Between Compliance And Capital: The Fundraising Paradox Of Section 8 Companies
- IJLLR Journal
- Aug 17
- 1 min read
Ms. Sharayu Kadam, LL.B., New Law College in Mumbai.
ABSTRACT
Section 8 companies in India hold a peculiar place straddling the nonprofit and corporate worlds they are obliged to pursue social objects but can't distribute profits. This dual nature creates a paradox in their fundraising competing in the corporate form bestows on them credibility and regulatory identification; yet, cumbersome governance structures discourage potential donors and investors. The article studies the "fundraising paradox of Section 8 companies" when considering compliance-type requirements, restrictions on capital raising, and perceptions among stakeholders. Using a mixed- method methodology involving a review of statutory provisions, interviews with trustees and directors, and comparative insights from global nonprofit arenas, this study brings out how compliance-related constraints curb resource mobilization whereas in theory a corporate form is expected to enable it. The analysis brings forth three major tensions (1) regulatory credibility versus rigidity in administration, (2) donor's trust versus capital market inaccessibility, and (3) social mission versus financial sustainability.
By unpacking these dynamics, the paper contends that the Section 8 companies' opted fundraising capacity depends not only on legal reforms but also on innovative financial instruments, hybrid models, and a stronger institutional ecosystem. The findings add to the wider debate on non-profit governance to suggest ways of bridging compliance and capital for social sustainability.
Keywords: Non-profits, companies act, charitable, dividend, fundraising, financial regulatory, investment.
