • Copy of rental statement.

Features of Section 8 Company

Features of Section 8 Company

Profits

The income and profits of the company is used mainly for the promotion of the company.

No Dividend

The features of Section 8 Company is formed with the objective of charitable and social welfare without the intention to receive any dividend or profit.

Special License

It is mandatory for the Section 8 Company to get a Special License from the Central Government, unlike other companies. The entire requirement must be fulfilled. The Rule 19 of the Companies Rules (Incorporation), 2014 provides the issue of the license for the Section 8 Company under a procedure which is necessary to be followed.

Incorporation under Form INC- 29

A section 8 Company cannot be incorporated under the Form- 29.

Status

The Section 8 Company has a right to enjoy all the privileges and be subject to all the obligation of a Limited Company. It shall not be treated as a small company.

Use of Suffix

The suffix ‘Pvt. Ltd’ or ‘Ltd’ cannot be used by Section 8 Company with its name.

Charitable Objective

The aim of the Section 8 Companies is purely charitable in nature and not to make profits. Their objectives are to further causes like culture, science, religion, sports, research and etc.

No minimum share capital and Limited Liability

Unlike other companies, Section 8 Companies do not require a minimum paid-up share capital and the members only have limited liability in the company. Their liability cannot be unlimited in any case.

Amendment in Articles

Under the Section 8 Company, the articles can only be amended with the prior permission and approval of the Central Government and otherwise cannot be amended.

Firms as members

Section 8 Company also allows the firms to be the members of the companies apart from the individuals and associations of persons.

Transferability of Ownership

The shares and other interests of the members are considered as movable property under the Section 8 Company and hence can easily be transferred as provided by the Articles.

Flexibility

The Section 8 Companies comparatively has less legal formalities and has benefits of special exemptions and privileges under the Company law.

Conclusion

The main objection for the formation of Section 8 Company is to promote the social welfare, education, research, science, culture, art, commerce, religion and many more without the objective to earn a profit. Section 8 Company has a large contribution in the growth and development of the economy. The Section 8 Company registration is important for a limited company to discharge its duties and functions in accordance with the rules and regulations prescribed under the Companies Act.

Also, Read: What is Copyright Infringement and Remedies in India?

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Japsanjam Kaur Wadhera

Japsanjam Kaur Wadhera is an Advocate and has completed her BA.LLB (Hons) and has experience of writing various research papers during her college time. Earlier she was working as an Associate Advocate in a reputed Law Firm. She has an extreme interest in writing legal content and her core area falls under legal enactments, tax and finance.

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