From the perspective of investment, India is the choice of most of the businesses. This is because in India the production cost is very low in comparison to the demand flow in the market. That’s why there are many foreign companies who want to invest in India. Companies Act 2013 not only talks about domestic companies but also foreign companies. Companies as per the Companies Act can be registered as private limited companies, Section 8 companies, public limited companies, etc. In the current block, we are particularly talking about the Section 8 company in India. With respect to its foreign aspects, we will discuss whether a foreign company can be registered as a Section 8 company in India or not.
What is Section 8 Company Incorporation?
In the Companies Act 2013 under Section 8 a type of company has been given which is formed for charitable purposes only. Such kinds of companies are known as NGOs. NGO which means non-government organization mostly works for the upliftment and welfare of the society. They can do so by engaging themselves in the promotion of education, arts, science, social welfare, etc. Such companies are not formed or incorporated for profit-making. Even as per the rules and regulations companies with the idea of making a profit cannot work as non-government organizations. Laws regarding such kinds of companies are very strict and cannot be ignored. Even in some scenarios, their incorporation certificate can be canceled. Hence to safeguard companies must follow the rules and regulations properly.
What is a Foreign Company?
Under section 2(42) of the Companies Act 2013, the concept of foreign companies has been given. As per this section, foreign company means any entity or institution that was incorporated outside the Indian territory and has a branch office in India. It can be through itself or by an agency or agent. Even if that company exists in the Indian market through electronic mode it will be considered that such a company has a business place in India. Except above points if any foreign company has any other business activity in India in any form that will be considered as foreign company.
Whether a foreign company can be registered as a section 8 company in India or not?
Under Section 8 of the Companies Act 2013, proper criteria have been given regarding who can become a Section 8 company in India. The companies which do not fall under this criteria cannot become Section 8 company . The question of whether a foreign company can be registered as a Section 8 company in India or not depends upon that criteria. If any foreign company fits in the criteria it can be registered as a section 8 company. The criteria for a foreign company to become a Section 8 company are given below:
- It also intends to prohibit the payment of any dividend to its members,
- Must check the foreign company is working for a charitable purpose like the promotion of education, protection of the environment, providing food, etc
- Whatever profit a company is making must be used for achieving the purpose or goal or aim or objective of the company.
After satisfying the above criteria the central government may issue the license and on such conditions as it deems fit. They will allow the person or association of persons to be registered as a limited company under section 8 company without the addition of the word limited. Therefore we can say that if any foreign company fulfills the criteria given under Section 8 of the Companies Act, it can become a section 8 company in India.
Traits of a Section 8 Company
Section 8 companies in India comprise several traits that set them apart from other types of companies incorporated the the companies law:
- The associates of a Section 8 company have limited liability just like the other companies under the Companies Act
- As Section 8 company works with non-profit objectives, it has been provided with numerous privileges, and exceptions which are given under Section 12AA and 80G of the Income Tax Act, of 1961.
- The one and only goal of a Section 8 company is to promote various charitable causes such as arts, sports, religion, social welfare, charity, research, and environmental protection.
- Unlike other companies, Section 8 companies do not require a minimum share capital as per the company’s act.
Benefits of Section 8 Company in India
A Section 8 company registration in India comes up with a number of benefits and privileges. It has a high level of trustworthiness in the market due to its stringent rules and regulations. It provides credibility and assurance regarding the company’s objectives or purpose for which the company is incorporated. These companies are committed to processes that accurately represent their activities to internal and external users. Given below are some benefits of the Section 8 companies in India:
- Reliability
- Trustworthiness
- Tax exemptions
- Tax Deductions
- Comparatively easy loan facility
- Helps in the welfare of the society
- Legal recognition under the Companies Act
- Separate legal entity
- Transparent work culture
Conclusion
Foreign companies have the right to become directors of a Section 8 company in India. But the condition is that they must have a valid Director ID number. It is compulsory that at least one director should belong to or be a citizen of India. For the purpose of doing business in India, a foreign company must have an office in the country. Also, it needs to obtain authorization from the government or the Reserve Bank of India commonly known as RBI. A foreign company can register as a Section 8 company in India if it meets specific criteria related to non-profit objectives. Section 8 companies focus on promoting charitable causes and enjoy tax benefits. Incorporating as a Section 8 company provides credibility and transparency in pursuing social and charitable goals, making a positive impact on society.
