Section 8 of the Companies Act, 2013
Section 8 of the Companies Act, 2013 deals with the formation of companies that are formed not for profit, i.e., companies established to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any such other object.
Here is a summary of Section 8:
📘 Section 8 – Formation of Companies with Charitable Objects, etc.
Purpose:
A person or an association of persons can register a company under this section if the objective is to:
Promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or other similar objectives.
Intend to apply its profits or income in promoting its objectives.
Prohibit the payment of any dividend to its members.
License from Central Government:
Such a company must obtain a license from the Central Government.
The license allows them to register as a limited company without using the words “Limited” or “Private Limited” in its name.
Incorporation:
The company can be registered as a private limited or public limited company.
It shall enjoy all the privileges and be subject to all the obligations of limited companies.
Revocation of License:
If the company violates any of the conditions on which the license was issued or conducts its affairs fraudulently, the Central Government may revoke the license.
Upon revocation, the company may be asked to convert into a regular limited company.
Conversion:
A company under Section 8 cannot convert into another kind of company unless it meets certain conditions and gets approval from the Regional Director.
Penalties:
If a person violates the provisions of this section, they may be punishable with a fine of not less than ₹1 lakh, up to ₹10 lakh.
Officers in default may be imprisoned up to 3 years, or fined, or both.
🔍 Key Features:
No profit distribution among members.
Must reinvest surplus into the company’s charitable activities.
Requires government approval.
Often used by NGOs, charitable trusts, and foundations.
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