Company IncorporationSection 8 Company

Section 8 Company: Why Choose One?

This article unfolds the information regarding section 8 company and the reasons to choose it.

It is governed by the Indian Companies Act, 2013, and the rules and regulations enacted thereunder. It is managed by the Ministry of Corporate Affairs, which is part of the government of India, and it is done through the Offices of Registrar of Companies (RoC), which are located in each state in India. 

The exact sort of company that is going to be founded has some influence on the rules, standards, techniques, and processes involved in creating a corporation.

Previously, it was known as a Section 25 Company under the Companies Act of 1956. Its primary objective was to promote any object, including but not limited to research, social welfare, religion, charity, commerce, art, science, sports, education, and environmental protection, as long as the profits or other income was used for promoting it. Companies licensed under Section 8 of the Companies Act of 2013 are called “Section 8 Companies” (the Act).

Consequently, a Section 8 Company is a company that has been established to serve the interests of a charitable organisation or a non-profit. In contrast to trusts and societies, which are created in accordance with the regulations of each state government, this business is registered with the Ministry of Corporate Affairs of the Central Government (MCA).

This provides a variety of advantages in comparison to Trust or Society, in addition to higher credibility with funders, government agencies, and other stakeholders. When creating a company using this business model, it is unnecessary to include the terms “Limited” or “Private Limited” in the firm’s official name. 

The following are some of the fundamental requirements for a company of this nature:

  • A minimum of two directors must be in place, and at least two investors must be in the company. A person may hold both directorships and shareholder positions.
  • At least one of the directors has to be a citizen of India. This is a must.
  • There is no needed minimum amount of capital.
  • You will require a Permanent Account Number (PAN) if you are an Indian citizen.
  • If you do not possess a valid driver’s license or passport, you will be required to provide a picture identification card. On the other hand, those not citizens of the country being visited are required to provide identification in the form of a passport.
  • A bank statement, an electric or water bill, a telephone bill, or a bill for a mobile phone
  • Registered Office address evidence (that is, a copy of the most recent utility bill in the landlord’s name and a no-objection certificate from the landlord’s owner, if the premises are leased), as well as the rent agreement; Registered Office addresses the evidence (that is, a copy of the most recent utility bill in the landlord’s name and a no-objection certificate from the landlord’s owner.
  • Suppose the premises are owned by either the Director or the Promoters. In that case, the no-objection certificate should be presented with any paperwork confirming ownership, such as a sale deed or a home tax receipt. This is required even if the premises are rented.

Why Choose To Work With A Section 8 Company?

So let’s have a look at the reasons to choose a section 8 company- 

Taxation Privileges

Since they are non-profit organisations, Section 8 businesses are exempt from paying income tax. Under Section 80G of the Income Tax Act of 1961, companies may take advantage of additional tax breaks and incentives. Donations made to charities that qualify under Section 8 may be deducted from the taxable income of both individuals and companies.

Stamp Duty Not Required

When registering, public and private limited companies must pay stamp duty; however, section 8 enterprises are exempt from this need.

Complete and Unrestricted Transfer of Ownership

Section 8 companies, as opposed to limited liability partnerships, can freely transfer ownership of moveable and immovable property and the titles to such properties.

No Need Of A Minimum Amount Of Paid-in Capital

As opposed to public limited businesses, section 8 corporations are free from the need of having a minimum share capital because of the charitable or research reasons for which they were created. However, the amount of cash acquired could be determined by the firm’s requirements.

An Individualized Status in the Legal System

A Section 8 company is considered a separate legal entity in the same way that other companies which the Companies Act controls, 2013 are.

GET YOUR SECTION 8 COMPANY REGISTRATION ONLINE

Possession of Real Estate

It is possible for corporations operating under Section 8 to exchange ownership of both tangible and intangible property. There is a possibility that the land will also comprise non-residential property, such as a training centre, research institution, school, gallery, and other such establishments. Since the property would be considered the exclusive property of the organisation, members and shareholders would be unable to stake a claim to it.

Continuity without Boundaries

These corporations, much like private limited companies, have an indeterminate life expectancy until they are legally dissolved, which might occur at any time. The company would continue to exist indefinitely even if all of its members were to pass away or be removed from their positions.

Credibility

Section 8, which has a higher degree of legitimacy, applies to businesses for the central government granted a license. Once a non-profit organisation has been registered, its founding documents, known as the Memorandum of Association (MoA) and Articles of Association (AoA), cannot be altered. These companies have built a strong name in the industry.

Limitations Placed on Legal Accountability

Members of a Section 8 company have limited liability, meaning their assets are not jeopardised if the business incurs debts or has other difficulties. The shareholders’ assets are not individually accountable for the corporation’s liabilities.

The members of staff of the company

Shareholders might come from individuals, businesses, and other organisations.

Conclusion

Companies operating under Section 8 are required to comply with all rules and regulations imposed by the government. After reading this article, you should be able to differentiate between a Section 8 company, a trust, and a society. 

You should also be able to identify the differences between the three. These comparisons can help you decide whether or not to launch a new company, should you consider doing so. Vakilsearch can further assist you with enquiries and legal advice. 

Read More:

  1. Who can Apply for Section 8 Company?
  2. Benefits of Section 8 Company
0

Back to top button

Adblocker

Remove Adblocker Extension