Difference Between Sec 8 Company with Shares vs Sect 8 Company with Guarantee
Are you looking to set up a non-profit organization in India? When considering Section 8 company registration, it’s important to understand the different options available to you, especially in Pune. You can choose between a Section 8 company with shares or a Section 8 company with a guarantee, depending on your goals and funding strategy. At Startupportal Business Services, we make the process of Section 8 company registration in Pune simple and guide you every step of the way to ensure your non-profit thrives.
What is a Section 8 Company?
A Section 8 company is a non-profit organization (NPO) under the Companies Act, 2013. Its primary goal is to promote activities such as education, arts, science, sports, or charity. Unlike regular companies, these organizations cannot distribute profits to their members or shareholders; all profits must be reinvested in the company’s objectives.
Section 8 Company with Shares:
A Section 8 company with shares operates like a regular company regarding ownership. Here’s how it works:
- Ownership: The company is owned by its shareholders, who invest in the company by purchasing shares.
- Capital Contribution: Shareholders contribute capital to the company in exchange for shares.
- Fundraising: The company can raise funds by issuing shares to new members. This makes it easier to attract investors who share the company’s objectives.
For instance, if a Section 8 company is running an educational institution, it can issue shares to individuals who wish to support the cause financially.
Section 8 Company with Guarantee:
A Section 8 company with guarantee is different in its structure and financial obligations:
- Ownership: It does not have shareholders. Instead, it has members who guarantee to pay a certain amount if the company faces financial trouble or winds up.
- Capital Contribution: There is no upfront contribution from members; their role is to offer a guarantee.
- Fundraising: Fundraising typically depends on donations, grants, or loans, as the company cannot issue shares.
For example, a Section 8 company focused on environmental conservation may rely entirely on grants and donations from its members and the public.
Key Differences Between the Two:
Ownership Structure:
- A Section 8 company with shares is owned by its shareholders.
- A Section 8 company with a guarantee is supported by members who do not hold shares but guarantee financial backing.
Fundraising Approach:
- Companies with shares raise funds through share issuance.
- Companies with guarantees rely on donations, grants, or loans.
Capital Requirement:
- Shareholders contribute capital upfront in companies with shares.
- Members of companies with guarantees provide only a promise of financial contribution if required.
Which One Should You Choose?
Your choice depends on your organization’s goals and funding strategy:
- If you intend to attract investors and raise funds through share issuance, opt for a Section 8 company with shares.
- If your organization relies on grants, donations, or external funding, a Section 8 company with a guarantee is the better option.
Choosing the right structure for your Section 8 company is key to achieving your non-profit’s goals, whether through shares or guarantees. At Startupportal Business Services, we simplify the online company registration in the Pune process and guide you in selecting the best option for your needs. With expert assistance in Section 8 company registration, we ensure compliance and a smooth setup. Consult us today to get started and make your non-profit vision a reality!