Section 8 company
Topic: Civil Society, Pressure Groups, NGOs and Self-help Groups · NCERT: Beyond NCERT
Meaning
A Section 8 company is a non-profit company registered under Section 8 of the Companies Act 2013. It was earlier Section 25 of the Companies Act 1956. It is formed to promote objects such as commerce, art, science, education or charity. The Centre licenses it. It must use all its income for its objects and cannot pay dividends, which are shares of profit, to its members. It is one of the three legal forms of NGOs in India.
Example
Suppose a group wants to run a skills-training NGO with company-style rules and management. It can register as a Section 8 company. Any surplus it earns must go back into training, not to its members.
Don't confuse with
- Ordinary company: it exists to make profit and pays dividends to shareholders. A Section 8 company cannot pay dividends.
- Society: registered under the Societies Registration Act 1860, which many states have adopted with changes. A Section 8 company is registered under the central Companies Act and licensed by the Centre.