If you are wondering how the section 8 companies do business then you will surely get all your answers right here!
Not all companies today aim to make huge profits or even profits by carrying out the normal process of trade or commerce. Several companies have objectives of being charitable and generating zero profit. Search companies are known as Section 8 companies and are recognized under Section 8 of the Companies Act 2013. These companies will likely dedicate all the income or profit towards charitable objectives.
What Do You Need To Know About Section 8 Companies?
The Companies Act defines a Section 8 company as a company whose primary objective is to encourage the field of commerce, art, education, research, science, sports, social welfare, charity environment, legal protection, or other similar goals. These companies donate all the profit towards the objective and do not pay any dividends to the members. Previously section 25 of companies in 1956 defined all these objectives with fewer or more provisions. However, the described new act has better goals than Section 8 companies can make the most of.
Some of The Features Of Section 8 Company:
Section 8 company comprises various components that all companies do not enjoy.
Section 8 companies do not have any motive to make profits. The objective here is to be entirely charitable. They support the causes, including cultural science, religion, sports, etc.
No Minimum Share Capital
Unlike other general companies, They do not have any prescribed paid-up capital minimum limit.
Members of Section 8 companies have only limited liability. In any case, the penalties cannot be unlimited.
They can only work if they have a licence from the central government. In some cases, the government also has the right to revoke consent.
As the companies have charitable objectives, the Companies Act offers several benefits and exemptions to them.
Companies As Members
Besides individuals and the association of people, Section 8 also allows the companies to be members of these companies.
Learn About The Formation Of The Section 8 Company
Before doing business with Section 8 Company, learn some section 8 about the formation of this company. Then, you can apply to the registrar of companies using the requisite forms to form the company with charitable goals under Section 8 of the Companies Act. This can be done by either one person or by the association of people. The central government will accept the application if satisfied with the given terms and conditions imposed under the licence.
Once received, the registrar of companies can register the company provided you pay all the requisite amount of money. You should also know that such companies can only have limited companies. Therefore, all the privileges and obligations of limited companies also apply to this one. Furthermore, you cannot add words like private limited or limited in the name like other companies have.
As the existence of such companies is based only on the licence given by the central government, they cannot change the member India articles of association without permission from the central Government of India. If the permit is disallowed, they cannot do anything.
Can a Licence Be Cancelled?
Section 8 companies generally require a licence by the central government. All the rights are revocable on the following grounds.
The company contravenes the provision given under Section 8 of the Companies Act.
The terms and conditions of the licensor violated
When the conduct is fraudulent or violates its objectives and public policy.
The government can also order the company to be amalgamated if any other situation pops up.
Benefits of Section 8 Company
The privileges of taxes are plenty as the section age companies can be exempted from paying the income tax. The companies also have other benefits under section 83 of the Income Tax Act 1961. The donations made towards the section 8 companies by corporations or individuals can claim the tax exemption.
The charity organisation under this section must also register for sections 80 g and 12 A of the Income Tax Act 1961 to get all the exemptions and deductions. Furthermore, private, public limited companies can also make donations to Section 8 and contribute towards corporate social responsibility as per section 131 of the Companies Act 2013.
Zero Duty Payable
The companies falling under Section 8 are totally exempted from the process of paying off the stamp duty during the registration process, which is different from any other private or public limited companies.
Unrestraint ownership transfer
They are allowed to transfer their ownership or title of the immovable or movable property without restrictions and they are different from a partnership or limited liability company.
Unique Legal Identity
Like other companies working under the Companies Act 2013, a Section 8 company can also have its corporate structure and a separate legal identity.
Capacity To Own The Property
Section 8 companies can own or even tangle the property alone is a separate legal identity. The property can be residential or non-residential, including the Research Institute training centre. The property can belong to the company, and no shareholder member can also claim the same.
The companies also have the right to exhibit perpetual existence, just like private limited companies, until the company is legally dissolved. Irrespective of the death or termination of the members, the company continues to exist till the end of time.
Against the trust of societies, they have better credibility as these companies hold the licence by the central government. These companies are not, and there are more restrictions like not being able to change the memorandum of association or articles of association once they are registered. These companies are trusted widely due to such measures and have a reliable image.
Even though they have evolved with a great motive, they have to align with all rules and regulations to function well, or the central government can also discard the licence. Generally has several benefits, and you should know everything about it before starting a company or doing business with them.
If you are looking forward to knowing more about section 8 companies and want to register one, then the experts at Vakilsearch can be of great help to you here! Connect with the professionals now.