Sec 8 Company and its Incorporation

What is Sec 8 Company

Sec 8 is a form of a company which is formed with the sole objective to promote fields of arts, commerce, science, research, education, sports, charity , welfare, religion or other similar objectives. It is mandatory for those companies who wants to apply their profits only for the objectives and purpose they are registered for .These companies were previously defined under Sec 25 of the Companies Act 1956.

Features and Advantages of Sec 8 Companies

1. It does not require Minimum share capital unlike other companies.
2. Members of these companies have limited Liability.
3. It requires Central Government approval before commencing any business.
4. They can’t alter Memorandum and Articles of Association without obtaining prior approval of Central Government.
5. These companies need not include word ‘ Private Limited ‘ or ‘ Public Limited after their name. It shall include the words Foundation, Federation, Association etc
6. As per sec 8(1)(a) of Companies Act 2013, Sec 8 companies can carry out Micro financing Activities. However such activities should be only for the promotion of activities specified in sec 8(1)(a) of Companies Act 2013.
7. Being charitable in Nature these companies enjoy several tax benefits and Exemptions.
8. A Sec 8 Company is exempt from paying stamp duty on Memorandum and Articles of Association .
9. Enjoys more Credibility as these companies are recognized by central Government .

Disadvantages of Sec 8 Companies

1. Central Government has the power to revoke or cancel the registration if funds are not used for the specified objectives.
2. Members cannot get any dividend out of profits of the company .
3. Cannot apply company’s profits for any other purpose other then specified in MOA .

Incorporation of Sec 8 Company

Sec 8 company can be formed by making an application to Central Government by submitting necessary documents. All the documents will be verified and scrutinized by the Ministry of Corporate Affairs and if found suitable they can grant registration or decline the registration .

In case of any queries or any assistance required for incorporation please mail at contactus@palankarta.com