What is Section 8 Company as per Companies Act, 2013?
The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.
The Central Government may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word "Limited", or as the case may be, the words. "
Some examples of Section 8 Company:
Infosys Foundation, Reliance Foundation, TATA Foundation, and Reliance Research Institute are some of the examples of Section 8 companies registered under the Act.
What is the minimum Capital of Section 8 Company ?
There is no requirement of minimum paid-up capital in the case of a Section 8 company incorporation. NGOs established as a Section 8 company need not use the words 'Limited' or 'Private Limited' in their name.
What is the limit of Sec 8 Company in case of number of Directors?
Section 149(1) of the Companies Act 2013 – prescribed minimum of 3 & 2 directors for public limited & private limited companies respectively and a maximum of 15 directors. But there is no minimum or maximum prescription for section 8 company.
What is the basic difference between Section 8 Company and Trust?
Section 8 of the company formed with charitable objects and of that sort.
Whereas trust is governed by the public trust act. A trust is basically a legal entity in which a trustor (first party) through which the second party holds the rights to manage the interests of the property or assets.
Important reasons of forming a Section 8 Company:
To attain charitable objectives, to apply the income and the profits derived from the companies to attain such objectives and to not to pay the dividends to its members.
Advantages of Section 8 Company
• Access to Tax benefits.
• Zero Stamp Duty.
• Minimal share capital.
• Exempted from any name.
• Separate legal entity.
• Improved Credibility.
• Eligible for foreign contribution.
• Profit distribution is not permissible.
The basic differences between Trust & Sec 8 Company arethyefollowings :
Cost factor low for Trust, Transparency in working is also lower that Sec 8 Company.
The trust is basically governed by Indian Trust Act, 1882 whereas the company under section 8 is governed by the Indian company’s act, 2015.
The main registrable document of a trust is the trust deed whereas the main registrable document for a Section 8 Company is its MOA (Memorandum of association) and AOA(Articles of Association).
Under the trust, the jurisdiction falls on the charity commissioner or the deputy registrar of that area whereas in the latter the jurisdiction falls under the regional director or registrar of the state.
A minimum of 2 members is required under a Trust whereas a minimum of 2 under the private company and 7 for the public company is required.
The trust deed has to be made on a Non Judicial stamp paper which may vary from state to state whereas no stamp duty is required in the latter
The public charitable trusts are irrevocable or cannot be dissolved whereas the company under section 8 may be dissolved at any time.
Mode of the succession of the board of directors is by appointment or election whereas it is managed by the board of manager in the latter.
The legal title vests in the name of the trustees only whereas the rights of legal title vests in the hands of the company.
In case the trust becomes inactive due to mere negligence, the commissioner may take steps to revive the Trust and if it is still not able to revive the same then it may apply a legal doctrine stating to amend the objects of the trust whereas under a Section 8 Company, after the dissolution of the company and after its settlement, the remaining property and assets must be transferred or given to some other company under Section 8 Company.