What is a section 8 company in India?
What a section 8 company is under the Companies Act, 2013, the charitable-object test that defines it, the licence route through the Registrar, and how it differs from an ordinary company on profit distribution and name.
In this guide
A section 8 company is a company licensed under section 8 of the Companies Act, 2013 to promote objects such as commerce, art, science, education, charity or social welfare. It must apply its profits to those objects and is barred from paying any dividend to members. It is incorporated with a licence from the Central Government, exercised through the Registrar, and can drop the Limited or Private Limited suffix.
What is a section 8 company?
A section 8 company is a company that holds a licence under section 8 of the Companies Act, 2013. It is formed to promote an object such as commerce, art, science, education, charity or social welfare, and it runs on the condition that its profits go back into that object rather than out to its members.
The legal shape is still a company. It has members, directors, a memorandum and articles, and it files with the Registrar like any other company. What sets it apart is the licence and the two conditions the licence rides on: profits are applied to the object, and no dividend is paid to members.
Which objects qualify under section 8?
Section 8 lists the objects that qualify: promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any object of a similar nature. The company has to intend to apply its profits and other income only in promoting that object.
The object is not decoration. It is the reason the licence is granted, and the profit-application condition is tied to it. A company that wants to distribute surplus to members does not fit section 8 and should incorporate in the ordinary way.
Is a sports association automatically a section 8 company?
No. Sports is on the section 8 objects list, but the licence still requires the profit-application and no-dividend conditions. A sports body that wants to pay surplus to members is an ordinary company, or another legal form, not a section 8 company.
Can a section 8 company pay dividends?
No. Section 8 prohibits payment of any dividend to members. This is the condition that most clearly separates a section 8 company from an ordinary one. Members can be reimbursed proper expenses and the company can pay staff and directors for work done, but a return on membership in the form of a dividend is out.
Can a section 8 company pay its directors?
Yes, for work actually done. The no-dividend rule bars a return on membership, not a salary or sitting fee for services. Treating every payment to a member as a forbidden dividend is a misread of section 8.
How is a section 8 company formed?
A section 8 company is incorporated with a licence from the Central Government, and that power is exercised through the Registrar of Companies. The licence is granted where the Registrar is satisfied that the object falls within section 8 and that the profit-application and no-dividend conditions will be observed.
Because it is a licence, section 8 also carries a revocation risk. If the company later acts against the conditions of the licence, the Central Government can revoke it, which is why the object and the profit rules are not treated as one-time paperwork.
How does section 8 differ from ordinary?
| Point | Section 8 company | Ordinary company |
|---|---|---|
| Object | Charitable or similar object under section 8 | Any lawful object |
| Profits | Applied to the object | Available for distribution |
| Dividend to members | Prohibited | Allowed |
| Name suffix | Limited / Private Limited may be dropped | Must carry the suffix |
| Basis of status | Central Government licence | Plain incorporation |
How do I confirm section 8 rules?
- Read section 8 of the Companies Act for the objects list and the licence conditions.
- Check that the intended object fits one of the heads in section 8 before choosing this route over an ordinary company.
- Confirm the company can live with the no-dividend and profit-application conditions for the long run, not just at incorporation.
- Watch MCA updates for any change to the licence process or the conditions attached to it.
Why do section 8 licences get revoked?
- Choosing section 8 for a venture that intends to distribute surplus to members later.
- Treating the object as a formality instead of the condition the licence rests on.
- Assuming the licence cannot be revoked once granted.
- Reading the no-dividend rule as a bar on paying staff or reimbursing genuine expenses.
Where are section 8 licence changes published?
The section 8 licence process and its conditions move through MCA notifications and rule changes. Complied AI keeps MCA updates in one feed so you can open the source behind a change instead of working from an old note. When you need the provision itself, open section 8 next to the update.
Practical checks
Common questions
Can a section 8 company pay dividends to its members?
No. Section 8 of the Companies Act, 2013 prohibits payment of any dividend to members. All income and profits have to be applied to promoting the objects for which the company was formed, so members cannot draw a return the way shareholders of an ordinary company can. Paying staff or reimbursing genuine expenses is not a dividend and is not barred by that rule.
Does a section 8 company need the word Limited in its name?
No. A section 8 company is allowed to be registered without the Limited or Private Limited suffix under section 8 of the Companies Act, 2013. That is one of the visible differences from an ordinary company incorporated under the Act. The licence, not the name, is what creates the status; dropping the suffix without the licence is not available.
What kinds of objects qualify for a section 8 licence?
Promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any similar object, as listed in section 8 of the Companies Act, 2013. The company must intend to apply its profits and other income only to promoting that object. A venture that wants to distribute surplus to members does not fit and should incorporate in the ordinary way.
Who grants the section 8 licence, MCA or the Registrar?
The Central Government grants the licence, and that power is exercised through the Registrar of Companies. The licence is granted at incorporation on being satisfied that the object and the profit-application and no-dividend conditions in section 8 are met. Because it is a licence, it can also be revoked if the company later acts against those conditions.
Can we convert an ordinary private company into a section 8 company later?
Section 8 is built around a licence granted because the object and the no-dividend conditions will be observed. Choosing section 8 after members have already taken dividends, or while they still expect a return, fights the licence conditions. If the intent is a not-for-profit company, apply for the section 8 licence at incorporation rather than planning a later conversion as a workaround.
Does a section 8 company still file AOC-4 and MGT-7 with the ROC?
Yes. A section 8 company is still a company under the Companies Act, 2013. It has members, directors, a memorandum and articles, and it files with the Registrar like any other company, including AOC-4 within 30 days of the AGM under section 137 and the annual return under section 92. The licence changes the object and dividend rules, not the fact of being a company.
If the licence is revoked, what happens to the company?
Section 8 lets the Central Government revoke the licence where the company acts against the conditions on which it was granted. After revocation the company can no longer enjoy the section 8 privileges, including the dropped Limited suffix and the not-for-profit status the licence created. Treat the object and the no-dividend rule as continuing conditions, not one-time paperwork at incorporation.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 28 August 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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