Section 8 (Companies Act, 2013) company will become Holding Entity and other entity will become its subsidiary.
Holding entity will do all the marketing, fundraising, financial, future planning for whole group.
This process involves member restructuring, change in authorise signatories with banks and government authorities.
Now the main issues related to restructuring of these entities are:
Administrative cost payment, Staff payment in different parts of the country,
Consolidation of accounts, Remittance under one combined group,
Registration under FCRA, Registration under 80G, Registration under 12A ,
Remuneration to Director, Location based issue.
1. Remuneration of Director/Member/Trustee:
| Basic\ Entity | Section 8 | Trust | Society |
| Present Law | As per section 197 of Companies Act, 2013 and read with articles of the company, any Director, not being a member, may be paid remuneration as board may determine with the provision of Companies Act, 2013. | Under the Indian Trusts Act, a trustee has no right to remuneration unless a provision for such remuneration has been laid down in the deed of the trust. Thus, if the founder of a private trust wishes to earn money through a trust as its trustee | As per Section 14 of the Societies Registration Act, that member is not entitled to receive profit; |
| Present Scenario | Since the existing director and member are same so they can not withdraw remuneration | If trust deed has, provision related to remuneration to trustee they so do so. | Not entitled |
| Future or proposed scenario | New director who is not member can withdraw remuneration | Need to check the trust deed | Not entitled |
2. Impact on FCRA (Foreign Contribution (Regulation) Act, 2010) Compliances:
| FAQs\ Entity | Section 8 | Trust | Society |
| Change in name of Organisation. | Approval from CG required | Approval from CG required | Approval from CG required |
| Change in name of Authorise
signatory |
Approval from CG required | Approval from CG required | Approval from CG required |
| Transfer of foreign contribution to register or unregistered persons. | Need to take prior approval from CG in Form FC-10 | Need to take prior approval from CG in Form FC-10 | Need to take prior approval from CG in Form FC-10 |
| Yearly reporting of foreign contribution and Utilisation of bank accounts | FC-6 yearly return along with CA certificate | FC-6 yearly return along with CA certificate | FC-6 yearly return along with CA certificate |
| Shift of account from one bank to other | Prior approval from CG | Prior approval from CG | Prior approval from CG |
| Combination of donors of different entities into Holding entity | Not permissible | Not permissible | Not permissible |
Author Bio
Dear Sir,
Can you please clarify if a Section 8 company in which Directors are eligible for a remuneration as per the MOA, can apply for tax exemptions under sections 11, 12, 12A and 80G? Thank you.