Arpit Shah (Accountant)     29 November 2014

Section 8 Company – Old Section 25 Company

Many entrepreneurs, both established names in the industry, as well as those just beginning, have always felt an attraction toward philanthropy. These may look to found religious or otherwise socially responsible companies dedicated to promoting the welfare of all. Social entrepreneurship is often taught as a separate course in many business schools. It is said that it is a good thing to give a man a fish, as it enables him to feed his stomach for a day, a better thing to teach him to fish, as this teaches him a skill with which to provide himself a livelihood, but a great thing to so much educate, train and impart knowledge and skills about a fishing business to an otherwise illiterate and uneducated man, as to enable him not only to perform a valuable trade but to generate an operation that provides employment to several hundreds or thousands.

A social entrepreneur, then, is one who sees the innate dignity and immense potential of every human being and, shows him practical ways and provides him all the means necessary in which to realize and achieve it. Recently, Mohammed Yunus, founder of the non-profit Grameen Bank, developed a whole new method in microfinance aimed at helping less fortunate sections of be gradually lifted out of generational poverty. For his efforts, ingenuity and initiative, and as a token of appreciation of the immense good he has done in the world, he was awarded the Nobel Peace Prize.

Section 8 Company – Companies with Charitable Objects

In India, a non-profit organisation can be registered as Trust by executing a Trust deed or as a Society under the Registrar of Societies, or as a private limited non profit company under Section 8 Company under the Companies Act, 2013. A Section 8 Company is the same as the popular Section 25 company under the old Companies Act, 1956, which was one of the most popular forms of Non- Profit Organisations in India. But, as per the new Companies Act 2013, Section 25 (as per the old act) has now become Section 8.

As per Section 8(1a, 1b, 1c) of the new Companies Act, 2013, a Section 8 company can be established for “promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object”, provided it “intends to apply its profits, if any, or other income in promoting its objects” and “intends to prohibit the payment of any dividend to its members.”.

To register a section 8 company in India, the process is similar to the incorporation of other companies (except an additional license is required). The applicant looking to start a section 8 company is required to file Form INC-1 for name availability. Once the name is approved, there is a further requirement of obtaining a license for a Section 8 Company, for which Form RD-1 is to be filed in order to obtain a license for such company. After obtaining license number, applicant can proceed further to incorporate a company by filing e forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and DIR-12 as the case may be.

The text of the Section 8 provision in the 2013 Companies Act reads:

COMPANIES ACT, 2013, Section 8 Formation of companies with charitable objects, etc.:

1. Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company:
   1. has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object
   2. intends to apply its profits, if any, or other income in promoting its objects; and
   3. intends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.
   4. the company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.

IndiaFilings and Section 8 Company

As a company driven to be the very best and help budding entrepreneurs everywhere achieve their dreams,IndiaFilings has had the pleasure and privilege of working as a partner besides many noble organizations focused on helping disabled children, children with AIDS etc and with other non-profits, helping them to continue to do well the good work they have begun. Often, it happens that people give up lucrative careers to devote their time, money and effort to serve the common good and humanity. This is like doing God’s work and is something that should in every possible way be encouraged by the government. If you wish to start a Section 8 Company to promote some social good or charitable work, contact IndiaFilings today.