The section 8 companies are named so as they are registered as Section 8, under the Company Act 2013. The Section 8 Company have similar characteristics of section 25 of the old company act; the act enables the government to register establishments with charitable objectives in order to promote sports, commerce, art and culture, education, research etc as a limited company, without adding the words ‘Pvt. Ltd.’ The Section and Section 25 under Companies Act 2013 for non-profit purposes.
Here it is important to note that income of the company must be used for charitable objects only, failing to which the government would cancel its license. The licenses to all such companies are provided by the central government only after informed restrictions and conditions applicable to Section 8 companies. In case any such companies are found to be functioning with any fraudulent objectives, a stringent action is taken against all officers.
Besides restrictions and conditions laid for Section 8 companies, it offers plenty of advantages as compared to a ‘Trust’ or ‘Society’ such as better recognition as well as legal understanding. The Section 8 companies have greater credibility amongst donors and stakeholders.
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