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Company Law and Practice · Legal Status and Types of Registered Companies

Specialised Company Types: Section 8, Producer and Nidhi Companies

Updated 11 October 2026 · Fact-checked

These are special company types with their own rules. A Section 8 company has charitable objects, applies profits to those objects, pays no dividend and works under a Central Government licence. Producer companies are for primary producers. Nidhi companies take deposits from members only. Answer by stating the type, its test, then its conditions.

Understand Specialised Company Types: Section 8, Producer and Nidhi

Most companies exist to earn profit for owners. The Companies Act, 2013 also allows special types for special purposes. You must know what makes each type different and which conditions apply.

A Section 8 company is formed for charitable and similar objects. Under Section 8(1), the objects must be the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. It must intend to apply profits or other income to promote those objects. It must also intend to prohibit payment of any dividend to members. If the Central Government is satisfied, it issues a licence. The company can then be registered without adding "Limited" or "Private Limited" to its name.

A Section 8 company still enjoys all the privileges and bears all the obligations of limited companies (Section 8(2)). A firm may be a member (Section 8(3)). It cannot alter its memorandum or articles without the previous approval of the Central Government (Section 8(4)(i)). It can amalgamate only with another Section 8 company having similar objects (Section 8(10)). The Central Government can revoke the licence if the conditions are broken, or if affairs are conducted fraudulently or against public interest (Section 8(6)). A hearing must be given first.

A producer company is a company of primary producers, such as farmers, registered under the Chapter on Producer Companies (Sections 378A onwards). Its name must end with "Producer Company Limited". Under Section 378J, an inter-State co-operative society can apply to the Registrar to become a Producer Company. The application needs a special resolution of not less than two-thirds of total members. The Registrar certifies registration within thirty days of receiving the application.

A Nidhi company is a mutual benefit company that borrows from and lends to its members only, to cultivate thrift and savings. A government company is one where the Central or State Government holds at least 51% of paid-up share capital (directly, by both, or through subsidiaries). A foreign company is a company incorporated outside India that has a place of business in India. Section 234 also allows mergers between Indian and foreign companies with prior Reserve Bank of India approval.

Key rules to remember

Three tests for a Section 8 company
Charitable objects + profits applied to objects + no dividend to members = Central Government licence
All three conditions in Section 8(1)(a) to (c) must be met.
Name of a Section 8 company
Licence allows omission of "Limited" or "Private Limited" from the name
Section 8(1). On revocation, the company must add the words back (Section 8(6)).
Alteration of MoA or AoA
Previous approval of Central Government required
Section 8(4)(i). Ordinary companies do not need this approval for every alteration.
Penalty for default under Section 8
Company: fine ₹10,00,000 to ₹1,00,00,000. Officer in default: fine ₹25,000 to ₹25,00,000
Section 8(11). Imprisonment was removed in 2020. Fraud makes the officer liable under Section 447.
Amalgamation of a Section 8 company
Only with another Section 8 company having similar objects
Section 8(10).
Inter-State co-operative to Producer Company
Special resolution of not less than two-thirds of total members; Registrar certifies within 30 days
Section 378J(2)(a) and (4). Name must include "Producer Company Limited" (Section 378J(3)).
Merger with a foreign company
Prior approval of the Reserve Bank of India; consideration in cash, Depository Receipts or both
Section 234(2). Applies to a merger either way, into an Indian company or vice versa.
Assets on winding up of a Section 8 company
Transfer to another Section 8 company with similar objects, or sell and credit proceeds to the Insolvency and Bankruptcy Fund
Section 8(9). Tribunal may impose conditions on the transfer.

How to solve Specialised Company Types: Section 8, Producer and Nidhi questions

Use this method for any question on specialised company types, whether it asks for features, a comparison or a case.

  1. 1Identify the type of company from the facts: charitable objects, farmers, members-only deposits, Government shareholding or foreign incorporation.
  2. 2State the defining test in one line. For Section 8, name the three conditions in Section 8(1).
  3. 3List the special rules that apply: licence, name, alteration, amalgamation, winding up, penalty.
  4. 4Apply each rule to the facts given. Say what the company can or cannot do.
  5. 5If the question asks for a difference, write two columns of points in sentences: objects, name, dividend, alteration, licence.
  6. 6Cite the section where you are sure of it, such as Section 8, 234 or 378J.
  7. 7Close with a clear conclusion that answers the exact question asked.

Quickest way: Three-line answer for Section 8 questions

When to use it: Use when time is short and the question asks about a charitable company or its licence.

  1. Line 1: Objects, application of profits and no dividend are the three conditions under Section 8(1).
  2. Line 2: The Central Government grants a licence, and the name need not carry Limited or Private Limited.
  3. Line 3: Alteration of MoA or AoA needs prior Central Government approval; breach can lead to revocation under Section 8(6) after a hearing and fines under Section 8(11).

Common mistakes in Specialised Company Types: Section 8, Producer and Nidhi

  • Saying a Section 8 company cannot earn a profit.

    Students link charity with no income.

    Fix: It may earn profit. It must apply that profit to its objects and cannot pay dividend to members.

  • Saying a Section 8 company is not subject to company law obligations.

    The name rule makes it look exempt.

    Fix: Section 8(2) says it enjoys all privileges and obligations of limited companies.

  • Thinking the licence is granted by the Registrar.

    The Registrar does the registration, so students confuse the roles.

    Fix: The Central Government issues the licence. The Registrar registers the company after that.

  • Writing that the Section 8 penalty includes imprisonment.

    Old notes still show the earlier punishment.

    Fix: Imprisonment was omitted with effect from 21-12-2020. Only fines remain, unless fraud brings Section 447 into play.

  • Mixing up the foreign company rules with a company incorporated in India.

    Both are described as companies with foreign links.

    Fix: A foreign company is incorporated outside India. For mergers, Section 234 needs prior RBI approval.

  • Forgetting the two-thirds rule for a co-operative becoming a Producer Company.

    Students remember only that a special resolution is required.

    Fix: Section 378J(2)(a) requires a special resolution of not less than two-thirds of total members.

Worked examples

Example 1

Shiksha Vikas Foundation wants to promote education in rural Bihar. It proposes to apply all income to education and pay no dividend. It asks if it can be registered as a company without the word "Limited". Advise.

Show the solution
  1. Provision: Section 8(1) allows registration without adding Limited or Private Limited if three conditions are met and the Central Government is satisfied.
  2. Facts: education is a listed object. Income will be applied to the object. No dividend will be paid.
  3. All three conditions in Section 8(1)(a) to (c) are met.
  4. The Central Government may then issue a licence on such conditions as it thinks fit, and the Registrar registers the company on application.

Answer: Yes. The Foundation can be registered under Section 8 without "Limited" or "Private Limited" in its name, once the Central Government grants a licence.

Example 2

A Section 8 company, Jal Seva Trust Limited, wants to alter its objects clause and later merge with Ashoka Traders Private Limited, an ordinary company. Examine.

Show the solution
  1. Alteration: Section 8(4)(i) says a Section 8 company cannot alter its memorandum or articles except with the previous approval of the Central Government.
  2. So it must get that approval before altering its objects clause.
  3. Merger: Section 8(10) says it shall amalgamate only with another Section 8 company having similar objects.
  4. Ashoka Traders Private Limited is an ordinary company, so the amalgamation is not permitted.
  5. Consequences: breach of Section 8 requirements can lead to revocation of the licence under Section 8(6) after a hearing, and fine under Section 8(11).

Answer: The alteration is valid only with prior Central Government approval. The merger with Ashoka Traders Private Limited is not permitted, because a Section 8 company can amalgamate only with another Section 8 company having similar objects.

Exam tips

  • Learn the three Section 8(1) conditions word by word. They are the most likely short-answer question.
  • For a difference between a Section 8 and an ordinary company, cover objects, dividend, name, licence, alteration and amalgamation.
  • Remember the penalty range in Section 8(11) and that imprisonment is no longer part of it.
  • Write Section 234 points for foreign company mergers: RBI approval and consideration in cash, Depository Receipts or both.
  • Define government and foreign company precisely, as definition questions are common in this chapter.

Practice questions from Legal Status and Types of Registered Companies

Specialised Company Types: Section 8, Producer and Nidhi in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Specialised Company Types: Section 8, Producer and Nidhi: frequently asked questions

Can a Section 8 company pay dividend to its members?

No. Section 8(1)(c) requires that the company intends to prohibit payment of any dividend to its members. Profits must be applied only to promote its objects.

Who issues the licence for a Section 8 company?

The Central Government issues the licence, in the manner prescribed and on conditions it deems fit. The Registrar then registers the company on application in the prescribed form.

Can a Section 8 company be wound up?

Yes. If the licence is revoked, the Central Government may direct winding up or amalgamation where it is essential in public interest, after giving a reasonable opportunity of being heard (Section 8(7)). Surplus assets go to another Section 8 company with similar objects or to the Insolvency and Bankruptcy Fund (Section 8(9)).

How can a co-operative society become a Producer Company?

An inter-State co-operative society applies to the Registrar under Section 378J with a special resolution of not less than two-thirds of total members. The Registrar certifies registration within thirty days of receipt of the application. The name must then include "Producer Company Limited".

Can an Indian company merge with a foreign company?

Yes. Section 234(2) allows a foreign company to merge into an Indian company or vice versa with prior approval of the Reserve Bank of India. Consideration may be in cash, Depository Receipts, or partly each.