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Section 8 Company


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A Section 8 Company is a type of non-profit entity designed to advance charitable endeavors, arts, sciences, education, and sports. Unlike for-profit organizations, the earnings of these companies are reinvested to support their mission rather than being distributed among members. Understanding the nature of a Section 8 Company, its documentation needs, and the incorporation process is crucial.

Under the Companies Act of 2013, a Section 8 Company is characterized as an entity whose primary objectives are to foster arts, commerce, science, research, education, sports, charity, social welfare, religion, environmental protection, or other similar causes. These organizations channel their profits towards achieving their goals and do not distribute dividends to shareholders.

A Section 8 Company is a special type of corporation designed to promote charitable and non-profit activities. These include initiatives in education, social welfare, environmental conservation, arts, sports, and various charitable endeavors. This structure operates under the guidelines of the Companies Act, 2013.

The primary goal of establishing a Section 8 Company is to support non-commercial objectives, encompassing sectors like trade, the arts, commerce, education, charity, environmental protection, sports research, and social welfare. To create a Section 8 Company, you need at least two directors, and there is no minimum capital requirement for setup.

Key Aspects of Section 8 Company Registration

In India, NGOs can register either as a non-profit entity under the Section 8 of the Companies Act, 2013, or through the Registrar of Societies.

  • Profits earned by Section 8 Companies must be used exclusively for charitable purposes and cannot be distributed among members or shareholders.
  • Section 8 Companies are the modern equivalent of the old Section 25 Companies under the Companies Act, 1956, now updated to Section 8 in the current legislation.
  • These companies must adhere to the provisions of the Companies Act, 2013, including maintaining financial records, submitting returns to the Registrar of Companies (ROCs), and following GST and IT regulations.
  • Any modifications to the company's charter documents, such as the Articles of Association (AoA) or Memorandum of Association (MoA), need to be approved by the government.

Creating a Section 8 company in India comes with a range of benefits. Here’s a detailed look at why it might be the right choice for your charitable or social initiative:

Tax Benef​its

A major advantage of Section 8 companies is their eligibility for complete tax exemption under Section 12AA of the Income Tax Act. Since these companies channel their profits towards charitable causes, they benefit from a 100% tax-free status, making them highly attractive for those looking to maximize their impact without worrying about tax liabilities.

Flexible Capital Requirements

Unlike public limited companies, Section 8 companies are not bound by any minimum capital requirements. This allows for greater flexibility in managing and adjusting their capital as the organization grows and evolves.

Distinct Legal Identity

Section 8 companies enjoy a separate legal identity and continuous existence, similar to other incorporated entities. This status enhances their credibility and provides them with a solid legal foundation.

Enhanced Credibility

Operating under a rigorous compliance framework boosts the credibility of Section 8 companies. Their adherence to strict regulatory standards ensures they are more trustworthy compared to NGOs and trusts, which often follow less stringent guidelines.

Name Flexibility

When registering, Section 8 companies have the freedom to choose their name without needing to include "Section 8" as part of it. This allows for more creative and flexible branding options.

Overall, Section 8 companies offer a host of benefits such as tax exemptions, no minimum capital requirement, no stamp duty, a separate legal identity, enhanced credibility, and flexible naming options. These features make them an appealing choice for individuals and groups aiming to start a venture with a focus on social or charitable causes.

Eligibility Requirements for Forming a Section 8 Company

To form a Section 8 company in India, certain criteria must be met:

  • At least one director is required.
  • The main objectives of the company should focus on areas like promoting arts, science, sports, charitable activities, education, or supporting low-income individuals.
  • The founder must be an Indian citizen or a Hindu Undivided Family (HUF).

Before initiating the incorporation of a Section 8 company in India, certain legal criteria must be met. Here's what you need to know:

Director Requirements For a Section 8 company aiming to function as a private limited entity, a minimum of two directors is required. If the company will operate as a public limited entity, at least three directors are necessary.

Membership Limits For private limited Section 8 companies, the Ministry of Corporate Affairs (MCA) stipulates a maximum of 200 members. Conversely, public limited Section 8 companies do not face any such membership restrictions.

Capital and Naming Criteria Under the Companies Act of 2013, Section 8 companies are not bound to maintain a minimum paid-up capital. Additionally, NGOs registered as Section 8 entities are not required to include "private limited" or "limited" in their names.

Purpose of the Company Section 8 registration is reserved for organizations with a non-profit mission. The Memorandum of Association and Articles of Association must explicitly outline these non-profit objectives. Any profits generated by the Section 8 company must be directed towards charitable endeavors or reinvested within the organization. These profits cannot be distributed among the members. Adhering to these criteria ensures that Section 8 companies operate transparently and align with their mission of promoting social welfare.

To successfully establish a Section 8 company in India, you will need to gather and submit the following documents:

  1. Articles of Association (AOA) and Memorandum of Association (MOA): Essential for outlining the company's structure and objectives.
  2. Declaration from Initial Directors and Subscribers: An affidavit is not necessary, but a formal declaration is required.
  3. Proof of Office Address: Acceptable documents include utility bills (electricity, water, or gas).
  4. Certificate of Incorporation (COI) of Foreign Corporate Entities: Required if applicable.
  5. Resolution from the Promoter Company: A formal resolution approving the incorporation.
  6. Consent of Nominee (Form INC-3): To confirm the nominee’s agreement.
  7. Proof of Identity and Residence: For both nominees and subscribers, including applicants.
  8. Digital Signature Certificate (DSC): Required for online filings.
  9. Declaration of Unregistered Companies: Confirming the status of the company.

Incorporating a Section 8 company in India involves several key steps. Here's a streamlined process to guide you through:

1. Secure a Digital Signature Certificate (DSC) First, obtain a Digital Signature Certificate (DSC) for all proposed directors. This certificate is essential for online document submissions to the Ministry of Corporate Affairs (MCA). Use Form DIR-3 for acquiring the Director Identification Number (DIN) alongside the DSC.

Forms Required: DIR-3, DSC

2. Apply for Director Identification Number (DIN) Following the DSC acquisition, apply for the Director Identification Number (DIN) for the directors. This unique ID is issued by the MCA to individuals aspiring to become company directors in India.

Forms Required: DIR-3

3. Reserve the Company Name Next, reserve the desired name for your company with the MCA. Ensure the name is distinctive and does not resemble any existing company name. Use Form INC-1 for this reservation.

Forms Required: INC-1

4. Submit the Incorporation Application With the company name approved, file your incorporation application using Form INC-32. Include the company's Memorandum of Association (MOA) and Articles of Association (AOA) in your submission.

Forms Required: INC-32, MOA, AOA

5. Acquire the Section 8 Company License Once your incorporation application is approved, apply for a Section 8 company license using Form INC-12. This form must be accompanied by the necessary documents.

Forms Required: INC-12

6. Receive the Certificate of Incorporation Finally, upon receiving the license, the MCA will issue a Certificate of Incorporation in Form INC-16. This certificate verifies the official incorporation of your Section 8 company.

Forms Required: INC-16

Summary of Forms: DIR-3, DSC, INC-1, INC-32, MOA, AOA, INC-12, INC-16

Funding and Donations for Section 8 Companies

Section 8 companies cannot raise capital through deposits but can accept public donations. You can explore various funding sources including:

  • Foreign Donations: Requires FCRA registration, which can be applied for up to three years post-registration. For immediate foreign donations, request prior permission from the commissioner.
  • Equity Funding: Issue new equity shares at a premium price.
  • Domestic Donations: No specific restrictions, but it's crucial to implement robust systems to prevent money laundering.


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