A Section 8 Company is an organization which is similar to a Trust registered under the Central Government’s Ministry of Corporate Affairs as a Non-Profit Organization (NPO). The objective of the company is to promote ‘arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, religion’ and it plans to apply its profits, if any, or any other income in promoting its objectives. It functions just like a limited company which includes all the rights and regulations that come with such a company. However, it differs from a company in one critical aspect, i.e. it cannot use the words “Limited” or “Section 8” in its name.

Section 8 companies have improved business credibility among donors, other stakeholders and also Government departments. It has many benefits when compared to a Trust like better legal standing and greater recognition.

The profit/income of the Company must be only used to promote charitable objectives and welfare goals, and also Section 8 Companies are prohibited from paying any dividend to its members. The incorporation certificate is given to all such companies after registration. Certain rules and regulations for section 8 companies are drafted by the Central Government and if they don’t abide by them, they may be ordered to wind up the company. If fraud objectives of the Company are proved, the Central Government will take legal action against the members of the Company.