History of Company with Charitable purpose
The concept of Section 8 companies was introduced in Companies Act 1913 that permitted companies with charitable objects etc. to be registered without the words ‘Limited’ or ‘Private Limited’.
The restriction was that the businesses were permitted to use the profits just for the aim that the corporate was promoted and there was a prohibition on distribution of dividend.
Based on the advice of the Bhabha Committee, Companies Act of 1956 was passed. the businesses Act of 1956 came into force from 1st April, 1956 and was largely supported English Companies Act of 1948.
Section 25 of Companies Act, 1956 was introduced for such companies supported English Companies Act 1948. Bhaba committee also recommended to allow partnership firms (though not a legal entity) to be members of section 25 companies and provided for cession of membership of a partnership firm during a section 25 companies on the dissolution of the partnership.
Companies Act, 2013
The Companies Act, 2013 continues with the supply for such companies and provides for a framework for an equivalent under Section 8 of the businesses Act, 2013.
Section 8 continues to supply for restriction on application of profits and permits an equivalent just for the aim that the corporate is promoted, prohibits declaration of dividend, continues to allow partnership firms to be a member of section 8 companies etc. 2013 Act elaborates on the objects for such companies and specifies objects like sports, education, research, welfare and protection of environment that the businesses are often formed under this section.
Types of NPOs
In India, there are mainly the subsequent sorts of non-profit organizations i.e. Section 8 Companies (earlier Section 25):
- Societies registered under section 20 of the Societies Registration Act
- Trusts formed under Indian Trusts Act 1882
Eligibility to Apply for Section 8 Company
An individual or an association of individuals are eligible to be registered as Section 8 Company if it holds below-mentioned intentions or objectives. The objectives have to be confirmed to the satisfaction of the Central Government.
- When the company intends to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment or alike other objectives;
- When the company holds an intention to invest all the profits (if any) or any other income generated after incorporation in the promotion of such objects only;
- When the company does not intend to pay any dividend to its members.
Documents Required for Section 8 Company Registration
- Arrange documents that are required for the common registration process. Hence, a businessman must collect its documents including PAN which is of the utmost importance.
- Address proof is required, it might be a driver’s license , aadhar card, electricity bill or phone bill . But these bills shouldn’t be older than 2 months.
- All the people that are involved within the registration process are asked for the newest passport size photographs. as an example all the administrators and Promoters need to submit their photographs.
- A Rent Agreement.
- It is mandatory to submit the Utility Bill of the suggested Registered Office.
- The consent to Act as a Director and therefore the Directors Directorship details within the companies are filled.
Advantages of Section 8 Company
- Section 8 Company has systematic execution with a bigger flexibility.
- It avoids the accurate procedure of registration and physical presence of the partners or members.
- There is no minimum and maximum limit on the paid up capital.
- It provides with the tax benefits consistent with section 12AA and 80G of the tax Act.
- It gives the liability to all or any the partners or members of any company or firm to access the Directorship.