Section 8 company
A section 8 company is a company licensed to promote commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection. Company Suggestion incorporates it under section 8 of the Companies Act, 2013. Its profits go to those objects and are not paid as dividend.
What is a section 8 company?
The Central Government’s power to issue the licence is exercised by the Registrar. The licence lets the company drop the words Limited and Private Limited from its name. It still has the obligations of a limited company, including accounts, audit, and annual filing.
If the company pays a dividend or stops pursuing the objects, the licence can be revoked. The Registrar then adds Limited or Private Limited back to the name. The detailed annual calendar is on the section 8 compliance page.
Who can form it?
It can be formed with the numbers of a private company or of a public company.
- As a private company: at least 2 members and 2 directors.
- As a public company: at least 7 members and 3 directors.
- A firm may be a member, which section 8(3) allows.
- There is no minimum paid-up capital.
It is not a small company, so the annual return is MGT-7. The exemption notification relieves it from appointing independent directors. It cannot be converted into a one person company.
Which papers does the licence need?
The Registrar looks at the objects and at how the income will be used.
- The draft memorandum and articles, with the objects and the bar on dividends
- A projection of income and expenditure for the next three years
- A declaration by a chartered accountant, a company secretary, a cost accountant, or an advocate in the form the rules prescribe
- PAN, Aadhaar, photographs, and digital signatures of the subscribers and directors
- Proof of the registered office, including a utility bill not older than two months
What are the incorporation steps?
Company Suggestion incorporates the company in four steps.
- The objects are written so they fit section 8, and the articles bar a dividend.
- The name is reserved. It does not end with Limited or Private Limited.
- SPICe+ is filed with the licence papers and the three-year projection.
- The certificate and the licence are issued together. A company that claims the charitable exemption files ITR-7.
Frequently asked questions
4 questions cover the rules that decide this registration.
Can a section 8 company pay a dividend?
No. Section 8 requires the profits to be applied to the objects. A dividend to members is a ground for the licence to be revoked.
Must the name end with Limited?
No. The licence allows the name to omit Limited or Private Limited. If the licence is revoked, the Registrar adds the word that was omitted.
Can it become a one person company?
No. A section 8 company cannot be converted into a one person company. A change to the memorandum or the articles needs the approval of the Central Government.
Which annual return does it file?
MGT-7, not MGT-7A. A section 8 company is not a small company. It also holds at least four board meetings a year and files AOC-4 after the AGM.