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Process of Converting Section 8 Company into Other form of Companies

A section 8 Company can be converted into the private limited company, public company and other forms of companies. However, a section 8 company cannot be converted into a one person company.

Section 8 company is registered for the non- profit purposes or the charitable purposes only. The main objectives of Section 8 Company are promoting research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment. One thing to be noted about section 8 Company is that any profits and income arising shall be applied for promoting only the objects of the company. Further, no dividend is paid to its members.  Section 8 Company is empowered to convert itself into the companies of any other kind after following the prescribed conditions under the rule 21 and rule 22.

Conversion Process

Following steps must be followed in order to convert section 8 Company into any form of company-

  1. Obtaining the consent of the members- An approval of members of the company shall be taken by the way of special resolution passed at the general meeting. The explanatory statement containing the reasons for such conversions shall be attached to the notice of the general meeting. Further, a certified copy of the special resolution along with a copy of the Notice and the explanatory statement shall be filed with the Registrar in Form No. MGT- 14.
  2. Obtaining NOC from other authorities- If a company has obtained any special privilege, benefit or grant(s) from any government authority or a recognized body then it shall give them notice in writing and proof of service along with the application for conversion. By filing the notice a “No Objection Certificate” must be obtained and filed with the Regional Director, along with the application.
  3. Filing an application with the regional director- The sections 8 company shall make an application in FORM NO-18 to the regional director along with the copy to ROC for converting itself into other forms of companies.

It is mandatory for the section8 company to file all its financial statement and Annual Returns of the financial year before submitting the application to the Regional Director. In case the application is filed after the expiration of 3 months from the financial year to which the financial statement has been filed, a statement of the financial position duly certified by chartered accountant made up to a date not preceding thirty days of filing the application shall also be attached.

4 Declaration by the board of directors- A declaration shall be given by the Board of directors asserting that no part of income or property of the section 8 company is transferred directly or indirectly by way of dividend or bonus or otherwise to the members of the company.

  1. Certificate from professionals- A certificate certifying that the company has complied with the conditions laid down for conversion has been prescribed with from a practicing Chartered Accountant/ Company Secretary in practice/ Cost Accountant shall be filed by the company.
  2. Publishing a notice in the newspaper- The section 8 company shall publish a notice in Form INC 19 within a week from the date of making the application to the Registrar of Companies. The notice shall be published in vernacular language and one English language newspaper. Further, the copy of such notice in newspapers shall be submitted to the Regional Director immediately after their publication.
  3. Sending the notice to authorities- A copy of the notice, application and all attachments shall be sent to the below-mentioned authorities through registered post or hand delivery to:

(i) The Chief Commissioner of Income Tax having jurisdiction over the company,

(ii) Income Tax Officer who has jurisdiction over the company,

(iii) The Charity Commissioner,

(iv)The Chief Secretary of the State in which the registered office of the company is situated,

(v) Any organization or department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating.

These authorities shall make representations, if any, to the Regional Director within sixty days of the receipt of the notice.

  1. Approval or rejection by the regional director- In order to take this decision the regional director may require the applicant to file approval of any particular authority and he may also obtain the report from the Registrar. After being satisfied the regional director may issue an order approving the conversion of the company into a company of any other kind. The regional director may impose any conditions as he deems fit. Following are some of the conditions that may be applied-

(i)The company is required to give up all claims of special status, exemptions, and privileges after the conversion.

(II) To make compensations for the difference in prices of the immovable property to the buyer.

(III) Within 30 days of receiving the approval, the company is required to set off the accumulated profits or unutilized income brought forwarded from the previous years and transfer the balance to IEPF account.

Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director.

  1. Post Conversion requirements-If the conversion is approved by the regional director the company shall pass a special resolution for amending its memorandum of association and articles of association consequent to the conversion of the section 8 company into a company of any other kind.
  2. Obtaining the fresh certificate of Incorporation-The Section 8 company is required to file the certified copy of the approval of regional director in Form INC 20 within 30 days of receipt. The approval shall be filed along with the Amended memorandum of association and articles of association of the company and a declaration by the directors that the conditions if any imposed by the Regional Director have been fully complied with. Further after receiving all the documents the Registrar of Companies shall register the documents and issue a fresh Certificate of Incorporation.

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How to Register a Section 8 Company in India

An organization registered as the Non- profit organization (NPO) can be regarded as the section 8 company. The various objectives of section 8 Company are the promotion of arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research and religion. One of the crucial points to be noted is that the section 8 company shall invest its profits, or any other income received only in promoting its objectives. Further section 8 company functions exactly like a limited company in respect of all the rights and obligations. However, one significant distinction between a company and section 8 Company is that it cannot use the words “Section 8” or “Limited” in its name.

Benefits of section 8 company

  1. Tax Benefits- Number of tax exemptions are provided to the section 8 company and to the persons who are contributing in section 8 companies.
  2. Separate legal identity- The legal identity of section 8 company is separate from its members thus the liability of members is limited to their share.
  3. Stamp Duty Exemption- Section 8 company is exempted from paying the stamp duty on registration.
  4. No minimum capital requirement- There is no minimum capital requirement for the formation of section 8 company like private limited company.
  5. Easy process of incorporation-There is no requirement of minimum paid-up capital for forming Section 8 Company.

Minimum Requirements

In order to register a section 8 company it is required to fulfill the following requirements-

  1. At least two shareholders
  2. Minimum two directors(Shareholders and directors can be the same)
  3. At least one director shall be the Indian resident
  4. PAN card number.
  5. Identity proof
  6. Passport
  7. Proof of residence(Electricity/telephone/mobile bill or bank statement)
  8. Passport size photograph
  9. In case of rented office premise No Objection Certificate (NOC) from the owner.
  10. Copy of rent agreement in case of rented premises.

Process of registering section 8 Company

Step-1 -Collection of the documents

Initially, the applicant is required to collect the above-mentioned documents along with director’s consent in DIR-2.

Step-2-Applying for Digital signature certificate

Further, the applicant is required to apply for the Digital Signature Certificate which is required for filling the various forms electronically in the Ministry of Corporate affairs.

Step-3- Obtaining Director’s Identification Number

It is mandatory for every director to obtain the valid Director’s Identification Number from the Ministry of Corporate Affairs by filing Form DIR-3, in case the director does not have DIN.

Step-4 Applying for Company name

The next step is one of the most crucial steps as it involves applying for the valid name of the company. While choosing a name an applicant must adhere to various guidelines as specified by MCA. Further, the applicant can give maximum six names in order of preference.

Step-5-Drafting MOA and AOA

As soon as the approval is received the Memorandum of Association and Article of Association shall be drafted. Further, it shall be sent to ROC along with other documents in e-Form INC 13 for the issuance of the license under section 8 of the Companies Act, 2013. The subscription pages of both MOA and AOA shall be signed by each subscriber of the memorandum.

Memorandum of Association- It is legal document that defines the relationship of the company with its shareholders. It describes the company name physical address of registered office, names of shareholders and the distribution of shares etc.

Article of Association- It is the constitution of the company.It contain all the information regarding who holds the power distribution among directors, officers, shareholders etc, who holds right of vote and veto, the nature and form in which the primary business of the company is to be carried out etc.

Step-6 Application for license under section 8

To incorporate a section 8 company the applicant is required to file an application in form INC 12 along with the prescribed fees to register for obtaining a license.  Along with INC-12 following documents shall also be submitted-

  1. INC-13 Memorandum of Association. Article of Association
  2. INC-15 Declaration by each Subscriber to MOA (On Non- judicial stamp paper of Rs. 100/- and duly notarized).
  3. Estimated Statement of Income & Expenditure for Next three years and it should be signed the proposed Promoters.
  4. List of proposed Promoters and Directors of the Company.
  5. Subscribers page (AOA & MOA) should be hand written by the Subscriber (s), and witness.

Step-7 Certificate of Incorporation

The applicant shall file the incorporation documents in the FORM INC 7(containing the declaration of compliance with the requirements of the Act on application for registration of a company), INC 22(regarding notice of situation of registered office) and DIR 12(for appointment of directors of the company) along with the prescribed fees. In case registrar of the company is satisfied with the contents of the documents that are filed a certificate of registration will be granted in form INC-16.

Rules and Regulations of Section 8 Company Registration

Section 8 Company is a company that is only registered for charity purposes or for the organization’s objectives towards the society. Main objective of the company is to promote art, commerce, sports, science, education, social welfare, religion, charity, research or protection of the environment. Companies profit gained should only be used to promote the activities of the organization or to achieve the objectives of the organization

Advantages of Section 8 Company

The benefits enjoyed by a Section 8 Company are as follows:

  • Exemption from stamp duty for registration.
  • Many privileges and exemptions under the Company Laws.
  • Tax deduction to the donors of the company.
  • These companies exempt from keeping any titles or suffix.
  • These companies can be formed without share capital, the funds are brought in the form of donations
  • The shares of the company can be transferred easily.

To register a company under Section 8 Company you need to just follow these steps:

  • Fill a simple online form which will be available on the official website of Registrationwala.com
  • Obtain Digital Signature Certificate.
  • Obtain Director Identification Number (DIN), Quickly
  • Apply for Section 8 Company name approval from Ministry of corporate affairs.
  • Apply for Section 8 License from Regional Director of Ministry of corporate affairs.
  • Obtain Certificate of Incorporation (COI) and then apply for PAN (Permanent account number) and Tax Deduction Account Number (TAN) and Registration is complete under Section 8 Company.
  • You are ready to open your Bank Account.
  • 100% Tax-free on income of NGO since need to Apply for 80G & 12A registration

 Eligibility Criteria:

  • Person or group looking towards Section should have an objective to promote science, education, sports etc
  • Revenue gains earned should be used for the company’s development only
  • Members of the company will not be getting distribution of profits amongst

What will be the last Name to be added to Section 8 NGO?

As per rule 8(7), the name shall include the words–

  • Association – For labour association, Trade Association, Social body like RSS, financial association, RWA
  • Forum – Social knowledge or Social discussion, Buyer association etc.
  • Foundation – Foundation is good for microfinance company, social welfare organization, University
  • Chambers – for promotion of trade, science, and arts
  • Federation – for club, school, research, university, consumer forum
  • Confederation – social and welfare work

Document required

  • Identity proofs of the members of the Company
  • Address proof of the members
  • Passport size photographs
  • Copy of the rent agreement, in case, when rented
  • Copy of the property papers, if any
  • Copy of electricity or water bills
  • NOC from the landlord
  • Small draft about the core objectives of Section 8 Company
  • Sample copy of signature

Eligibility Criteria for Section 8 Company license

  • The major objective should be the promotion of sports, Social welfare, promotion Science & Art, education & financial assistance to lower income group.
  • All the surplus generated must be used for the meeting the principal objective of the company
  • No profit should be distributed among the members & Director of the company directly or indirectly
  • Founders, members & Directors of the company cannot draw any remuneration in any form cash or kind.
  • The Company should have a clear vision and project plan.

Statutory Obligations:

  • The Revenue and surplus generated should be exclusively used for the achievement of the main objective of the company
  • Appointment of Company Secretary is no longer mandatory
  • Incentives or commission are not allowed.
  • No need for minimum share capital
  • AGM can be conducted as Shorter notice period
  • Directors of the Section 8 Company can take positions in more than 20 companies
  • No portion of the profit should be paid to the directors and members of the company
  • Profit is 100% tax-free if 12A registration is obtained from income tax department.
  • The Objective of Company cannot be altered without prior permission from Central Government of India
  • Sharing the profit with the promoters is strictly prohibited
  • The revenue of the company shall only be applied for the promotion of the main objective
  • The income tax rates are applicable at the same rates as they applicable to other companies
  • The company registered under Section 8 of the company shall not alter the provisions of its memorandum or articles except the previous approved by the Central Government
  • No member of the company should be appointed as a remunerated officer and there will be no incentive.
  • Section 8 Company is licensed under the Section 8 of the Companies Act, 2013. Under the Companies Act, 1956, this act was earlier known as the “Section 25 Company”.
Difference between Section 8 company and Trust Registration

Section 8 Company-These are companies or organizations are also known as the Non-Profit Organization can be registered as the society. Companies under Section 8 mainly follows Companies act, 2013.A special license is granted under section 8 to drop the words ‘Private Limited’ or ‘Limited’ from their name.

Trusts are the forms of charitable organization which can be Public or Private Limited. In these organization private company are formed for family welfare. These kinds trust are not charitable trust governed by Indian Trusts Act. This Act is not applicable to public trusts.

In the case of the public, a person wants to dedicate their own property to specific cause. In this fundraising is not suitable when you want to raise funds from the public for the trust’s activities. Trust formed anywhere in India can operate all over in India. The company should be the charitable object.   

Applicable Act

Section 8 Company works under Indian Company Act,2015 whereas The Trust is governed by The Indian Trust Act, 1882. 

Instrumental documents

Section 8 company’s main instrument are Memorandum of Association and Article of Association which has certain rules and guidelines which should be strictly followed. In Trust deed is the main instrument because the trust is established for humankind.

Members Required

Section 8 Company should have minimum of 2 members and for a private company and 7 members for the public company and managed by the director whereas in Trust there is a requirement of only 2 trustees and there is No upper Limit. Trust is controlled by the trustees.

Jurisdiction and Stamp duty

Section 8 follows the jurisdiction of the power to register lies in the hand of Regional Director & Registrar of Companies of the concerned state. Whereas trust follows jurisdiction of Deputy Registrar/Charity commissioner of the relevant area.

There is no requirement of stamp duty in Section 8 Company for the MOA and AOA whereas in a non-judicial stamp is required which vary state to state.

Time for registration

Section 8 Company takes 60-75 days to get registered and can be dissolved but the Trust takes 15-20 days and it is irrevocable.

Annual Compliance

In Section 8 Company there is no requirement of annual compliance by the filing of annual accounts and the return of company with the ROC. Whereas trust does not require any annual return filing.

Case of inactiveness

In section 8 upon dissolution, all debts, liabilities, funds and property of the company may not be distributed among the members of the company. Funds need to be transferred to other section 8 company preferably similar objects as the dissolved entity. Whereas the Trust becomes inactive in case negligence of trustees. Some steps can be taken trustees by the Charity Commissioner Object of trust is a difficult job.

Get Trust Section 8 Company Registration through Registrationwala






Types of Companies under Ministry of Corporate Affairs

Ministry of Corporate affairs is an Indian ministry that is primarily concerned with Companies Act, 2013, Companies Act, 1956, Limited Liability partnership act 2008 and other  rules and regulations. The responsibility of this Ministry is regulation of Indian enterprises in Industrial and Services sector.

Companies can be registered in India

Private Limited Company-It is the type of company recommended for Business. The cost of registration of the private limited company is cheaper than other forms of a company. Private limited should have a minimum of 2 members and can have maximum 200 members. In this company liabilities are limited and it has some features of a partnership.

People mostly prefer this of the company for fundraising. The degree of operation and ownership can easily separate in this type of company. Business can be exited without any hassle. In this members are limited to only contribute towards a number of shares.      

One Person Company-It is the type of company which can be started by a Single member.OPC is the latest form of company in Companies Act, 2013. One person can become the director as well as the shareholder. Similar to the private limited company as the degree of operation and ownership are on the separate basis. 

OPC gives wings in the hand of Sole proprietor to form the company under with full control. It is done without any interference of the third person. This type is easy for an entrepreneur to directly target the market. Fundraising from banks and the financial institution is easy. People who are Indians and resident in India can form OPC.     

Public Limited Company-This is a publicly held company. A large amount of capital investment can easily be obtained. These types companies are considered to be a more transparent business model as compared to other business structures. Investors get the choice of transferring their ownership in the company without any hassle by just selling the shares.

Section 8 Company-These companies are basically formed to encourage arts science, sports, education, research, social welfare, religion, charity, etc. These kinds businesses do not play any vital role in profit. Company Intends to prohibit the payment of any dividend to its members. These companies are the non-profit making company.

Section 8 company was incorporated mainly for welfare purposes. Previously, it was defined as Section-25 Company. Due to commencement of Companies act, 2013 it was called as Section-8 Company

Nidhi Company- Nidhi Company comes from the Hindi word ‘Nidhi’ means fund. These are the  NonBanking financial corporation. These are also known as mutual benefit funds. Nidhi company is known in the corporate scenario is member benefits company. Companies are formed for the welfare of the members and to increase saving habits.  

Other types of Companies

There are some more types companies which can be registered in India.

  • Companies that have unlimited liability
  • Producer Company
  • Joint Venture Company
How to Protect Your Business

However the type and size of business, it is valued by its owner(s) and as the business grows, the bigger the value gets and hence higher the protection needed. The owner must understand the vulnerability that comes along with the success of a business, such as with success comes competition, risks, legal obligations, reputation sustenance, vigilant, etc. 

An owner must be prepared to face the difficulties that come in building a successful business. There are no strict rules to be followed, however, certain aspects of protecting ones business remain constant in all cases. 

Protection against legal threats 

  • Physical assets are one of the most important assets of a business as they are worth a lot of money. For example, they not only include the office space but also the things that fill up the office. All physical assets belonging to the business must be insured to avoid any loss in case of any natural disaster or theft.
  • A legal attorney who is well versed with local laws and policies must be hired to handle any legal actions that may arise at any time of the business operation. A legal attorney will also help in foreseeing any potential legal threat and help in implementing the task at hand accordingly.
  • In case of sole proprietorships, it is important that the owner separate its personal assets from that of the business. Any attack on the business finances will directly impact the personal finances in case the separation is not clearly defined and limited. 

Organize your Finances 

  • Finances of a business must be documented and organized time to time to avoid any threats not only from the outside but also from the conflicts that may rise among the stakeholders of the business.
  • Hiring an accountant is a good start to protecting finances.
  • Finances in sole proprietorships must be specially monitored as the finances of the business may be linked with the personal finances. It is preferred and suggested to keep both the finances separate to avoid loss on the other when one is under attack. 

Protection against technological threats 

  • Technology has reached such heights that it is difficult to run a business without a strong technological support. This may include software that is needed in every domain of running a business. For example, a good software system is needed not only for business documentations but also strong software is needed to run a security check in the office space. Considering the high level cyber attacks and crimes in todays’ times,protection of such technology is needed to protect the business.
  • Protection of intellectual property is highly critical to avoid risking any legal action and theft from any seekers. Trademarks and copyrights are also a major part of technological assets and if these are not protected, they can land a business in a lawsuit against their favor. There are experts available to help protect a business trademark, copyrights, and intellectual property.
  • An IT expert must be hired to ensure any technology used and applied in a business is highly protected from hackers and cyber criminals. 

Protection against reputation threats 

  • Running a business successfully requires that it makes its presence felt in the market at almost all times. Offline marketing that includes display of brand on its products or service material and online marketing that includes its presence on social media platforms are one of the most common and beneficial marketing techniques. Hence, the representation of the business on such platforms must be protected. Simply by using the right language favoring in the progress of business is protecting the business.
  • A social media manager or public/business relations’ manager understands the operations of such platforms to help maintain the reputation of the business. Hiring of such an expert will help the business from being attacked by any reputational threats that are sometimes the most probable causes of the downfall of a business. 

Protecting a business can be a task but the efforts will make the success of a business only smoother. If the above major aspects are taken care of, the business is well protected and any hassle on its way of progress can be dealt with ease.

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