If you are stressed how the Section 8 companies do business then you will surely get all of your answers in this blog
Not all the companies nowadays wish to make huge profits or even profits by carrying out the simple process of trade or commerce. Some companies have objectives of being charitable and generating zero profit. Search companies are known as Section 8 companies and are considered under Section 8 of the Companies Act 2013. These companies will likely allot all the income or profit towards charitable objectives.
All you Need to Know About Section 8 companies?
The Companies Act defines a Section 8 company as a company whose primary object is to promote the fields of commerce, arts, education, research, science, sports, social welfare, charitable environment, legal protection or other similar goals. These companies donate all profits to the cause and do not pay any dividends to the members. Earlier in 1956 section 25 of the companies had defined all these objectives with more or less provisions. However, the defined new act has better goals than section 8 companies can make the most of.
Some Features of Section 8 Company:
Section 8 Company includes various components that not all companies enjoy.
Section 8 companies do not have any profit motive. The aim here is to be completely charitable. They support causes including cultural science, religion, sports, etc.
No minimum share capital
Unlike other generic companies, they have no prescription
Section 8 companies have only limited liability of the members. In any case, the punishment cannot be unlimited.
They can work only if they have a license from the central government. In some cases, the government also has the right to revoke consent.
Since companies have charitable objectives, the Companies Act provides them with several benefits and exemptions.
Companies as members
Apart from individuals and association of persons, section 8 also allows companies to become members of these companies.
Formation of The Section 8 Company
Before doing business with a section 8 company, do some section 8 learning about the formation of this company. Then, you can apply to the Registrar of Companies using the required forms to form a company with charitable objects under section 8 of the Companies Act. It can be done either by an individual or with a collaboration of people. The Central Government will accept the application on being satisfied with the terms and conditions given under the license.
Once received, the Registrar of Companies can register the company, provided you pay all the required amount. You should also know that such companies can only be limited companies. Therefore, all the privileges and liabilities of limited companies apply to it as well. Also, you cannot add words like Private Limited or Limited in the name like other companies.
Since the existence of such companies is based only on the license granted by the Central Government,They cannot change the Articles of Union of the member India without the permission of the Central Government of India. If permission is not given, they cannot do anything.
Can the license be revoked?
Section 8 companies generally require a license by the Central Government. All rights are revocable on the following grounds.
- The company violates the provision given under section 8 of the Companies Act.
- Violation of terms and conditions of the licensor
- When the conduct is fraudulent or violates its objectives and public policy.
- If any other situation arises, the government can also order the company to be amalgamated.
Benefits of Section 8 Company
Tax privileges are immense as blockage companies can be exempted from paying income tax. Companies also get other benefits under section 83 of the Income Tax Act 1961. Donations made to Section 8 companies by corporations or individuals can claim tax exemption.
Under this section the charitable organization also has to register for section 80G and 12A of the Income Tax Act 1961 to avail all exemptions and deductions. Apart from this, private, public limited companies can also make donations to section 8 and contribute towards corporate social responsibility as per section 131 of the Companies Act 2013.
zero duty payable
Companies covered under section 8 are completely exempted from the process of paying stamp duty during the registration process, which is different from any other private or public limited companies.
uncontrolled transfer of ownership
They are allowed to transfer their ownership or title of real or movable property without any restrictions and are distinct from a partnership or limited liability company.
unique legal identity
Like other companies operating under the Companies Act 2013, a Section 8 company can also have its corporate structure and a separate legal identity
ability to own property
Section 8 companies can singly own or even conglomerate a property that is a distinct legal identity. The property may be residential or non-residential, including a research institute training center. The property may belong to the company, and not even a shareholder member can claim it.
Companies, like private limited companies, have the right to demonstrate perpetual existence until the company is legally dissolved.The company continues to exist till the end of time, notwithstanding the death or termination of the members.
Against the trust of societies, they have better credibility as these companies have licenses from the central government. These are not companies, and have more restrictions like not being able to change the Memorandum of Association or Articles of Association once registered.Due to these measures these companies are widely trusted and have a reliable image.
Even though they are developed with a noble aim, they have to be in sync with all the rules and regulations to function well, or the central government may even cancel the license. It generally has many benefits, and you should know everything about it before starting a company or doing business with them.
If you are looking forward to knowing more related to Section 8 companies and wish to register one, then the professionals at Legaltax will help you in every step. Connect with our professionals now.