Procedure for Conversion of Section 8 Company into A Private Limited Company

Conversion of Section 8 Company into A Private Limited Company (Rule 21, 22 and 23 of Companies (Incorporation) Rules, 2014

Introduction: Converting a Section 8 Company into a Private Limited Company involves a structured process governed by specific rules and regulations outlined in the Companies (Incorporation) Rules, 2014. This conversion allows companies to alter their operational framework and enjoy the benefits associated with private limited entities. Let’s explore the procedural intricacies of this conversion as per Rules 21, 22, and 23.

> Procedure:

1. Hold Board Meeting and pass BR to give approval of conversion and holding EGM

2. Hold Extra-ordinary general meeting and pass special resolution

a) Information to be set out in the explanatory statement annexed to the notice convening the general meeting are as follows:

a) Date of Incorporation of the company;

b) Principal objects of the company as set out in the memorandum of association;

c) Reasons as to why the activities for achieving the objects of the company cannot be carried on as a section 8 company;

d) If the principal or main objects of the company are proposed to be altered, what would be the altered objects and the reasons for the alteration

e) What are the privileges or concessions currently enjoyed by the company (such as tax exemptions, approvals for receiving donations or contributions including foreign contributions, land and other immovable properties, if any, that were acquired by the company at concessional rates or prices and, if so, the market prices prevalent at the time of acquisition and the price that was paid by the company, details of any donations or bequests received by the company with conditions attached to their utilization )

f) Details of impact of the proposed conversion on the members of the company including details of any benefits that may accrue to the members as a result of the conversion.

g) Detailed reason for conversion

3. File e-form MGT-14 with ROC

4. The company shall file an application in Form No.INC.18 with the Regional Director with fees

5. Documents to be attached with the form no. INC 18

a) Licence number issued to the Company under Section 8;

b) Memorandum of Association;

c) Articles of Association;

d) Copy of Board Resolution;

e) Copy of the special resolution passed and notice of convening the general meeting along with the relevant explanatory statement;

f) Certificate from CA/CS/ICWA (in practice) certifying that the conditions laid down in the Act and rules, have been complied with;

g) Statement of assets and liabilities of the company, as on the date not earlier than 30 days of that date duly certified by the auditor;

h) Copy of valuation report by a registered valuer about the market value of assets;

i) Audited financial statements,

j) Board’s report, annual returns and the Audit reports of each of the two financial years immediately preceding the date of the application;

k) Statement of financial position;

l) Full details of fixed assets alienated, if any, during the preceding three FYs;

m) Written consent of lenders, if any loan is outstanding;

n) No objection certificate from all the creditors

o) Details of donation/grant/benefit received since incorporation of the company;

p) Proof of serving of the notice served to all authorities mentioned in sub-rule (2) of rule (Chief Commissioner of Income Tax having jurisdiction over the company, Income Tax Officer who has jurisdiction over the company, the Charity Commissioner, the Chief Secretary of the State in which the registered office of the company is situated)

6. Filing of Form INC 19 (News-paper Advertisement in 1 English and 1 vernacular) within a week of making application to RD in INC 18 and a copy of the notice, as published, shall be sent forthwith to the Regional Director.

7. Hold EGM and pass special resolution for amendment of MOA and AOA for which no need to file MGT-14

8. File Form INC 20 within 30 days from the date of order of approval of RD

9. MCA will issue New certificate of incorporation

Conclusion: Converting a Section 8 Company into a Private Limited Company requires meticulous adherence to the procedural requirements stipulated by the Companies (Incorporation) Rules, 2014. From obtaining approvals through board meetings and general meetings to filing various forms with the Registrar of Companies (ROC) and Regional Director (RD), each step is crucial for ensuring a seamless transition. By following the prescribed procedure diligently, companies can successfully achieve the conversion and leverage the advantages offered by a private limited structure.