The basic difference between Private limited and Section 8 in terms of their basic definitions, minimum requirements of shareholders, directors and capital for each of these forms of entities are detailed below.
Let us understand how private limited and section 8 companies differ in their basic definition:
What is a Private Limited Company?
A private limited company is a small business entity which is privately held. This is a type of business entity which limits owner liability to their shares, limits the number of shareholders to 50, and also restricts the shareholders from trading of shares publicly. These are generally formed for trading and business purposes. These are profit making entities.
What is a Section 8 Company?
In India, a non – profit organization which are often known as NGO can be registered as a Company under Section 8 of the Companies Act, 2013 (worthwhile Section 25 of the Companies Act, 1956) and it can also be registered as a Trust and a Society. Section 8 Company format of an NGO is the most popular form of NGO in India. It is, however, easy to register, run or manage a Section 8 Company in comparison of a Trust and a Society. This, however, enables the government to register any association who have charitable objectives such as to promote sports, commerce, art and culture, education, research etc as a limited company, without adding of the words ‘pvt. Ltd.’
Minimum Shareholders and Directors Required
Companies Act 2013 has stipulated the minimum number of Directors and Shareholder for each of these types of companies. Required minimum number of Directors and Shareholders in Private limited and Section 8 Company are:
Private Limited Company – Minimum of 2 shareholders and 2 directors are required.
Section 8 Company- Minimum of 2 shareholders and 2 directors are required.
Minimum Capital Contribution
At the time of company registration, the capital contribution is made by each of the promoters. To ensure that a company has funds to carry on business activities basic minimum capital contribution amount is fixed by the government. Minimum capital contribution for Private limited and Section 8 Company are:
Private limited company: Minimum Authorized Share Capital shall be Rs. 1,00,000 (INR One Lac).
Section 8 company: No minimum requirement of capital has been specified
There is a huge difference between the Private limited and Section 8 Company. Every type of company is useful in its own aspects.
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