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Meaning
Section 8 Companies, which are also known as Non-Profit Companies, are a form of legal entity that can be established in India according to Section 8 of the Companies Act, 2013.These organisations are established with the primary intention of fostering philanthropic or non-profit activities for the goal of advancing the advancement of the arts, sciences, commerce, education, social welfare, religion, charity, Protection of environment or any other beneficial public purpose.
Characteristics of Section 8 Companies
- Charitable Objects: Section 8 Non-Profit Organisations Companies are established for the purpose of promoting activities that benefit society as a whole or a particular segment of society. They are not primarily concerned with generating income for their members.
- Limited Liability: Limited liability protection is available to Section 8 Companies, just like it is to other kinds of companies. The personal assets of the members are not put in jeopardy in the event that the firm incurs any financial difficulties or responsibilities.
- Dividends:Dividends are not allowed to be distributed to members of Section 8 companies because this practise is against the law. Any profits or surpluses that are made have to be used towards advancing the company’s goals in some way.
- Limited or Private Limited: Section 8 Companies cannot use the word “Limited” or “Private Limited” in their official names. Instead, they often use terminology such as “Foundation,” “Association,” “Society,” or other appropriate terms that represent their status as a non-profit organisation.
- Benefits to the Taxpayer: Section 8in accordance with the Income Tax Act of 1961, businesses could be able to qualify for certain tax breaks and exemptions if they satisfy the necessary requirements and stipulations.
- Regulations: Section 8 Companies are obligated to operate in a manner consistent with the regulatory and reporting requirements stated in the Companies Act of 2013. This includes the submission of yearly financial accounts, the holding of regular board meetings, and the maintenance of appropriate accounting records.
- No Minimum Share Capital: Unlike other general companies, they do not have any prescribed paid-up capital minimum limit.
- NGO: Section 8 Companies are also considered as NGO’s like other form of NGO operations like Public Trust, Society.
Purpose
- Activities Benefiting the Public Good: Section 8 Companies are often founded with the intention of charity endeavours with the goals of elevating the poverty, enhancing the quality of life, and resolving social difficulties. This could involve activities such as education services, healthcare services, programmes to alleviate poverty, disaster relief, or any other charity projects that are being undertaken.
- Educating Future Generations: A primary goal of many Section 8 companies is to educate future generations by founding schools, colleges, training centres, scholarship programmes, and other educational initiatives. Their goal is to broaden people’s access to high-quality education while also making a positive contribution to the expansion of the education industry.
- Advancement of Society: Section 8 Businesses actively contribute to the improvement and advancement of society. They may participate in activities that support underserved areas, advance gender equality, encourage women’s empowerment, offer vocational training, assist those who are elderly or have a disability, and work on projects that are geared towards community development.
- Conservation of Art, Culture, and Heritage: Many Section 8 businesses are engaged in preserving and promoting art, culture, and heritage in their communities. They may participate in activities such as the organisation of cultural events, the preservation of historical monuments, the support of artists, artisans, and craftsmen, or the promotion of traditional forms of artistic expression.
- Research and Development in the Scientific Field: Some Section 8 companies put their emphasis on developing new technologies, conducting scientific research, and innovating. They might assist academic research establishments, provide financial backing for scientific endeavours, advocate for the promotion of scientific education, and work towards the development of more advanced technologies for the common good.
- Section 8 Deals with Relief and Rehabilitation: During times of natural disasters, emergencies, or other types of crises, Section 8 companies play a very important part in the provision of assistance and rehabilitation. They may participate in actions such as offering affected communities help in the form of food, housing, medical assistance, and other forms of support.
What is included in this
FAQs
Legal entity known as a Section 8 Company can also be referred to as a Non-Profit Company in India. This type of company is incorporatedin accordance with Section 8 of the Companies Act, 2013. It is founded for the purpose of encouraging philanthropic or other activities that are not for profit for the benefit of society.
Section 8 Company’s primary mission is to advance endeavours that are conducive to the general public’s or some subset of society’s well-being. Some examples of these activities are education, healthcare, fighting poverty, protecting the environment, promoting cultural diversity, and other similar endeavours.
The distribution of dividends to the members of a Section 8 Company is not permitted under any circumstances. Any profits or extra funds that are made available by the business must be put towards achieving the organization’s charitable goals.
There is no precise requirement for a minimum amount of capital to incorporate a Section 8 company, as such criterion does not exist. However, in order to carry out its charity operations, the corporation must have adequate financial resources.
Section 8 Companies are not allowed to use the phrases “Private Limited” or “Limited” anywhere in their company names. They often refer to themselves using terminology such as “Foundation,” “Association,” or “Society,” or any other appropriate terms that accurately convey their status as a charitable organisation.
Depending on whether or not they fulfil the necessary requirements and stipulations, Section 8 companies might be qualified for tax breaks and exclusions under the Income Tax Act of 1961. However, this is subject to the caveat that they do so.
Companies are required to comply with the regulatory and reporting duties stated in the Companies Act, 2013, according to Section 8 of the Act. This includes things like keeping accurate accounting records, submitting annual financial statements, holding regular board meetings, and satisfying any other regulatory requirements that may be applicable.
In order to incorporate a Section 8 company, you will need to submit the required documents and forms to the Registrar of Companies (RoC), in addition to paying the costs that are required. It is recommended to obtain the professional guidance of legal and financial advisors as well as company secretaries in order to increase the likelihood of successfully complying with the relevant laws and regulations.
