Company incorporation

What is a Sec 8 company under Companies Act, 2013 with basic key points

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Sections (8) of companies act, 2013 deals with the formulation of companies with charitable objects such as promotion of art, science, commerce, sports, education, research, welfare, without adding the words “limited” or “private limited” to the name of the new company registered.

1. The satisfaction of central government is necessary, that a person proposed to be registered as limited liability Company (LLC) under this act.

  • Includes the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment etc.
  • The profits or income of new company registered will be used for promoting objects of company.
  • The Central Government may issue license on such condition as it deems fit; allow it to be registered as a limited company.

2. Company incorporation shall enjoy the privileges and are subject to all the obligations of limited companies.

3. A firm can become a member of the new company registered.

(i) Once the new company registered under this act; are not liable to alter the memorandum or articles without prior permission of central government.

(ii) Conversion into some other form of company incorporation is only possible after complying with such conditions as prescribed from time to time.

4. Revocation of licence: Central government may revoke the licence if the company contradicts with any of the requirements mentioned under this section or in a manner violative of objectives of the company or prejudicial to the public interest, direct the new company registered to convert its status & change its name.

5. Subsequently, when the licence is revoked and the Central Government is satisfied that it is essential in the public interest that the new company registered should be amalgamated/wound up with another company incorporation under this, then the Central Government may provide for such amalgamation to form a single company with such features as prescribed by the government in the order.

{Note: Reasonable opportunity of being heard must be given}

6. Winding up/Dissolution of a company registered under section (8) companies act, can be transferred to another company registered under this section subject to certain conditions as the Tribunal may impose, or maybe sold and proceeds will be credited to the Rehabilitation and Insolvency Fund formed under section 269.

7. Amalgamation between companies could be done only if both are registered under the same section of the act, having similar objects.

8. Any default in complying with the requirements specified under this section, be punishable with a fine which shall not be less than 10 lakh rupees extending up to 1 crore rupees and the directors/officers of the company who found guilty shall be punishable with imprisonment for a term which may extend to 3 years or fine not be less than INR 25,000 extending to INR 25 lakh or both.



Several new features were introduced in the Companies act, 2013 which makes it unique from the companies act, 1956. Some features are discussed below:


(i) One Person Company incorporation: Companies act, 2013 brings relief for the new generation entrepreneurs who are not willing to share the stake in their company with anyone. Now an individual can form a single person company which was not possible earlier. Now the foreign investor can also set up wholly-owned private subsidiary in India. Hence it will promote foreign investment in India.

(ii) Small Company incorporation: Companies other than the public company having a paid-up share capital of not more than 50 lakh & turnover does not exceed 2 crores.

{Note: This will not apply to holding/subsidiary, companies registered under section (8) of companies act, 2013 or any company formed under special act}

(iii) Dormant Company incorporation: Earlier dormant company was tagged with a sign of caution, but this situation has done away with in company act, 2013. Now a dormant company can be formed for holding assets or intellectual property subject to the company not having any significant transactions.

(iv) Associate Company incorporation: A company having “significant influence” on the other without being a subsidiary/holding company. Here the term “significant influence” can be termed as a company having a stake of at least 20% or more.

(v) Private Company incorporation: Total number of shareholders in a private company has been increased from 50 to 200.


Previous companies act, 1956 requires the object clause to be classified into 3 categories viz. The main object, Ancillary object & other objects; reason for such condition was to restrict the company from commencing any other business. However, such a requirement has been done away with by coming of companies act, 2013.

Know about Section 8 Company Registration


“Promoter was nowhere mentioned in the previous companies act. However, it was extensively used under the Companies act, 2013. A promoter is a person who is named such under any annual return.


Under the new companies act, there is no buyback of securities within one year from date of closure of the previous buyback. This period is termed as “cooling off period”. Further, if a company is a defaulter (loan), then the company incorporation shall compulsorily have to wait for 3 years after repaying the entire outstanding amount.