Section 8 Company is an organization which is registered as a Non-Profit Organization (NPO). NPO/Section 8 Company has its objective of promotion of arts, commerce, charity, education, protection of environment, science, social welfare, sports, research, religion etc. and intends to apply its profits, if any, or other income in promoting its objects. It functions exactly like a limited company including all the rights and obligations that are associated with such a company.
A Section 8 Company is similar to a Trust or Society; except, a section 8 Company is registered under the Central Government’s Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations.
Compared to a trust or a society, a Section 8 Company has various advantages like improved members’ reach, better legal standing, credibility, transparency of donations received etc. The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
The major difference of section 8 and other limited companies are as follows:-
- Formed with the object the of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other matters.
- The profit generated from the activities can be used only to meet administrative and other expenses incurred in the performance of activities mentioned in the Memorandum of Association i.e, dividend payment is prohibited.