Section 8 companies in India are defined under the Companies Act 2013. Section 8 of the Companies Act 2013 deals with the formation of companies with charitable objects. These companies incorporated to pursue charitable purposes are known as Section 8 companies or non-profit organizations (NPO). A well-renowned Section 8 company is Reliance Foundation, founded by Mr. Mukesh Ambani and is affiliated with Reliance Industries Limited. It is one of the largest profit-making foundations and was formerly known as “the Ruby Ambani Foundation”. Its main purpose is to promote sustainable growth in India, and it actively takes part in the rural transformation, promoting education and health, etc. Some more examples of Section 8 companies include the “Federation of Indian Chambers of Commerce and Industry” and the ‘Confederation of Indian Industries’. The objective of these companies is to facilitate the growth of trade and commerce in India. The main purpose behind the incorporation of the Section 8 (non-profitable) company is to promote the welfare of society.

The transition from section 25 of the Companies Act, 1956

Before the Companies Act 2013, the non-profitable organizations of India were governed by Section 25 of the Companies Act 1956. These Section 25 companies had the same objectives as Section 8 companies, but when the Companies Act 2013 was introduced, it superseded Section 25 with Section 8. Section 8 defines the rule in a clearer and simplified way so organizations can easily understand it. Moreover, the rules are aligned according to international standards to increase credibility, making it easier for Indian organizations to collaborate with international donors or partners.

Evolution of non-profitable corporate structure:

Before the introduction of Section 25 and later Section 8 companies, most charitable work was done through trusts and societies. The new corporate structure enabled the non-profit organizations to operate with better management and transparency. Section 8 became famous in a short time after its introduction since it made it easier for organizations to get funding and partnerships with businesses due to better operation management.

Key Distinguishing Features

Non-profit nature:

Section 8 companies are formed mainly to promote the charitable objective. All incomes and profits generated by these organizations must be reinvested into social work, e.g. for improving education, health, commerce, environmental protection, etc., rather than distributed among the company’s members.

Corporate structure benefits:

Section 8 companies also get many advantages due to their corporate structure:

Tax exemption:

Tax exemptions are provided to Section 8 companies. Moreover, the donors who contribute to the Section 8 companies can also claim tax exemptions against their donations to a Section 8 company.

Credibility:

A Section 8 company is considered more credible as compared to any other non-profitable company, such as a trust or society, because the central government registers Section 8 companies under the Act 2013. Due to the official recognition of the companies, the donors and partners consider them more trustworthy. Also, the Section 8 companies can’t easily change “The Memorandum of Association (MOA)” and “Articles of Association (AOA)” documents, which outline the company’s objectives, rules, and governance structure. Since the Section 8 companies can’t change these documents easily, the adherence to their founding documents makes these companies more credible and trustworthy in sight of donors and beneficiaries.

No title requirement:

Private limited companies have to include “Pvt Ltd” in their name, and public limited companies have to include “Ltd” as a suffix, but Section 8 companies don’t have to add any suffix in their name.

Limited liability protection:

The personal assets of the members or directors are protected in case the company faces any legal issues or debts, and they won’t be responsible for paying those debts beyond the amount they have invested in the company.

Purpose and social significance:

Support for national goals and empowerment of communities:

Section 8 companies play an important role in developing various national initiatives in India in education, health care, environmental protection, etc. Moreover, Section 8 companies also play a vital role in enhancing the well-being of the communities that are marginalized or unprivileged. These companies work on projects that benefit the whole community, e.g., providing job training and better education.

Social impact focus:

Section 8 companies focus more on important social issues. For example, these companies ensure that everybody has access to quality education, people are getting medical care, and all genders are treated equally. Moreover, these companies think long-term. They aim to create long-term solutions to problems that will radically change society.

Legal Framework

Companies Act 2013 governs Section 8 companies in India. This Act defines descriptively the rules and regulations for forming these companies. Moreover, it also describes the requirements and how to operate an 8 section company.

Relevant Rules and Notifications:

Various rules issued under the Companies Act 2013 give instructions on operating and managing Section 8 companies.

Companies (Incorporation) Rules, 2014:

These rules provide details about the registration process and the required documents for registering a Section 8 Company.

 (Accounts) Rules, 2014:

These rules provide details about how Section 8 companies should maintain their accounts.

Ministry of Corporate Affairs (MCA) Guidelines:

The Ministry of Corporate Affairs (MCA) also provides guidelines to Section 8 companies to help them operate smoothly according to legal standards. The guidelines provided by the Ministry of Corporate Affairs (MCA) are:

• Filling out the annual returns and financial statements.
• Conduction of audits and maintenance of transparency.
• Regulations related to fundraising and donations.

Registration Requirements

Some requirements and steps must be followed to register a Section 8 company in India.

Basic Prerequisites:

Members: A Section 8 company requires At least two people if it is a private Section 8 company and at least seven members if it’s a public Section 8 company.

Directors: At least 2 directors are needed for a private Section 8 company, and three directors are needed for a public Section 8 company.

Company’s objective: The Company’s main purpose must be doing social work rather than making profits.

Requirement of Documentation:

Director Identification Number (DIN): Each director must have a unique director identification number (DIN) issued by the Ministry of Corporate Affairs (MCA).

Digital Signature Certificate (DSC): The director must have a digital signature certificate (DSC) to sign documents electronically for online filing.

Articles of Association (AOA) and Memorandum of Association (MOA): The director must submit the Articles of Association (AOA) and Memorandum of Association (MOA), which include the main objective and operating details of the company, to register a Section 8 company.

Declaration form: Directors also need to submit a declaration form stating why they want to initiate a Section 8 company, including the commitment that they won’t change their company’s non-profit objectives in any case.

Other Documents: Some other documents include the correct address, its proof, identity proof, etc.

Regulatory Approvals:

Approval from MCA:

After filling out the application is submitted to the MCA to determine whether all the required documents and other requirements are complete. Moreover, the company name should be approved by MCA.  After reviewing the application and the provided documents, MCA issues a license under Section 8, proving that the company has been converted into a Section 8 (non-profit) company.

Compliance obligations

After registration, section 8 companies must follow some compliance obligations to operate legally and transparently.

Adherence to the Companies Act, 2013: The companies must adhere to the laws and rules outlined in the Companies Act, 2013. E.g. all the laws related to maintaining finance, company operation, and maintaining its non-profit status.

Annual General Meeting (AGM): Section 8 companies are required to arrange a meeting every year to discuss the financial and operational matters of the company.

Annual audit of accounts: The section 8 companies’ accounts must be audited yearly. This means that a professional auditor must review and verify the account records. The company audit is done to maintain transparency and financial accuracy.

Regular filings:

Annual return: Section 8 companies are required to submit an annual return to the Ministry of Corporate Affairs (MCA) every year to give an overview of the current position and how the company is operating. It also includes details about the company’s directors, shareholders, and the registered office.

Financial Statements: The companies must submit financial statements, including the balance sheet (description of the company’s assets and liabilities), income sheet, and expenses for the past year.

Income tax filings: Section 8 companies must submit annual tax returns to the income tax department to receive tax exemptions.

Governance standards:

Transparency in operations: Section 8 companies are required to operate transparently. These companies should operate according to the rules of the Companies Act 2013.

No profit Distribution: Section 8 companies are directed to spend the profits on the organization’s objective rather than distributing it among members and stakeholders of the company.

Tax Laws Applicable

Income Tax Exemptions: Section 8 companies don’t have to pay tax on certain parts of their income if they operate according to the guidelines, such as maintaining proper records and operating according to their objectives. It is very beneficial for Section 8 companies because, due to this reason, the companies can spend more part of their income on social welfare.

Goods and Services Tax (GST) implications: If the Section 8 companies engage in activities considered taxable, such as providing paid services, they must be registered for Goods and Tax (GST). In case the directors of these companies don’t register their companies for GST, they may have to face high legal penalties.

80G Registration Benefits: 80G Registration allows donors to reduce their taxable income from the money they give to charities, including the Section 8 companies. Consequently, it encourages donors to donate regularly because they have to pay low taxes. It also encourages other people to donate as well.

How to register a Section 8 company?

Prerequisites:

Many steps have to be followed to register a Section 8 company.

Name approval: The Section 8 companies must submit the name approval request to the Registrar of Companies (ROC). The company’s name should be thoughtful and creative, reflecting the company’s objectives.

Required forms for the registration:

For the registration of a Section 8 company, the following documents are required to be submitted:

SPICE+:Application for the incorporation of the company

INC 12: Application for license

INC 13: Memorandum of Association (MOA), which includes the purpose and operating details of the company

INC 14: A declaration from a practising charted accountant that verifies that the company is operating according to guidelines.

INC 15:  To declare that the company will not pay any profits to its stakeholders or embers.

INC 16:  To declare that the company is following its objectives.

INC 22:  For notifying the registered office address of the company

DIR 2:  Consent of directors

DIR 3: Application of Registrar of Companies (ROC) to get Director Identification Number (DIN)

DIR 12: Appointment of directors.

Director’s qualification check: It is necessary to check the director’s qualifications while registering a Section 8 company. All the directors must meet all the requirements. For example, they must be at least 18 years old, and one of the directors must be a resident of India.

Section 8 Company Registration process

Digital Signature Certificate (DSC): All directors must have a digital signature certificate (DSC) to sign documents electronically for online filing.

Director Identification Number (DIN): Each director must have a unique director identification number (DIN) issued by the Ministry of Corporate Affairs (MCA).

Documents submission: Submit all the forms stated above to the Registrar of Companies (ROC) through the MCA portal.

Track the application status: After submitting all the necessary documents, one should track the application on the MCA website because sometimes, the ROC may raise some queries.

Content Requirement:

Articles of Association (AOA) and Memorandum of Association (MOA): To register a Section 8 company, the director must submit the AOA and MOA documents, which include the company’s name, purpose, and operating details.

Clarity: The Memorandum of Association (MOA) and articles of association (AOA) should be written under the specified format by the Companies Act 2013, and the directors should make sure that the drafts are clear and cover all the necessary details.

Licensing process

Application Requirement: To register a Section 8 company, the director must submit the AOA and MOA, which include the company’s name, the purpose, and the operating details.

Processing timeline: The processing time is 30-60 days from the date of application submission. The processing time depends upon the workload of the Registrar of Companies (ROC).

Post-license Compliance:

The director will get a certificate of Incorporation after getting the license. After getting the certificate of incorporation, the companies are directed to follow all the guidelines related to Section 8 companies.

Operational Structure

Management Requirements:

The Section 8 companies are directed to follow certain management rules.

Board composition rules:  The Section 8 companies should set up the board of directors according to the rules regarding the number of directors and their roles.

Director Qualification: The directors must meet all the requirements, e.g. they must be at least 18 years old, and one of the directors must be a resident of India.

Key Managerial Personnel Needs: Section 8 companies might need a key Managerial personnel (KMP) such as a chief executive officer (CEO) or chief financial Officer (CFO) to manage the company’s operations.

Membership Structure

Types of members

The Section 8 companies can have different types of members, e.g. Founding members who are part of the incorporation process, ordinary members, and honorary members who are invited to join the company based on their contributions in that specific field.

Rights and Responsibility:

There are several rights and responsibilities of members in Section 8 companies.

Voting rights: the members of Section 8 companies have the right to vote on the primary issues, e.g. for electing board members. Moreover, they must follow the company’s rules, such as attending meetings and contributing to its activities. The responsibilities of a member depend upon their roles in the organization.

Membership Regulations:

Some rules and regulations govern how a person can become a company member and leave the company. These rules also govern how a member should contribute to the company’s activities.

Decision-Making Process

Section 8 companies can take several ways to make a decision.

Board meetings: Section 8 companies hold regular meetings with the board of directors to discuss strategies that can be taken to improve the operational matters of the company.

Member Meetings: Section 8 companies also hold general meetings in which the members of the companies can also participate in the decision-making for critical issues.

Resolution Types:

Ordinary resolutions: These are the decisions used for routine matters that don’t require a high level of approval. These types of decisions are taken based on voting.

Special resolutions: These decisions are critical decisions that impact the company, e.g. decisions about changing the structure or objectives of the company.  These require a higher level of approval of about 75%.

Financial Management:

Banking operations: Section 8 companies must set up a company bank for all financial transactions to keep the finances transparent. That bank should solely be used for the company’s financial transactions. All financial activities, like receiving funds and performing transactions, must be carried out through that bank account.

Fund Utilization Rules:

Funds must be used only for non-profit objectives, e.g., social welfare, education, environmental protection, etc., and shouldn’t be distributed among the company members.

Unique Features and Benefits of Section 8 Company

There are certain features and benefits of Section 8 companies:

Tax exemption: Tax exemptions are provided to Section 8 companies. Moreover, the donors who contribute to the Section 8 companies can also claim tax exemptions against their donations to a Section 8 company.

Income Tax exemptions: Section 8 companies don’t have to pay tax on certain parts of their income if these companies operate according to the guidelines, like maintaining proper records and operating according to their objectives. It is very beneficial for Section 8 companies because, due to this reason, the companies can spend more part of their income on social welfare.

Other tax exemptions: Section 8 companies also get some other benefits, e.g., they have to pay a lower registration fee when registering the company. Moreover, they are exempted from paying GST for their charitable services.

CSR fund Eligibility:

Companies are directed to spend 2% of their net profit of their average net profit in the past three years on CSR activities. This rule applies to the following companies:

• The Section 8 companies, which have a net worth of more than 500 crore
• The Section 8 companies, which have a turnover of more than 1000 crore
• The Section 8 companies which have a net profit of 5 crore

Qualification criteria: The Company must be recognized as a non-profit company and work for society’s welfare. The company’s main objective should be to improve the education conditions, environmental conditions, etc., and the company must comply with the rules set by the Companies Act 2013.

Application process: The Company must submit a proposal that states the usage of funds, CSR activities, and their expected impacts. It helps to encourage other companies to donate. Moreover, the process also includes submitting other documents showing that the company is non-profitable.

Utilization Requirements:

The funds must be used for charitable work rather than distributed among the company members because the companies are required to provide a report on how the funds were used, and any type of conflict in compliance with the regulations can lead to penalties.

Foreign Funding Possibilities

FCRA considerations:

Section 8 companies can get foreign funding by ensuring they comply with the Foreign Contribution Regulation Act (FCRA). The company must also get approval from the central government, which will help ensure it uses the funds for its charitable objectives only. The eligibility criteria for qualifying is that the company should be functional for at least 3 years and have a proper record of its activities.

International collaboration options

Section 8 companies can collaborate with international non-profit organizations and NGOs for social projects.

Compliance Requirements: Section 8 companies that receive funds from foreign sources must submit the annual return under FCRA to show their yearly activities and transparency.

 Government support:

Available schemes: The government offers many subsidies to Section 8 companies to support non-profit activities in the fields of education, health, and environment, etc.; section 8 companies have to pay lower electricity bills and lower taxes, which consequently helps the Section 8 companies lower their operational costs.

Application process: Section 8 companies must submit all the required documents, such as a Memorandum of Association (MOA) and Articles of Association (AOA), while applying for Government funding and support programs.

Restrictions and Limitations of Section 8 Companies

Profit Distribution:

Section 8 companies are prohibited from distributing the profits and incomes among their members. Instead, all the incomes and profits must be reinvested into social work, e.g., improving education, health, commerce, environmental protection, etc., rather than distributed among members and stakeholders of the company.

Permitted Uses of Surplus: Companies can only use the surplus or profits to expand social activities, fund social programs, or save money for future projects.

Investment Restrictions: Section 8 companies should invest their money carefully, without high-risk investments. Moreover, they should prioritize secure and stable investments.

Salary and Remunerations

Director Compensation Limits

The salaries should be paid to all directors under Section 197 of the Companies Act 2013.

Single managing director: If only one managing director of the Section 8 Company exists, their maximum salary should not exceed 5% of the company’s total net profits.

Multiple Managing Directors: If multiple managing directors of Section 8 Company exist, their combined salary shouldn’t exceed 11% of the company’s total net profits.

Staff salary guidelines:

There are no specific guidelines for staff salaries. Salaries for staff should be reasonable and according to the company’s financial health and operational needs.

Benefits Restrictions:

Section 8 companies cannot distribute profits to their members. The surplus funds must be used for social welfare purposes and could be saved for future projects.

Property Utilization

Usage Limitations:

All the incomes and profits of Section 8 companies must be reinvested into social work, e.g. for improving education, health, commerce, environmental conditions, etc., rather than distributing it among members of the company or any other profit-making activities, as stated in its Memorandum of Association (MOA).

Disposal Restrictions:

Section 8 companies are not allowed to get involved in any activity which conflicts with their objective without prior approval from the central government.

Management guidelines:

The management of Section 8 companies must comply with the Companies Act 2013. I.e. maintaining transparency, holding annual general meetings, etc.

Conversion rules for Section 8 companies

Transformation Limitations:

A Section 8 company can convert itself into any public or private company by applying to the Regional Director.  However, even after conversion, these companies must follow non-profit principles.

Process requirement:

To convert the company, a resolution must be passed by the Board of Directors and shareholders. An application and all the necessary documents must be submitted to the Regional Director. All the changes and approvals from regional Directors must be filed with the Registrar of Companies (ROC).

Legal Implications:

If a company wants to be converted into another type of company, it must follow the rules stated in the Companies Act 2013 related to legal requirements for the conversion. The company might face high legal penalties if it fails to follow the regulations.

Compliance Requirements for Section 8 Company

Financial Statements: The companies are required to submit financial statements, including the balance sheet (description of the company’s assets and liabilities), income sheet, and expenses for the past year.

Annual return: Section 8 companies are required to submit an annual return to the Ministry of Corporate Affairs (MCA) every year, which gives an insight into the current position of the company and an overview of how the company is operating.  It also includes details about the company’s directors, shareholders, and the registered office.

Activity Reports: Activity reports give an insight into the social activities and initiatives taken by the company throughout the year. The activity report is submitted as proof of compliance with the company objectives.

Meeting requirements:

Board meetings: Section 8 companies hold regular meetings with the board of directors to discuss strategies that can be taken to improve the operational matters of the company.

General Meetings: Section 8 companies also hold general meetings once a year in which the members of the companies can also participate in the decision-making for critical issues.

Extraordinary Meetings: Extraordinary meetings address urgent matters that cannot be postponed until the next board meeting. It can be held according to the need.

Record Maintenance for Section 8 Companies

Statutory Registers:

These registers are significant records, including information about the company’s members’ names, addresses, and other primary details.

Minute Books: Minute books contain the key points for every board, general, and extraordinary meeting. It also includes the date, time, place of the meeting, attendees’ names, and the meeting summary, etc.

Financial Records: Financial records maintain accurate financial information and ensure company financial operations transparency. Financial records must be kept for a limited time, usually 7 years, and should be reviewed frequently.

Audit Requirements for Section 8 companies

Statutory Audit:

Section 8 companies are required to conduct a statutory audit every year to provide an independent evaluation of the company’s financial statements, like balance sheets, to ensure that the company’s financial statements are correct. The audit is done by a qualified professional auditor registered with the Institute of Chartered Accountants of India (ICAI).

Internal audit:

An internal audit is an insight into the internal reviews of the company’s operations. Someone within the company does it. An internal audit is conducted to check whether the company is working efficiently or not.

Special audits:

Special audits are made in case of concerning situations, such as financial issues or possible fraud cases. The company’s director or regulatory authorities initiate the audit request if they have any concerns.

 Funding sources for Section 8 companies

Donations and Grants:

Domestic Sources:

Domestic sources refer to the funds received by individuals, businesses, and organizations within the country. These funds may be specifically granted for non-profit activities. Moreover, the company might need to submit documents like AOA and MOA to show its transparency and credibility.

CSR contributions

Eligibility criteria: The Company must be recognized as a non-profit company and work for society’s welfare. The company’s main objective should be to improve the education conditions, environmental conditions, etc., and the company must comply with the rules set by the Companies Act 2013.

Application process: The Company must submit a proposal that states the usage of funds, CSR activities, and its expected impacts. After getting funds, they may be required to report how they were used.

Government Funding:

Available schemes: The government offers subsidies to Section 8 companies to support non-profit activities in the fields of education, health, and the environment. For example, Section 8 companies have to pay lower electricity bills, which helps them lower their operational costs.

Application procedures: Section 8 companies must submit documents such as a Memorandum of Association (MOA), Articles of Association (AOA), and other documents to apply for Government funding and support programs.

Self-Generated Income: Section 8 companies can generate income through specific activities that comply with their company objectives. They may charge some fee against their services. In this way, they can earn additional revenue.

Examples of Section 8 companies

Education and Research:

The Section 8 companies can provide educational services by running schools, colleges, workshops, etc. Still, they must ensure that they provide services that comply with their educational goal of providing quality education to the students. It is also necessary to keep track of important records, such as how many students have enrolled in their programs and all the financial transactions (income from tuition).

Healthcare:

The Section 8 companies can offer medical services like health awareness programs. They must ensure that they provide medical services that comply with the health regulations, to avoid any mishap. They must obtain all necessary licenses and adhere to safety standards to ensure patient care.

Social Welfare:

Section 8 companies can also run programs to decrease poverty, skill development, women empowerment, etc. For this purpose, these companies can collaborate with different NGOs to implement their programs smoothly and effectively. They should also conduct regular assessments to see how their initiative affects the people.

Environmental Protection:

Section 8 companies can also take initiatives for environmental protection. They can initiate programs to conserve natural resources, promote sustainability, and raise awareness about environmental issues. Moreover, they must adhere to the laws related to environmental protection. These companies should also ensure they don’t harm wildlife or create pollution during the process.

Recent Developments:

Dematerialization of shares: The Ministry of Corporate Affairs (MCA) has introduced a new law according to which the Section 8 companies are now required to dematerialize their shares from 30 September 2024. Initially, company shares were issued as a physical certificate. Still, the physical certificates can now be dematerialized into electronic format, which is then stored in a Demat account for shares. This Recent development benefits the stakeholders since they don’t need to worry about losing their physical certificates.

Names of Section 8 companies: Now, The Section 8 companies are directed to include

“Foundation”, “Forum”, or “Association” in their name.

Case studies

Tata Trusts: Tata Trusts is one of India’s oldest and largest non-profit companies. It works for many causes like education, medical care, rural development, etc.

SEWA:  Another famous Section 8 company, the SEWA (Self-employed Women’s Association), mainly focuses on women’s empowerment. It has empowered thousands of women by improving their economic status and promoting gender equality in India.

Comparison with Other Structures

Trust Structure

Key differences:

Trusts are governed by the Indian Trusts Act of 1882, while the Section 8 companies are governed by the Companies Act of 2013. Moreover, trusts are formed to manage the assets of beneficiaries. On the other hand, Section 8 companies mainly focus on promoting charitable or social objectives.

Advantages of trusts

There are several advantages of Trusts:

Flexibility: Trusts have fewer formal requirements than Section 8 companies.

Simplicity: They are simpler to set up and operate as compared to the Section 8 companies

Informal structure: It is beneficial for smaller or less complex charitable activities.

Disadvantages of Trusts

Some of the disadvantages of trusts are:

Limited liability: Due to their less formal requirements, the trustees may not have the same level of protection from personal liability as directors in Section 8 companies.

Less transparency: They are less transparent than the Section 8 companies.

Society Structure:

Societies are formed under the Societies Registration Act 1860. Societies generally require at least seven members, while Section 8 companies can be formed only by two members. Moreover, Section 8 companies have stricter requirements than societies. If a person prefers a more informal governance structure, they can choose a “society structure”.

Regular companies:

The main purpose of regular companies is to make a profit, while Section 8 companies are non-profit companies. Moreover, Section 8 companies are not allowed to divide their profits and incomes among the company’s members and are directed to spend it for social wellness. On the other hand, Regular companies can distribute their profits among their members. Choosing the right structure for an organization depends upon its objectives and priorities. If the company aims to make profits, it can opt for a regular company structure.

How to Exit Section 8 Company?

Voluntary Closure:

Board Resolution: If one wants to dissolve the Section 8 Company, a board meeting is held. The board should pass the resolution for the voluntary closure of the Section 8 Company.

Approval from Members:

After the board meeting, a special resolution must be passed at a general meeting in which 75% of members should be present and voting for approval.

Application to the Tribunal:

After that, a dissolution application must be filed with the National Company Law Tribunal (NCLT), and additional documents must be submitted.

Approval of application:

The National Company Law Tribunal (NCLT) reviews the application, and if it is satisfied with all the documents and objections, it grants the dissolution approval.

Asset Distribution:

Since Section 8 companies are non-profit companies and are not allowed to distribute profits among their members, the assets are transferred to another Section 8 company with similar objectives after their dissolution.

Documentation:

The Section 8 companies are required to fill out some necessary legal paperwork and submit some documents. These essential documents include financial statements, a declaration of solvency, and proof of asset transfer. These documents must be filed with RoC. Moreover, the directors are ordered to keep copies of these records for future reference.

Conclusion

Section 8 companies are the non-profitable companies that work for the welfare of society. The Section 8 companies spend their profits and incomes on resolving social issues rather than distributing them among the members. Section 8 companies also get exemptions on taxes and eligibility for CSR funding, which encourages them to initiate more programs related to social wellness.80G Registration also allows the donors to reduce their taxable income from the money they are giving to charities, including the Section 8 companies. Consequently, it encourages donors to donate regularly because they have to pay low taxes. It also encourages other people to donate. However, the companies must adhere to the laws and rules outlined in the Companies Act 2013. E.g. all the laws related to maintaining finance, company operation, and maintaining its non-profit status. Even though managing a Section 8 company is very difficult due to its strict rules and formalities, this setup helps these companies grow faster. These companies gain the trust of the public very quickly. Moreover, this structure allows Section 8 companies to achieve adequate social wellness.