Section 8 Of Companies Act 2013: Incorporation Of Section 8 Company
Updated: Jun 21, 2022
What are Section 8 Companies?
Philanthropic social activities with the main object of promoting welfare and social responsibility towards the under developed and less thought-out sections and arenas of the society have grown in necessity as well as in practice due to the rise in economic and social trends such as the spread of capitalism, consequent rise of the welfare state and the decline of the traditional family support structure. In India a non-profit organization can either be registered as a trust, a society or a private limited non-profit company under section 8 of the Companies Act of 2008.
Section 8 of the Cincompanies act, 2013 which identical to the former Section 25 of the old companies act of 1956 helps to facilitate this very approach. In accordance with section 8(1) clauses (a)(b)(c) a limited company is a person or an association of persons who have promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment as their objective and who intend to apply its profits for the promotion of the same prohibiting the payment of any of its dividend to its members.
The central government on fulfillment of these conditions would allow the person or association of persons to be registered as a “limited company’ under section 8 of the companies act 2013 without adding the word “Limited” or “Private Limited” as the case maybe. The main objective of a section 8 company is the welfare of the society, Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industries (CII)is one such company focusing on growth of trade in India, other famous examples include Reliance, Infosys, Tata foundation and Reliance Research Institute.
Advantages of Section 8 Companies-
1. Limited Liability
This means that the members of the company and the company in itself are considered separate entities according to the law. The liability of the members for the company’s debts only extends up to a limited sum depending on the sum of the face value of the shares they take over.
2. Distinct Legal Identity
A section 8 company unlike a society or a trust a distinct legal entity separable from its members and shareholders, it can thus own properties, transfer and incur debts under its independent name. This advantage helps in not only promoting its objective but also transferring ownership and initiating corporate restructuring schemes such as merger, acquisition etc whatever the case maybe.
3. Tax Benefits
In order to obtain the said benefits the company needs to registered under Section 80G and 12AA of the 1961 Income Tax act. These enable it to receive donations for the furtherance of its objects, it further receives concessions in certain states for formation and registration of property in the form of stamp duty. Not only is minimum stamp duty available thus but the less stamp duty is charged on incorporation of the section 8 company under the given section.
Formation of Company under Section 8
For this, a person or association of persons can apply to the registrar of companies through the the required forms, the application would be accepted by the central government on its discretion subject to any terms and conditions that it may impose under the license granted by it. Prior to this the company will be registered upon payment of the requisite fee to the registrar. Due to the fact that the company has been formed on the basis of the license granted by the central government, changes to the memorandum of the association can be made only with the consent of the central government.
Incorporation of Section 8 Companies-
1. Application for the Company’s name-
An application for reserving the company’s name has to be made through part-A of SPICe Plus (SPICe+) form, wherein one has to select the type of business activity followed by filing of two proposed names, in the case that the CRC rejects the proposed name, filing of two more proposed names have to be completed before the expiration of a given time limit as specified.