A few examples of Section 8 companies under the act are Infosys, Reliance, TATA, and Reliance Research Institute.
The company is referred to as a Section 8 Company when it is registered as a non-profit organization (NPO) and intends to use its earnings and other revenues for achieving the objectives of arts, commerce, education, charity, environmental protection, sports, science, research, social welfare, and religion.
NPO revenue cannot be used to pay profits to the partners, but must be used for society’s welfare. Typically, such corporations are incorporated by the central government and are accountable to the government and follow its regulations.
As a result of failure to accept the commitments provided by the central government, companies may be forced to close .
How Do Section 8 Companies Work?
A Section 8 company is a company that has been licensed by the Companies Act, 2013. Founded as a non-profit organization, it promotes commerce, arts, science, sports, education, and research. The revenue of such kinds of corporations goes towards development and none of their income is used for partners.
What are the business possibilities for Section 8 companies?
There are no restrictions on a Section 8 Company being changed into another company, including a One Person Company (OPC), as described under Section 8(4)(ii) and Rules 21 and 22 of Companies (Incorporation) Rules, 2014. In addition to this, it is also subject to restrictions and compliance with other applicable laws, such as the Income Tax Act of 1961.
* While they acquire the status of a corporation with restricted liability, these public or private limited companies need not initially use the words “limited” or “private limited” in their names
* For registering such firms and keeping an account of documents, the fee structure is very reasonable
* According to notification no. , such firms are exempt from several requirements of the Act. It was published by the Ministry of Corporate Affairs (MCA) on 13 June 2017 as GSR 584(E) and GSR 466(E) dated 5 June 2015.
Company Section 8 Advantages
Identity that is distinctive
Section 8 companies, such as trust companies and societies, are legal bodies with a different status than their managers and shareholders. Assets and obligations can be incurred in its name. Having a Section 8 company as a state government corporation has several benefits, including the ability to transfer shares as well as using corporate restructuring techniques for the benefit of the corporation.
There is a limitation of liability
The partners of a limited liability firm have no responsibility toward the firm’s obligations since the firm and partners are deemed separate individuals in law. Accordingly, the firm is identified as an artificial juridical individual. At best, the company’s partners are only responsible for the outstanding percentages of their investments.
Benefits of taxation
Companies that meet certain requirements can be enrolled under Sections 80G and 12A of the Income Tax Act, 1961. Therefore, Section 8 companies can obtain contributions for the benefit of their subjects related to trusts. Stamp duty settlements are also available for Section 8 companies in certain states for their arrangements and enrollments of assets.
CSR (Corporate Social Responsibility)
As capable implementation dealers, CSR projects help CSR-acceptable firms achieve their CSR spend goals. Section 8 companies can be utilized as implementing dealers if they are owned by companies with adequate CSR requirements. An organization that wishes to be considered a CSR execution agency should have enrolled under Sections 12A and 80G of the Income Tax Act.
Whenever companies rectify CSR programs on or after 01 April 2021, they must file form CSR-1 with MCA and collect CSR registration number. Also, Section 8 firms can use CSR payments to establish properties for furthering CSR goals with the rules.
Section 8 Companies’ Statutory Obligation
In order for the firm to accomplish its purposes, the income and excess generated by its company systems should be used only for this purpose
* Section 8 companies do not need to nominate a Company assistant
* In Section 8 companies, incentives and increments are not permitted
* Companies under Section 8 can hold annual general meetings within a short period of time
* Section 8 corporations cannot change their purposes without the prior approval of the central government
* Companies that meet 80G and 12A requirements are tax-free for their Section 8 revenue
* More than 20 firms offer positions to corporate managers. Section 8 of the company incorporation act does not require a minimum share engagement investment.