A Guide to Section 8 Companies
An interactive explainer on forming and managing a non-profit company in India under the Companies Act, 2013.
Companies for a Cause
A **Section 8 Company** is a special type of company registered with the primary objective of promoting charitable activities like commerce, art, science, education, social welfare, or environmental protection. Unlike other companies, its main goal is not to earn profit. Any income generated must be reinvested back into promoting its non-profit objectives, and it is strictly prohibited from distributing dividends to its members.
Key Characteristics
Non-Profit Motive
Primary goal is to promote a cause, not to generate profit for owners.
No Dividends
Profits cannot be distributed to members; they must be reinvested.
Limited Liability
Members' personal assets are protected from the company's debts.
Government License
Requires a special license from the Central Government (MCA) to operate.
No "Ltd." Suffix
Permitted to operate without "Limited" or "Private Limited" in their name.
Tax Benefits
Eligible for tax exemptions under the Income Tax Act, enhancing their funds.
The Lifecycle of a Section 8 Company
What does it take to start and run a Section 8 Company? Use the buttons below to explore the key requirements at each stage.
Basic Requirements for Formation
Minimum Directors: At least 2 for a private limited structure or 3 for a public limited structure.
Minimum Members: At least 2 shareholders/members are required to start.
Clear Objects: The MoA must clearly define the non-profit objectives (e.g., education, social welfare).
Promoters: The individuals or entities promoting the company must be identified.
Important Ongoing Considerations
Strict Compliance: Must adhere rigorously to the Companies Act, 2013 and its rules.
Profit Utilization: All income and profits must be used only to further the company's stated charitable objects.
Annual Filings: Must file annual returns and financial statements with the RoC, just like any other company.
License Integrity: The Central Government can revoke the license if the company acts fraudulently or against its objectives.
Professional Guidance: Due to the complex regulatory framework, ongoing professional help is highly recommended.
Why Choose a Section 8 Structure?
Enhanced Credibility
A corporate structure is often seen as more transparent and credible by donors, government agencies, and the public compared to unregistered entities, trusts, or societies.
Access to Funding
The regulated nature and transparent governance make it easier to raise funds and receive donations, including foreign contributions under FCRA (subject to registration).
Perpetual Existence
As a separate legal entity, the company continues to exist even if its members or directors change, ensuring the longevity of its mission.
Asset Ownership
The company can legally own property, enter into contracts, and manage assets in its own name, separate from its members.