Companies primarily having charitable and not for profit objectives not intending of making profits by carrying out trade and commerce are referred as a Section 8 Company.
Such companies get recognition under Section 8 of Companies Act, 2013. anf dedicate all their incomes and profits towards the furtherance of their objectives.
Definition of Section 8 Company:
The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.
These companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.
These companies were previously defined under Section 25 of Companies Act, 1956 with more or less the same provisions.
The new Act has, however, prescribed more objectives that Section 8 companies can have.
Famous examples of Section 8 companies include Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industries (CII).
The objective of these companies is facilitating the growth of trade and commerce and India.
Features of a Section 8 Company:
A Section 8 company comprises of the following distinct features that most other kinds of companies do not have:
Charitable objectives:
Section 8 companies do not aim to make profits. Their objectives are purely charitable in nature. They aim to further causes like science, culture, research, sports, religion, etc.
No minimum share capital:
Section 8 companies, unlike all other companies, do not require a prescribed minimum paid-up share capital.
Limited liability:
Members of these companies can only have limited liability. Their liabilities cannot be unlimited in any case.
Privileges: Since these companies possess charitable objectives, the Companies Act has accorded several benefits and exemptions to them.