Conversion of society into a section 8 company- Companies Act, 2013

Section 366 of the Companies Act, 2013 prescribed that the existing societies and any other association registered under different laws or any other legislation framed by various state governments or any community benefit society are having an option to convert themselves in a Section 8 Company under Companies Act, 2013.

SOCIETY TO PASS A SPECIAL RESOLUTION

A society can be formed under section 20 of the Societies act 1860 for charitable assistance, promotion of science, literature, fine arts, foundation or maintenance of libraries, upkeep of historical buildings, museum and galleries of paintings, works of art etc. So, a Society can be described as a group of persons united voluntarily for charitable activities like education, art, religion, music, culture, and sport etc. Only registered society with the registrar of societies or any other authority can be converted into a company

As per Section 366 of the Companies Act, 2013, there is a requirement for a special resolution. Three-fourth of the members of the society should vote in favour of the special resolution to convert the society into a section 8 company. The said resolution should pass with the entire legitimate test either in person or by proxy to be passed by the total members present and voting. Further, there should be seven or more members at the time of conversion, and prior consent from secured and unsecured creditors must have been obtained. The said resolution should be a special resolution for conversion may be as follows.

Resolved that all assets, liabilities and functions of xxxx xxxx Association be transferred to the new company licensed u/s 8 of the Companies Act 2013, incorporated on xxxxxxxx and the association would stand dissolved with effect from the date the said company takes over the association as per section 13 of the Societies Registration Act And That the new company shall from the date of dissolution of the said association discharge all the statutory or any other or any other obligations of the association or relating to its affairs or arising from there, whether prior or after its dissolution.

Resolved that all the Office Bearers, Executive Committee members and members of the dissolved association shall be the Office Bearers, Executive Committee members and Members of the new Company from the day of its takeover. Further In compliance and directions of the General House Resolution dated…….., those members who have failed to pay the annual membership for the last two years despite notices issued by the association, shall not be the members of the new company and their membership be and is hereby terminated. Resolved further that xxxxxxxxxx be and hereby authorized to take all necessary steps as may be required or necessary in this regard

SECTION 8 COMPANY

Section 8 companies are the companies which may be incorporated for charitable or not-for-profit purposes for charity, sports, promoting commerce, art, science, education, research, social welfare, religion, protection of environment or any such other object, with an intent of that the profits, if any, or other income will apply for promoting the objects of the company. No dividend is paid to its members. The said charitable section 8 companies can be incorporated without using the word “Limited” or “Private Limited” as the case may be & there is no requirement of minimum capital under the act. These companies are not for profit. So, A registered society can be converted into section 8 company only as a company limited by guarantee. For Conversion of Society into Section 8 Company, the provision of Chapter II of the Companies Act, 2013 relating to the incorporation of company and matters incidental to that shall be applicable mutatis mutandis for such registration.

All the promoter Directors of the Section 8 Company are required to obtain Digital Signature Certificate, and Director Identification Number after a special resolution is passed in the meeting of members of society for such conversion. An application in Form No. INC – 1 shall be moved to the ROC for the reservation of proposed name should be submitted. The name of the company should be the same as the existing society. In case the proposed name is not identical to any company name, then the same shall be approved.

FILING OF FORM URC 1 WITH ROC

A registered Society shall file a Form No. URC. 1 for proposed conversion to registration as a company limited by guarantee under section 8 and shall attach the following documents.

1. A list of members of the society showing the names, addresses and occupations.

2. A list of proposed directors of the proposed section 8 company.

3. A list comprising the names and addresses of the seven or more members of the governing body of the society with a  Declaration of two or more directors verifying the particulars of all members/ partners

4. A copy of the society registration certificate.

5. Written consent/ no objection certificate from all the secured creditors of the applicant. Mention the total outstanding amount with date & description.

6. Copy of resolution passed of not less than Three Forth members of the society and with the declaration of the amount of guarantee and consenting to registration with limited liability.

7. An undertaking about to comply with the requirements of the Indian Stamp Act, 1899.

8. The latest income tax return/ assessment order of the society

9. A defaulter society with the Registrar of Societies shall not be eligible to apply for registration under section 366 of the Companies Act.

10. Object clause of the company along with a declaration to comply with all the members about the prohibitions as mentioned in section 8 of the act.

11. A statement of the cases which are pending in any court or any other Authority with their current status.

12. An undertaking that all necessary documents shall be submitted to the registering authority in the event of registration as a Section 8 company by all the members.

13. The society shall publish a notice and a copy of the notice, as published, shall be sent forthwith to the registrar within a week from the date of making the application to the Registrar in Form No. INC.26  at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated or is situated, and circulating in that district, and at least once in the English language in an English newspaper circulating in that district; and

Notice is hereby given that in pursuance of, an application has been made to the Government of India for a license directing that a Company about to be formed under the name of “XYZ Association” which may be registered as a Company with limited liability without the addition of the word “Limited” or the words “Private Limited” to its name.

A. The principal objects of the company are as follows: –

To take- over / acquire the assets and liabilities of ‘XYZ Association, a body registered under the Societies Registration Act, 1860.

B. A copy of the draft Memorandum and Articles of Association of the proposed Company may be seen at the proposed Registered Office of the Company.

Notice is hereby given that any person, firm, company or corporation, objecting to this application may communicate such objections to the Regional Director within 30 (thirty) days from the date of publication of this notice, by a letter addressed to The Regional Director.

14. An advertisement seeking objections if any should carry a clear twenty-one days’ notice from the date of publication, failing shall be presumed of having no objection and the notice shall disclose the purpose and substance of matters in Form No. URC 2.

15. A publication with the notice served on Registrar of Societies along with proof of service.

16. Certified Statement of accounts by the Auditor prepared not later than fifteen days preceding and the copy of the Audited Financial Statements of the previous year.

17. Intimation of the intent of converting to section 8 company to the Commissioner of Income-tax (Exemption) in case Society is registered under section 12A of the Income Tax Act, 1961.

18. However The Registrar may require the applicant to furnish the approval or concurrence of any appropriate authority, regulatory body, department or Ministry of the Central Government or the State Government(s). The registrar shall, after considering the objections, if any, received by it within thirty days from the date of publication of the notice, decide whether the license should or should not be granted.

LICENSING OF SECTION 8 COMPANY

An application in Form No. INC – 12 for issuance of a license under Section 8 of the Companies Act, 2013 shall be made before the Regional Director, Ministry of Corporate Affairs after the approval of URC – 1, by the Registrar of Companies, The application shall be accompanied by the following documents namely:-

1. The memorandum and articles of association of the company;

2. The declaration as given in Form No.INC.14 by an Advocate, a Chartered accountant, Cost Accountant or Company Secretary in Practice, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

3. For each of the two financial years immediately preceding the date of the application, or when the company has functioned only for one financial year, for such year (i) the financial statements, (ii) the Board‘s reports, and (iii) the audit reports, relating to existing companies

4. a statement showing in detail the assets (with the values thereof), and the liabilities of the company, as on the date of the application or within thirty days preceding that date;

5. an estimate of the future annual income and expenditure of the company for the next three years, specifying the sources of the income and the objects of the expenditure;

The licence will be in Form No.INC.16/INC.17, as the case may be, and the registrar shall have the power to include other conditions as may be deemed felt necessary by him. Further, he may direct the company to insert some conditions in the memorandum or articles of the company.

INCORPORATION OF SECTION 8 COMPANY

After issuance of a license under section 8 of Companies Act, 2013, another application for the incorporation of a company shall be made and upon its approval. There is a requirement of filing of documents along with the Form Spice+

(a) The memorandum (Form No. INC13) and articles of association of the proposed company;

(b) The declaration in Form No.INC.14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

(c) A budget of the company for the next three years, specifying the receipts and the objects of the expenditure;

(d) Every person declaration in Form No. INC. 15.

(e) Consent to act as a Directors of the Company in Form DIR 2.

(f) An Affidavit by each Subscriber in Form INC 9. Further An affidavit from each of the persons proposed as the first directors, that he is not disqualified from being a director under section 164(1) and that all the documents filed with the registrar for the registration of the company contain information that is correct and complete and true to be best of his knowledge and belief;

(g) For the purpose of the address of Registered Office:

-Proof of address (lease deed/ Conveyance/ Rent Agreement/NOC), Copies of utility bills not older than two months

(h) The interest of First Directors in any other Entity.

After fulfilling the above requirements, a Certificate of Incorporation shall be issued by the Registrar of Companies in form INC-11. The registrar shall issue a Certificate of Conversion under Section 367 of the Companies Act, 2013. After obtaining a Certificate under Section 367 of the Companies Act, 2013, intimation to this effect shall be given, within fifteen days of such registration to the concerned Registrar of Societies under which the society has initially been registered, along with necessary papers for its dissolution as a society.