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Section 8 Company is a company set up for NGO or non-profit and charitable purposes. It is named after the Section 8 of the Companies under Companies Act, 2013. A Section 8 Company is established for the enhancement in the fields of commerce, art, sports, religion, charity, research, sports, religion, education, protection of the environment, social welfare and much more where profits are utilized for the development objective and dividend is not shared among individuals.
A Section 8 Company is registered under the Central Government’s Ministry of Corporate Affairs unlike a Trust or a Society. The State Government regulates the Trust or a Society. A Section 8 Company earns more credibility amongst Donors, Stakeholders, Government departments and other shareholders. Section 8 Company has numerous benefits including better legal standing and better recognition in comparison to a Trust or a Society.
Under the Companies Act, 2013, A Section 8 Company is registered by the Ministry of Corporate Affairs, Government of India. Hence, the Ministry of Corporate Affairs will issue registration and certificate of incorporation.
A Section 8 company can be registered under names that constitute words like Association, Federation, Charities, Academy, Society, Council, Development, Chamber of Commerce, Organization, Institute, Foundation, Club, etc.
Based on the MOA and AOA of the Section 8 Company, the Board of Directors will manage Section 8 Companies. The concept of Trustees is not possessed under a Section 8 Company. As per a Trust Deed, Trusts are generally managed by Trustees.
A Section 8 Company will also incur losses, expenses, and revenue just like a Private Limited Company. The profits can be utilized only for non-profit or charitable purposes as outlined in the MOA in a Section 8 Company.
A simple change to the composition of the Board of Directors allows for a change in management from one person to another of a Section 8 Company. Shareholders can also control a Section 8 Company.
Within 2-3 days, Directors can acquire DSC and DIN. Director Identification Number (DIN) and Digital Signature Certificate (DSC) will be required by the proposed Directors of the Section 8 Company.
With the DIN and DSC of at least two Directors, an application for reservation of name can be submitted to the MCA. Once the name is reserved, a license should be obtained before incorporation.
Once the license is obtained, registration documents must be submitted to the MCA for approval. The application incorporation processes in 5-7 working days, subject to the MCA.