A section 8 company is a non-profit company formed under section 8 of the Companies Act. It works for objects like education, charity, social welfare or the environment, uses all its income for those objects and never pays dividend to its members. One note before you read on: Darpan Portal Guide is an independent guide, not a government website and not linked to the Ministry of Corporate Affairs (MCA). Company filings happen only on the official MCA portal, mca.gov.in.
What is a section 8 company in India?
Here is the section 8 company meaning in plain words: a section 8 company means a company that the Central Government has licensed to work for a public purpose instead of profit. People often search for the "section 8 company act", but there is no separate act. It is one section inside the Companies Act, and the company is governed by the Companies Act and the rules made under it, mainly the Companies (Incorporation) Rules. The Registrar of Companies (ROC) handles its filings.
A company registered under section 8 has the same legal standing as any other limited company. It can own property, open a bank account, sign contracts and sue in its own name. The members have limited liability. What makes it different are the conditions in its licence: profits stay inside the company and members get no share of them.
Many NGOs choose this form because funders, especially companies giving CSR money, find a company structure familiar. If you are still deciding between forms, read trust vs society vs section 8 first.
Objects a section 8 company can have
Section 8(1) lists the objects allowed. The company must plan to promote one or more of these:
- commerce, art, science or sports
- education or research
- social welfare, religion or charity
- protection of the environment
- any other similar object
It must also intend to apply its profits or other income only to these objects, and must prohibit paying any dividend to members. The memorandum of association (MoA, the company's charter) for such a company is drafted in Form INC-13, which carries these conditions.
Can a section 8 company do business? It can earn income, for example by charging fees for training or selling products made by beneficiaries, as long as the activity serves its objects and every rupee of surplus goes back into the work. It cannot run as a business that shares profit with its owners.
Key features of a section 8 company
| Feature | What the rules say |
|---|---|
| Licence | Granted by the Central Government under section 8. For a new company, the application now goes with the SPICe+ incorporation form on the MCA portal. |
| Dividend | Not allowed. Profits and income are used only for the objects. |
| Payments to members | The INC-13 MoA bars paying members any profit. Only items like out of pocket expenses, reasonable rent or reasonable interest, and fair pay for real services, are allowed. |
| Section 8 company name | No "Limited" or "Private Limited" at the end. Rule 8(7) asks for a word such as Foundation, Forum, Association, Federation, Chambers, Confederation, Council or Electoral Trust. |
| Minimum members | Two for a private company, seven for a public company. |
| Section 8 company directors | At least two for a private company, three for a public company. |
| Share capital | No minimum paid-up capital. It can also be formed without share capital, where each member promises a fixed contribution if the company closes. |
| Changing MoA or AoA | Needs prior approval as set out in the licence conditions. |
| Licence revocation | The Central Government can revoke the licence if the company breaks its conditions or runs its affairs fraudulently, after giving a hearing. |
For a section 8 company name check, the MCA name reservation step (Part A of SPICe+) tells you if the name is free. A ready "section 8 company name list" is not something we publish; pick a name that matches your work and does not copy any existing company or trade mark.
Who can form a section 8 company
Any person or association of persons can apply, as long as the objects fit section 8(1). In practice the founders are often two or three people who will be the first members and directors. A firm can also be a member. Every director needs a Director Identification Number (DIN).
A One Person Company (OPC) cannot be formed as, or converted into, a section 8 company. Rule 3 of the Companies (Incorporation) Rules says this clearly. An existing limited company with charitable objects can apply for a section 8 licence for itself.
The actual filing steps, documents and DIN rules are on our section 8 company registration page.
Section 8 company compliances: the yearly work
Section 8 company compliances are close to those of any company, with a few relaxations. Here is the annual compliance for section 8 company in broad terms:
- Accounts and audit: books of account must be kept and audited every year by a chartered accountant appointed as auditor. There is no exemption from audit.
- Annual filing: the audited financial statements and the annual return go to the ROC on the MCA portal every year.
- Section 8 company board meeting requirements: a relaxation allows at least one board meeting in each half of the calendar year, instead of the usual four a year. The quorum is also relaxed.
- General meeting: an annual general meeting is still held, with some relaxation on notice period.
- Income tax: an income tax return every year. Tax exemption needs separate registration with the Income Tax Department, explained on our 12A and 80G registration page.
An important catch: the MCA relaxations for section 8 companies apply only if the company has not defaulted in filing its financial statements or annual return. A late filing can take away the relaxed rules. So treat the ROC filing calendar as the most important section 8 company compliance checklist item. Ask your auditor or a company secretary to confirm current due dates, because they can change by notification.
Other registrations depend on your funding: NGO Darpan for government grants, CSR-1 for company CSR funds, and FCRA for foreign donations.
Section 8 company benefits and drawbacks
Benefits of section 8 company
- Recognised under a central law, so the rules are the same in every state.
- Limited liability for members.
- Clear public record on the MCA portal, which donors and CSR teams can check.
- Easy to add or change members and directors through ROC filings.
Drawbacks
- More paperwork than a trust or society: audits, ROC filings, board minutes.
- Professional help is usually needed every year, which adds running cost.
- Late filings bring penalties and can cost you the relaxations.
- Tax exemption is not automatic; it needs income tax registration.
Conversion, closure and strike off
Conversion of section 8 company to private limited is possible but strict. Rule 21 and 22 of the Companies (Incorporation) Rules ask for a special resolution, an application in Form INC-18 to the Regional Director, newspaper notice in Form INC-19, and notice to authorities such as the Income Tax Department. If approved, the company may have to give up its section 8 privileges and move surplus funds as ordered, then file Form INC-20 for a fresh certificate.
For closure of section 8 company, the usual routes are winding up or strike off under the Companies Act. On winding up, section 8(9) says leftover assets can go to another section 8 company with similar objects or be dealt with as the Government orders. They do not go back to members. Before a strike off of section 8 company, clear all pending filings and settle liabilities, and take advice for your case.
Common questions
Section 8 company ek non-profit company hai. It is a company under the Companies Act that works for charity, education, welfare or similar aims, and cannot pay dividend to its members. All income goes back into the work.
It can be either. A section 8 company can be registered as a private company, with at least two members and two directors, or as a public company, with at least seven members and three directors. Both drop the word Limited from the name.
Two members for a private section 8 company and seven for a public one. A One Person Company cannot become a section 8 company.
Yes, but it must apply. Section 8 companies are listed among those who can seek registration and donation approval from the Income Tax Department. See our 12A and 80G page for the current forms.
The Companies (Auditor's Report) Order lists companies licensed under section 8 among those it does not cover. The normal statutory audit and audit report still apply. Confirm the current position with your auditor.
Many hospital, school, skill training and research bodies are run as section 8 companies. You can check any company's status, including whether it is a section 8 company, through the company details available on the MCA portal. We do not list real organisations here.