Which Companies Act Provisions Do Not Apply to a Section 8 Company? – Exemptions and Their Limits
Brief: A Section 8 company remains subject to the Companies Act, 2013 unless a specific provision is removed or modified. The principal relief is in MCA Notification G.S.R. 466(E) dated 5 June 2015, as amended by G.S.R. 584(E) dated 13 June 2017. It covers matters such as Board composition, meeting notices, minutes, director appointments, Board meetings and certain interest disclosures. The relaxations are conditional: the company must not have defaulted in filing its financial statements under Section 137 or annual return under Section 92. This article separates provisions that do not apply from those that apply in modified form, and explains why annual filings, audit and other unlisted obligations must still be checked.
- Short Answer
- Applicable Legal Provisions
- Relevant Extracts
- Legal Position
- Three categories must be kept separate
- Filing default affects the notified relief
- Private-company exemptions require a separate check
- Secretarial Standards and meeting records
- Exemptions and Relaxations
- Practical Interpretation
- Example
- Conclusion
- FAQs
- Q1. Can a Section 8 company hold only one Board meeting in a year?
- Q2. Does a filing default take away only the relaxation connected with that filing?
Short Answer
There is no blanket exemption for Section 8 companies. Under Section 462 of the Companies Act, 2013, the MCA issued G.S.R. 466(E) dated 5 June 2015, subsequently amended by G.S.R. 584(E) dated 13 June 2017. These notifications remove certain requirements and modify others. The exceptions and modifications apply only where the company has not defaulted in filing its financial statements under Section 137 or its annual return under Section 92. An exemption should therefore be claimed provision by provision, after checking the company’s filing status and Articles of Association.
Applicable Legal Provisions
- Section 8(2): A company registered under Section 8 enjoys the privileges and is subject to the obligations of limited companies.
- Section 462: Enables the Central Government to grant specified exceptions, modifications and adaptations by notification.
- G.S.R. 466(E), as amended by G.S.R. 584(E): Specifies the Section 8 company relaxations and the condition concerning filings under Sections 137 and 92.
- Section 2(85), proviso: A company registered under Section 8 is excluded from the definition of a “small company”.
- Section 8(4)(i): Alteration of the memorandum or Articles of a Section 8 company requires the previous approval of the Central Government or the authority exercising that power.
Relevant Extracts
- Section 8(2): A company registered under Section 8 enjoys the privileges and is subject to the obligations of limited companies.
- Paragraph 2A of G.S.R. 466(E), inserted in 2017: The notified exceptions, modifications and adaptations apply to a Section 8 company which has not committed a default in filing its financial statements under Section 137 or annual return under Section 92 with the Registrar.
Legal Position
Three categories must be kept separate
A provision may not apply, may apply in modified form, or may remain unaffected. For example, Section 178 does not apply, whereas Section 177(2) is modified only to remove the requirement that independent directors form a majority of the audit committee. The modification does not, by itself, abolish the audit committee.
Filing default affects the notified relief
The condition inserted in 2017 refers to the company’s default in filing either its financial statements under Section 137 or its annual return under Section 92. It is not limited to a relaxation concerning the particular filing. Before relying on a notified exemption, the company should check whether any filing default exists and document that check. The effect of subsequently curing a default on an action already taken while in default should be assessed separately; filing later should not simply be assumed to validate that action retrospectively.
Private-company exemptions require a separate check
A Section 8 company incorporated as a private company may also consider a relaxation framed for private companies. Its availability must be tested against the wording and conditions of that specific notification. It should not be assumed merely because the company is registered under Section 8, nor should every private-company relaxation be treated as excluded without that examination.
Secretarial Standards and meeting records
The notification disapplies Section 118 for Section 8 companies, subject to its stated exception concerning minutes where the Articles provide for confirmation by circulation. Since the statutory obligation to observe Secretarial Standards is contained in Section 118(10), their mandatory application in light of this exemption should be considered on the notification’s wording. Regardless of that question, the company should maintain reliable notices, attendance records, resolutions and minutes. Other applicable requirements for meetings, including Section 102 where relevant, must still be observed.
Exemptions and Relaxations
| Provision | Position for a Section 8 company | Category |
|---|---|---|
| Section 2(24) – definition of company secretary | The notified exemption disapplies this definition. It should not be paraphrased as an unconditional exemption from every provision concerning a company secretary; any separate appointment requirement must be examined on its own terms. | Disapplied definition |
| Sections 2(68) and 2(71) – minimum paid-up share capital | The notification removes the then-stated minimum paid-up share capital requirement. Subsequent changes to the Act’s general definitions must also be taken into account. | Modified |
| Section 149(1)(b) and its first proviso | The maximum of 15 directors and the requirement concerning a woman director under that proviso do not apply. The minimum of two directors for a private company or three for a public company remains. | Partly disapplied |
| Specified provisions of Section 149 concerning independent directors; Section 150 | The independent-director provisions identified in the notification and Section 150 do not apply. | Disapplied as specified |
| Proviso to Section 152(5) | The identified proviso does not apply. | Disapplied |
| Section 165(1) – directorship limit | The subsection does not apply. | Disapplied |
| Section 178 – nomination and remuneration committee and stakeholders relationship committee | Section 178 does not apply. | Disapplied |
| Sections 101(1) and 136(1) – notice periods | “Twenty-one days” is replaced by “fourteen days” in the specified subsections. Other requirements of those sections remain subject to their own terms. | Modified |
| Section 96(2) – annual general meeting | An additional proviso requires the Board to decide the time, date and place of each AGM beforehand, having regard to any directions given by the company in general meeting. The notification does not expressly grant an unrestricted right to hold an AGM on a holiday, after business hours or at any place. | Modified |
| Section 118 – minutes | The section does not apply as a whole, subject to the notification’s exception concerning recording minutes within 30 days where the Articles provide for confirmation of minutes by circulation. | Disapplied with exception |
| Section 160 – candidature for directorship | Does not apply where the Articles provide for election of directors by ballot. | Conditional exemption |
| Section 173(1) – Board meetings | The Board must hold at least one meeting within every six calendar months. | Modified |
| Section 174(1) – Board quorum | The quorum is the lesser of eight members or 25% of the Board’s total strength, but must not be fewer than two members. Apply the statutory rounding rule where a fraction arises. | Modified |
| Section 177(2) – audit committee composition | The words requiring independent directors to form a majority are omitted. Any otherwise applicable requirement to constitute an audit committee must be examined separately. | Modified |
| Section 179(3)(d), (e) and (f) | The specified matters concerning borrowing, investment and loans or guarantees may be decided by the Board through a resolution by circulation instead of at a meeting. | Modified |
| Sections 184(2) and 189 – interested contracts and register | The notified modification applies where the transaction referred to in Section 188, assessed on the contract or arrangement’s terms and conditions, exceeds ₹1 lakh. This does not remove other applicable related-party requirements. | Modified |
| Section 186(7) – minimum interest on loans | The specified exception applies where the Central or State Government, alone or together, holds at least 26% of paid-up share capital and the company provides loans to fund industrial research and development projects in furtherance of its memorandum objects. | Narrow exception |
| Audit, financial statements and annual return | No general exemption from audit, preparation and filing of financial statements, or filing the annual return is granted by these notifications. | Not generally exempted |
Practical Interpretation
- Check the company’s filings under Sections 137 and 92 before using a notified relaxation, and retain evidence of the filing-status check.
- Where relief depends on an Articles provision, such as election of directors by ballot, verify the actual wording of the Articles. An alteration to a Section 8 company’s Articles requires the previous approval contemplated by Section 8(4)(i).
- Maintain at least two directors if incorporated as a private company and three if incorporated as a public company. The 2017 amendment narrowed the Section 149(1) exemption; it did not remove the statutory minimum.
- When issuing a meeting notice on the modified 14-day basis, record the notification relied upon and the company’s filing status.
- Assess a filing default and any resulting non-compliance under the relevant underlying provision. Section 8(11) concerns defaults under Section 8 itself; it should not automatically be cited as the penalty for every breach of another provision.
Example
Gyan Jyoti Foundation is a public Section 8 company with three directors. It calls an extraordinary general meeting using the notification’s 14-day notice relaxation while its financial statements for an earlier year remain unfiled beyond the applicable due date. Because the notification’s filing condition is not met, the company cannot safely rely on that relaxation. It should examine whether a valid shorter-notice consent has been obtained under Section 101; otherwise, the meeting and its resolutions may be open to challenge.
Conclusion
Section 8 status does not displace the Companies Act as a whole. A company should maintain a provision-wise register identifying the exact entry in G.S.R. 466(E), the effect of the 2017 amendment, any required Articles clause and its filing status when the relief is used. Requirements outside the notified relief should be evaluated under the ordinary provisions of the Act.
FAQs
Q1. Can a Section 8 company hold only one Board meeting in a year?
It must hold at least one Board meeting within every six calendar months. The dates of meetings must satisfy that interval; merely holding two meetings in a financial year is not conclusive.
Q2. Does a filing default take away only the relaxation connected with that filing?
No. Paragraph 2A conditions the notified exceptions and modifications on the company not having defaulted in filing its financial statements or annual return. The company should cure the default and assess any action taken during the period of default separately.
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Author: CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES, Company Secretary in Practice, Delhi. Contact: [email protected].
Disclaimer: This article reflects the author’s understanding of the applicable provisions at the time of writing. Readers should check the current law, the company’s Articles and its particular facts before acting. It does not constitute professional advice.
