The Companies Act defines a
Section 8 company as one whose main objectives is to promote fields
of arts, commerce, science, research,
education, sports, charity,
social welfare, religion, environment protection, or other similar
objectives. The key feature of this Company is that the name of the
Company can be incorporated without using the word “Limited” or “Private
Limited” as the case may be. These companies are subject to stringent regulatory compliance and scrutiny, can apply their profits for promoting only the objects of the company and are not allowed to pay dividend to their members.
Therefore,
Section 8 Company is registered to pursue charitable or not-for-profit objects.
This form of company is, however, similar to a Trust or Society with the exception
that a Section 8 Company is registered under the Central Government’s “Ministry
of Corporate Affairs (MCA)” whereas the Societies and Trusts are
registered under the State Government regulations. This enjoys various added
advantages as compared to Trust or Society and has higher credibility amongst
the donors, Government departments, and other stakeholders. This structure is best suited to undertake large projects of public interest and welfare.