REGISTRATION OF COMPANY NOT-FOR-PROFIT UNDER SECTION 8 OF THE COMPANIES ACT, 2013

 

Basic information

 

Company Not for profit purpose is governed by Section 8 of the Companies Act, 2013, which has main object of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. The profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members. It is registered purely for charitable or not-for-profit purposes. Prior approval of Central Government is also required for registration of Section 8 Company.

 

It is similar to a Trust or Society; expect a section 8 Company is registered under the Central Government's Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations. A section 8 Company has various advantages when compared to Trust or Society like improved recognition and better legal standing. Section 8 company also has higher credibility amongst donors, Government departments and other stakeholders.

 

Advantages of SECTION 8 Company Registration

 

1. Separate Legal Entity: Section 8 Company is a legal entity and a juristic person established under the Companies Act, 2013. Therefore it is a form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of Section 8 Company have no personal liability to the creditors of a company for such debts.

 

2. Easy Management: No other approvals except the approval of members is required for any change management of Section 8 Company. The Board of Management controls the activities of the Section 8 Company.

 

3. Uninterrupted Existence: A Section 8 company has 'perpetual succession', that is continued or uninterrupted existence until it is legally dissolved. A Section 8 Company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.

 

4. Owning Property: A Section 8 Company being a juristic person, can acquire, own, enjoy and alienate property in its own name. No member can make any claim upon the property of the Section 8 Company as long as it is a going concern.

 

5. Better Credibility: Section 8 Company enjoys better credibility when compared to unregistered Section 8 organizations. Section 8 Companies are registered and monitored by the Central Government. Section 8 Organization are on the other hand governed and monitored by State Governments.