Companies Act section 8 — Section 8 company licence and governance
Reviewed by CA Divyanshu Sengar · Last reviewed 29 August 2026
A Section 8 company is a non-profit structure incorporated under a special Central Government licence, prohibited from paying dividends to its members.
Finin2min Summary — in 2 Minutes
A Section 8 company is a non-profit structure incorporated under a special Central Government licence, prohibited from paying dividends to its members.
Official source and legal ownership
What this covers
Section 8 of the Companies Act, 2013 allows incorporation of a company for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or similar objects, where the company intends to apply its profits (if any) toward promoting those objects and prohibits payment of any dividend to its members.
How the licence and governance work
A Section 8 company requires a specific Central Government licence (issued through the Registrar of Companies) before incorporation, and its memorandum cannot be altered without government approval - a materially more restrictive incorporation and governance framework than an ordinary company, reflecting its non-profit character.
Why it matters
A Section 8 company is a distinct legal form from a trust or society - it offers the specific advantages and disciplines of company-law governance (board structure, statutory filings, potentially easier structuring for certain funding relationships) while remaining bound by the no-dividend and objects restrictions that make it recognisably non-profit despite being a company.
Source and review trail
- Official starting point
- www.indiacode.gov.in
Section 8 Company: Licence, Setup and Governance
A Section 8 company is a corporate legal form for specified non-profit objects. Incorporation gives it corporate status and statutory restrictions, but it does not itself create 80G donor deduction, income-tax NPO registration or permission to receive foreign contribution.
How the legal framework applies
Section 8 of the Companies Act addresses companies promoting eligible objects such as education, charity, social welfare, arts and environmental protection, with profits applied to the objects and restrictions on dividends. New Section 8 companies obtain the licence through the SPICe+ incorporation system; the MCA incorporation FAQ explicitly states that INC-12 is not filed for a new Section 8 licence after the 2020 rule change. The memorandum and articles, promoter particulars, board appointments and registered-office documents remain distinct from later statutory permissions.
Evidence, filings and practical controls
Before incorporation, settle objects, income application, conflict policies, charitable programme states, authorised office-bearers and founders’ contributions. Preserve the incorporation certificate, licence and approved constitution together with statutory registers and annual filings. After commencement assess the tax application under the Income-tax Act, 2025 in Form 104 or 105 as applicable; assess CSR-1 only if the company seeks to act as an eligible CSR implementing entity; assess FCRA separately before receiving regulated foreign contribution.
Worked scenario
Two teachers create a Section 8 company to run science laboratories. Their incorporation certificate lets them contract and open ordinary business banking, but an overseas foundation’s proposed grant still requires the relevant FCRA registration or prior permission before regulated receipt.
Common mistakes to avoid
- Do not instruct new applicants to use INC-12 as the incorporation form.
- Check MCA annual filings independently of donor utilisation reports.
- Do not treat charitable objects as a blanket exemption from tax or FCRA law.
Frequently asked question
- Does incorporation as a Section 8 company automatically confer 80G approval?
- No; the Income-tax Department approval for qualifying donor deductions is an independent process.