A Section 8 company is such a company that intends to incorporate for the advancement of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of the environment, and further, other elements like these. This company has set to implement all its gained profits, income, or other earnings in developing these elements. Moreover, it does not pay any dividend or income to its members.
Section 8 company is a limited company which does not utilize the phrase "Limited" around its name. It has to be registered under the Companies Act. It can either be registered as a private limited company or a public limited company with the Section 8 Company registration cost. In a prior version under the Companies Act, 1956, it is known as a Section 25 Company. Whereas, for Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs), the legal form is the Section 8 Company. After your company gets done with Section 8 Company registration online, it will have the authorization to operate anywhere in the country.
Section 8 company registration procedure has the same process and requirements are the same as setting up for a limited company, while having certain Section 8 Company registration cost . It also incorporates all the powers and obligations that come up after registering for a limited company. The only difference is in the name as Section 8 companies cannot use the "Limited" word in its name.
Section 8 Company or a Non-Profit organisation (NPO) is a Company established for promoting commerce, art, science, religion, sports, education, research activities, charity or any other useful social object, provided the profits and donations is applied for promoting only the objects of the company and no dividend is paid to its members or owners. The term No Profit does not mean that the Company cannot generate profit or income, but what it means is applying the income for promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefitted out of those profits.
Section 8 Companies do not have the authorization to raise capitals utilizing deposits They can rather acquire donations from the common public. Mentioned below are some of the approaches through which Section 8 Companies can raise funding:
If FCRA (Foreign Contribution Regulation Act 1976) registration has taken place then only, foreign donations are accepted. You can apply for an FCRA license only after 3-years from the date of registration. However, if there is some urgency and you are required to get foreign donations, then you will be needed to take the prior permission from the commissioner.
Section 8 Companies are also allowed to raise funds by issuing new equity shares at a higher value.
The company can accept domestic donations without any limitation. And for avoiding money laundering cases, you must possess a proper system to keep them checking frequently.