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Section-8 Company are those companies which are established with the objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and protection of the environment or such other object.
The profit of such companies is utilized only for the purpose of promoting the object of the company for which it is incorporated. In such type of companies, the company does not pay a dividend to its member. These types of companies have improved recognition and better legal standing. These types of company just work in a similar way as to a public limited company but the difference is that these companies cannot use the word Section 8 or limited in its name.
Section-8 Company is just similar to a trust or society but the basic difference between a trust and a society is that the Section 8 companies are registered under the Central Government Ministry whereas trust and the societies are registered under the State Government regulations.
Some of the basic information about Section 8 Companies is:
1. Capital required for the formation of Section 8 companies:
As per the Companies Act, there is no minimum capital requirement to start a Section 8 company. As the business will grow, the capital can be increased accordingly.
2. Who all can be director of a Section 8 company:
The Director of a Section 8 company should be above 18 years of age, he must be a natural person. It is not necessary that the person who is to be appointed as a director should be a person resident in India even a foreign resident can become director of a Section 8 company.
3. Minimum and maximum number of Directors required for the formation of Section 8 Company:
Section 8 companies can be incorporated as Private Limited Company or Public Limited Company. If Section 8 is incorporated as a Private Company then the minimum number of Directors should be 2 and for Public Limited Company there should be 3 minimum number of directors. And the maximum number of members can be for Private Limited Company is 200 and for Public Limited Company there is no maximum limit.
4. The basic objective of the Section 8 companies:
As stated earlier, Section 8 Company should be formed only for the purpose of non-profit motive and the profit earned from running such companies should only be used for promoting the objective of the company for which it is formed. The profit cannot be used for any other purpose. In other words, the company should be formed only for the charitable purpose.
The following are the benefits of forming a section 8 company:
Normally it takes around 35-45 working days for incorporating a Section 8 Company. This time limit can also be reduced accordingly if the Regional Director approves the application early.
The following procedure should be followed to incorporate Section 8 Company:
Following documents are required for Section-8 Company Registration–
Note: In case of NRI, all the documents should be notarized and passport of the applicant is compulsory.
There are various Section 8 Companies that have been formed in the recent times. There are also many advantages and privileges of forming such company under Company Law. In case you need more insight on Section 8 Company, contact Enterslice.
Read our article:The relevance of Annual Compliance for Section 8 Company