What is Sec-8 Company?
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.
Features of a Section 8 Company
A Section 8 company comprises of the following distinct features that most other kinds of companies do not have:
i. Charitable objectives: Section 8 companies do not aim to make profits. Their objectives are purely charitable in nature. They aim to further causes like science, culture, research, sports, religion, etc.
ii. No minimum share capital: Section 8 companies, unlike all other companies, do not require a prescribed minimum paid-up share capital.
iii. Limited liability: Members of these companies can only have limited liability. Their liabilities cannot be unlimited in any case.
iv. Government license: Such companies can function only if they have the Central Government’s license. The Government can revoke this license as well.
v. Privileges: Since these companies possess charitable objectives, the Companies Act has accorded several benefits and exemptions to them.
vi. Firms as members: Apart from individuals and associations of persons, Section 8 also allows firms to be members of these companies.
Advantages/Privileges
People generally prefer to conduct charitable activities by forming Section 8 companies instead of regular NGOs and associations. This is because they have limited liability, so their personal assets will not be used in paying debts of the company. Here are some advantages that these companies enjoy:
• Members have limited liability.
• No minimum capital requirements.
• They get several tax exemptions.
• Stamp duties and high fees are not payable for registration.
• They have perpetual existence and separate legal status.
• Exemptions from carrying out several procedural compliances.
• More credibility than compared to NGOs, societies, and trusts because they are recognized by the Central Government’s license.