A company under section 8 of the companies act is established ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, on the condition that profit, if any, or other income is applied only for promoting the object of the company and it should not be distributed as dividends to the shareholder or members of the company. Therefore, a company formed under section 8 of the Companies Act, 2013 is for charitable or not-for-profit purposes.
A company formed under section 8 of the companies act is similar to a Trust or Society; except that a section 8 Company is registered under the Central Government’s Ministry of Corporate Affairs. On the other hand Trusts and Societies are registered under State Government regulations like trust act and society registration act. A section 8 company has various advantages when compared to Trust or Society like improved recognition and better legal standing. Also a company formed under section has higher credibility in the market amongst govt, donors, & Stakeholders.