# Section 8 Companies (Not-for-Profit)

A Section 8 company is a company licensed by the Central Government to operate without the objective of distributing profits to its members.

## Three Essential Conditions

For a company to be incorporated under Section 8, all three of the following must be satisfied:

1. Object — Promotion of one or more of:

Commerce
Art
Science
Sports
Education
Social welfare
(Also includes religion, charity, environment etc. as per the Act)

2. Application of profits — Intends to apply its profits/income solely for the promotion of its objects.

3. Prohibition of dividend — Prohibits the payment of dividend to its members.

## Grounds for Revocation of Licence

The Central Government may revoke the Section 8 licence on any of these grounds:

#	Ground
1	Contravention of the requirements of Section 8 itself
2	Contravention of the conditions of the licence issued
3	Fraudulent conduct of affairs
4	Affairs conducted in a manner prejudicial to public interest

## Key Privileges (Background Knowledge)

Need not use 'Ltd' or 'Pvt Ltd' in name.
Can be incorporated without minimum paid-up capital requirement.
Many procedural relaxations under the Act.

## Memory Aid

"CASES SW" — Commerce, Art, Science, Education, Sports, Social Welfare → object types.

Revocation Triggers = "C-C-F-P" — Contravention of Sec 8, Conditions of licence, Fraud, Public interest prejudice.

Worked example

### Example 1

Example: A trust wants to incorporate as a company to promote chess (a sport) in rural areas. It will use all surplus only for chess promotion and not pay any dividend. It can apply for incorporation as a Section 8 company, and the CG may grant the licence allowing it to drop 'Ltd'/'Pvt Ltd' from its name.

### Example 2

Example: A Section 8 company is found to have transferred surplus funds to a director as 'consultancy fees' which is actually a disguised dividend. The CG, on inquiry, can revoke the licence on grounds of fraud and contravention of Section 8 conditions.

⚠️ Common exam mistakes

Listing only some of the objects (e.g., forgetting Social Welfare or Sports). The list is broad — remember the indicative categories.
Confusing 'no profits' with 'no dividend'. Section 8 companies can earn profits; they only cannot distribute them.
Missing one of the four revocation grounds — students often skip 'prejudicial to public interest'.

Bare-Act text Section 8 · Companies Act, 2013 · 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 issue licence allowing registration as a limited company without addition to its name of the word 'Limited' or 'Private Limited'.

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Section 8 - Not-for-Profit Companies

Worked example

⚠️ Common exam mistakes