Microlesson · 5-min read

Section 8 Company - Formation, Privileges & Restrictions

# Section 8 Company (Not-for-Profit Company)

## Object of Formation

Section 8 deals with formation of companies for promoting charitable objects:

Commerce, art, science, sports, education, research
Social welfare, religion, charity
Protection of environment, or any such object

## Core Restrictions

1. No dividend to members — prohibited from declaring any dividend.

2. Surplus must be applied only in promoting its objects — cannot be distributed.

## Licence from Central Government

Central Government (powers delegated to Registrar of Companies) may register such persons/association as a limited company by issuing a licence on conditions it deems fit.
The company is granted dispensation from using 'Limited' or 'Private Limited' in its name.
The Central Government may revoke the delegation to ROC or itself exercise the powers, if necessary in public interest.

## Privileges & Status

On registration: enjoys same privileges and obligations as a limited company.
A partnership firm may be a member of a Section 8 company (special privilege; normally a firm has no separate legal personality).

## Alteration of MOA / AOA

Cannot alter its memorandum or articles except with previous approval of the Central Government.

## Application Process (Rule 19, Companies (Incorporation) Rules, 2014)

Application in Form SPICe+ (INC-32) along with fee.

### Documents to Accompany Application:

Document	Form
Memorandum of Association	INC-13
Articles of Association	INC-31
Estimate of future annual income & expenditure (next 3 years), with sources & object of expenditure	—
Declaration by Advocate / CA / CMA / CS in practice — that MOA/AOA conform with S.8 and all requirements satisfied	INC-14
Declaration by each applicant	INC-15

## Conversion into Any Other Kind of Company (Rules 21 & 22)

Step-by-step procedure:

1. Special resolution at general meeting approving conversion.

2. Explanatory statement to notice must give reasons for conversion.

3. File Form INC-18 with the Regional Director along with fee, certified true copy of SR, notice + explanatory statement.

Notice must be served (by registered post or hand delivery) to:
Chief Commissioner of Income Tax
Income Tax Officer having jurisdiction
Charity Commissioner
Chief Secretary of the State of registered office
Any Central/State Government Department / authority under whose jurisdiction the company operates
These authorities may make representations to RD within 60 days of receiving the notice (after giving opportunity to the Company).

4. Copy of application + annexures also to be filed with the Registrar.

5. Within one week of submitting application to RD, publish a notice in Form INC-19 at company's expense:

At least once in a vernacular newspaper in principal vernacular language of district of registered office
At least once in an English newspaper with wide circulation in that district
On the company's website, if any, and as Central Government may direct
A copy as published must be sent to the Regional Director.

6. Up-to-date filings: Must have filed all financial statements and Annual Returns up to the FY preceding submission, and all returns under the Act till submission date.

If application is filed after expiry of 3 months from preceding FY-end: attach a statement of financial position certified by a Chartered Accountant, made up to a date not preceding 30 days of filing.

7. Regional Director's order: On being satisfied, RD shall issue an order approving conversion subject to terms and conditions as imposed in the facts of each case. Before imposing conditions or rejecting, the company must be given a reasonable opportunity of being heard.

8. On receipt of RD's approval, company shall:

Convene general meeting to pass special resolution for amending MOA & AOA
File these with the Registrar along with declaration to adhere to RD-imposed conditions

9. Registrar registers documents and issues fresh Certificate of Incorporation.

## Amalgamation Restriction

A Section 8 company shall amalgamate only with another Section 8 company having similar objects.

## Revocation of Licence (Central Government's Power)

Central Government may, by order, revoke the licence where:

Company contravenes any S.8 requirements or licence conditions, OR
Company's affairs are conducted fraudulently, OR
Conducted in violation of objects of the company, OR
Prejudicial to public interest.

Worked example

### Example 1

Example 1: A group of doctors wishes to form a non-profit medical research association as a company. → File SPICe+ (INC-32), with MOA in INC-13, AOA in INC-31, 3-year income/expenditure estimate, INC-14 declaration by a practising CA, INC-15 declarations by each subscriber. Get licence from ROC (delegated by CG). Once registered, the company need not use 'Limited' / 'Private Limited' in its name.

### Example 2

Example 2 – Conversion: ABC Foundation (Section 8) wants to convert into a private limited company. Steps: pass SR with explanatory statement giving reasons → file INC-18 with RD + send notice to IT Chief Commissioner, IT Officer, Charity Commissioner, State Chief Secretary, etc. → file copy with ROC → publish INC-19 notice in vernacular + English newspapers + on website within 1 week → ensure all annual filings up to date (with CA-certified financial position if filing 3 months after FY-end) → obtain RD order → pass fresh SR to amend MOA/AOA → file with ROC → receive fresh COI.

### Example 3

Example 3 – Amalgamation: Section 8 company 'Green Earth Foundation' (object: environment protection) cannot amalgamate with 'XYZ Education Trust Pvt Ltd' (a profit-making private company). It can only amalgamate with another Section 8 company that has similar objects — say, 'Clean Rivers Foundation' (also environment).

### Example 4

Example 4 – Firm as member: Normally a partnership firm cannot become a member of a company in its own name. Section 8 carves out an exception: a firm may be a member of a Section 8 company. On dissolution, however, only the partners survive as members.

### Example 5

Example 5 – Revocation Trigger: A Section 8 company starts distributing surplus as 'consultancy fees' to its directors disproportionate to services rendered. → CG may revoke the licence as affairs are violative of objects / prejudicial to public interest.

⚠️ Common exam mistakes

Believing Section 8 companies CANNOT have profits — they CAN earn profits/surplus; what they cannot do is DISTRIBUTE them as dividend.
Forgetting that a Section 8 company can amalgamate only with ANOTHER Section 8 company having SIMILAR objects — not any other kind of company.
Missing the requirement to serve conversion notice on 5 different authorities (IT Chief Commissioner, IT Officer, Charity Commissioner, State Chief Secretary, and the authority under whose jurisdiction the company operates).
Confusing forms: INC-13 (MOA), INC-14 (professional declaration), INC-15 (applicant declaration), INC-18 (conversion application to RD), INC-19 (newspaper notice), INC-31 (AOA), INC-32/SPICe+ (incorporation application). These are frequently asked.
Forgetting the 60-day window for authorities to make representations to the RD after receiving conversion notice.
Forgetting the 1-week timeline for publishing INC-19 notice after filing application with RD.
Believing Central Government's approval of MOA/AOA amendment is not needed — Section 8 company CANNOT alter MOA/AOA without prior CG approval.
Forgetting the 30-day CA-certified financial position requirement when conversion application is filed after 3 months from FY-end.
Assuming OPC can be a Section 8 company — OPC CANNOT be incorporated or converted into a Section 8 company.
Treating revocation grounds as exhaustive — CG can revoke for fraud, contravention, violation of objects, OR public interest.

Bare-Act text Section 8 · Companies Act, 2013 read with Rules 19, 21 & 22 of Companies (Incorporation) Rules, 2014 · click to expand

Section 8(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— (a) 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; (b) intends to apply its profits, if any, or other income in promoting its objects; and (c) 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 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. Section 8(4)(i): A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government. Section 8(4)(ii): A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.

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