A Section 8 company is a type of limited company. While it has the same rights and restrictions as a regular limited company, it doesn’t need to use the words “private limited” or “limited” in its name.If it is registered as a non-profit organization, it will not be able to receive the profits of its activities.
A Section 8 Company is an entity that is registered with the Ministry of Corporate Affairs of the Central Government. Its purpose is to advance non-profit objectives in society. It is not allowed to pay dividends. It must have a minimum of three directors and no more than six. It also has limited liability and cannot have unlimited liabilities. It must have a government license. There are several advantages of forming a section 8 company.Ā
Another benefit of a Section 8 company is that it can have as many as two directors. This is an additional benefit over a traditional company. As a bonus, section eight companies are also much easier to start. There is no need to spend a fortune to form a Section 501(c)(3). The ROC will help you file your annual reports with the proper authorities. This type of organization is not for profit-seeking organizations.
While a Section 8 company is more expensive than a traditional corporation, it has a lower tax burden. This tax-deductible organization is similar to a Society or Trust, but it operates under a different set of rules. It is a registered charity and can use its profits to benefit low-income societies. It is also easier to register for a section 8 company, which gives it a more credible reputation. A section 8 company name doesn’t need to contain the word “Limited” or “Private Limited”.
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Registrars of Companies of respective jurisdictions are delegated with the powers of Central government to issue license to Section 8 Companies
To incorporate a Section 8 Company, an application shall be made to the Registrar of Companies in Form no. INC.12, which shall be accompanied, inter alia, by the following documents:
No. Rule 20(1) of the Companies (Incorporation) Rules, 2014 provides that only aĀ limited companyĀ registered under this Act or under any previous company law shall make an application to the Registrar for issue of license. Therefore, a company with unlimited liabilities cannot be registered as a Section 8 Company.
Stamp duty on memorandum & articles of association of a Company or on any increase in share capital is governed by Indian Stamp Act, 1899 as adopted by respective state or stamp act of respective state, as the case may be. Some of the states provide privileged rates for stamp duty on MOA/ AOA of Section 8 Companies or on increase in authorized share capital.Ā
No. Rule 3 of the Companies (Incorporation) Rules, 2014 prohibits a one person company to be incorporated as section 8 company or to convert into a Section 8 Company.
There is no restriction in the provisions of the Companies Act, 2013 for a registered Trust to become a member of Section 8 Company. In case of unregistered trusts, provisions of section 89 would be applicable.
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