Description

A Section 8 Company is a unique legal structure in India formed for promoting charitable or not-for-profit objectives such as education, art, science, sports, social welfare, religion, environment protection, and similar causes. Unlike other forms of companies that focus on profit distribution, a Section 8 Company channels its income and profits solely towards achieving its stated objectives. It is governed by Section 8 of the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs (MCA).
This type of entity is highly preferred by non-governmental organizations (NGOs), social enterprises, and nonprofit foundations seeking the credibility of a registered corporate form with limited liability, legal recognition, and transparency.
Legal Framework
The registration and regulation of Section 8 Companies are primarily governed by the following laws and rules:
1. Companies Act, 2013 – Section 8 and Rules 19 & 20 of the Companies (Incorporation) Rules, 2014.
2. Companies (Incorporation) Fifth Amendment Rules, 2019 – Simplified the licensing procedure.
3. Income Tax Act, 1961 – Sections 11 and 12A provide for tax exemptions to approved Section 8 entities.
4. Foreign Contribution Regulation Act (FCRA), 2010 – Applicable if foreign funding is involved.
Characteristics of a Section 8 Company
A Section 8 Company stands out due to its distinct features that differentiate it from trusts and societies:
• Non-Profit Objective: The main aim is to promote charitable activities rather than profit distribution.
• Limited Liability: Members’ liability is limited to the extent of their share capital or guarantee.
• Separate Legal Entity: It can own property, sue or be sued in its own name.
• Tax Benefits: Eligible for income-tax exemptions under Sections 12A and 80G.
• Name Restriction: Cannot use the words “Private Limited” or “Limited”; instead, it ends with “Foundation,” “Association,” “Society,” “Forum,” “Federation,” or similar words.
Eligibility Criteria
To qualify for registration as a Section 8 Company, an organization must meet the following conditions:
1. Objective: The company must be formed for promoting commerce, art, science, education, charity, sports, social welfare, or other similar purposes.
2. Profit Utilization: All profits and income should be used solely for furthering the company’s objectives.
3. No Dividend: Members cannot receive any dividend from the company’s profits.
4. Minimum Members: Two for a Private Limited Section 8 Company and seven for a Public Limited Section 8 Company.
5. Directors: A minimum of two directors for a Private Limited and three for a Public Limited Section 8 Company.
6. Registered Office: Must have a valid address in India to receive official correspondence.
Documents Required for Section 8 Company Registration
The following documents are needed for registration with the MCA:
A. For Directors and Shareholders:
• PAN Card of all applicants
• Aadhaar Card or Passport for identity proof
• Latest utility bill (electricity/telephone/gas) for address proof
• Passport-sized photograph
• Email ID and mobile number
B. For Registered Office Address:
• Utility bill (rent agreement or ownership proof)
• No Objection Certificate from owner
• Property tax receipt (if applicable)
C. Additional Documents:
• Draft Memorandum of Association (MOA) and Articles of Association (AOA)
• Declaration in Form INC-14 and INC-15
• Estimated Income & Expenditure Statement for the next three years
Step-by-Step Process for Section 8 Company Registration
Step 1: Obtain Digital Signature Certificate (DSC)
The first step is to obtain DSCs for the proposed directors. A DSC is required for e-filing forms with the MCA portal.
Step 2: Apply for Director Identification Number (DIN)
DIN is mandatory for every proposed director. It can be applied through the SPICe+ form during incorporation or separately through Form DIR-3.
Step 3: Name Reservation
Submit Part A of SPICe+ form to reserve the company name. Names should reflect the company’s objectives and end with terms such as “Foundation,” “Forum,” or “Association.” The Registrar of Companies (ROC) approves names after ensuring they are unique and in line with the provisions of Rule 8 of the Companies (Incorporation) Rules, 2014.
Step 4: Prepare MOA and AOA
The Memorandum of Association (MOA) defines the objectives of the company, while the Articles of Association (AOA) govern its internal management. Both must be drafted in compliance with Section 8 requirements and include a clause prohibiting profit distribution.
Step 5: File SPICe+ Part B and INC-9
SPICe+ Part B covers incorporation details such as registered office address, share capital, and declarations. INC-9 is an affidavit by the subscribers and directors confirming they are not guilty of any offence and are eligible to form a company.
Step 6: File AGILE-PRO-S Form
This form facilitates automatic registration for EPFO, ESIC, GST (optional), and Professional Tax (where applicable), along with opening a bank account.
Step 7: Review and Approval by Registrar
Upon submission, the ROC verifies documents. If found satisfactory, a License in Form INC-16 is issued along with the Certificate of Incorporation (CIN).
Post-Incorporation Compliance
After receiving the license, a Section 8 Company must adhere to the following statutory compliances:
1. Appointment of Auditor: Within 30 days of incorporation in Form ADT-1.
2. Opening Bank Account: In the name of the company for transactions.
3. PAN and TAN Application: Automatically generated via SPICe+ form.
4. Annual Filings: Form AOC-4 (for financial statements) and Form MGT-7 (for annual return).
5. Board Meetings: At least two meetings per year with a gap of not more than 90 days.
6. Maintenance of Books of Accounts: As per Section 128 of the Companies Act.
7. Income Tax Compliances: Apply for registration under Section 12A and 80G to avail tax benefits.
Tax Benefits for Section 8 Companies
A Section 8 Company enjoys various fiscal benefits once it obtains registrations from the Income Tax Department:
1. Exemption under Section 12A: Income used for charitable purposes is exempt from tax.
2. 80G Registration: Donors can claim tax deductions for contributions.
3. No Minimum Capital Requirement: Flexibility in funding charitable projects.
4. Foreign Funding (Subject to FCRA): Eligible to receive contributions from foreign sources after registration.
Comparison: Section 8 Company vs Trust vs Society
Particulars Section 8 Company Trust Society
Governing Law Companies Act, 2013 Indian Trusts Act, 1882 Societies Registration Act, 1860
Registration Authority Registrar of Companies Sub-Registrar of Trusts Registrar of Societies
Legal Status Separate Legal Entity No Separate Entity Limited Legal Status
Compliance Level High (MCA & IT filings) Moderate Moderate
Preferred For NGOs seeking credibility & foreign funding Family charities Local welfare societies

Advantages of Registering a Section 8 Company
1. Enhanced Credibility: Registered under the Companies Act and recognized by the government.
2. Limited Liability: Directors and members are not personally liable for debts.
3. Perpetual Succession: The company’s existence is independent of its members.
4. Eligible for Government Grants: Recognized NGOs may receive CSR funds and government aid.
5. Ease of Fundraising: Can attract donations and foreign contributions subject to compliance.
6. Tax Benefits: Income exemption and deductions for donors under the Income Tax Act.
Common Mistakes to Avoid
• Drafting MOA/AOA without clear non-profit clauses.
• Using words like “Limited” or “Private Limited” in the name.
• Failing to apply for 12A and 80G registrations after incorporation.
• Not maintaining proper books or failing to file annual returns.
• Accepting foreign donations without FCRA approval.
Conclusion
A Section 8 Company offers a structured, transparent, and legally recognized framework for non-profit organizations in India. It not only enhances credibility but also provides financial and tax advantages to those committed to social development and public welfare. With proper registration and compliance, such companies can attract funding from government, CSR initiatives, and international donors—helping them create a lasting impact on society.
If you’re planning to register a Section 8 Company, professional advisory from firms like Compliance Calendar LLP can streamline documentation, filings, and approvals, ensuring smooth incorporation and statutory compliance under the Companies Act, 2013