Section 8 Companies (Section 25 of Companies Act 1956) , can be registered under Companies Act 2013 having a charitable purpose with limited liability but without the addition of the word ‘Limited’ or ‘Private Limited’ to its name.

In India, there are basically following three forms of Non Profit organisations(NGO) registered under various Acts-

  • Trusts formed under India Trust Act 1882,
  • Societies registered under Section 20 of Societies Registration Act 1860,
  • Section 8 Companies under Companies Act 2013.

 SECTION 8 COMPANIES

  • Any person or association of persons desirous of incorporating with limited liability having following features:-

a) has objects like promotion of commerce, arts, science , education, research, social welfare, religion, charity, protection of environment or any such other object.

b) apply its profit or other incomes in promoting its objects.

c) prohibition on the payment of dividends to its members.

may make an application to grant registration under Section 8 of the Act.

  • The Company under Section 8 shall have all privileges and liabilities as any other company registered under any other provisions of the Act.

ALTERATION OF MEMORANDUM & ARTICLES OF ASSOCIATION OF SECTION 8 COMPANY

Any alteration in any provision of Memorandum of Association or Articles of Association of Section 8 company can only be done with the prior approval of Central Government. 

PROCEDURE FOR INCORPORATING SECTION 8 COMPANY

1. An application shall be made to Registrar of Companies in Spice+(Simplified Proforma for Incorporating Company Electronically- INC-32) along with such fees as prescribed under rules.

2. The said application shall be accompanied by following documents-

  • The Memorandum and Articles of Association  of the proposed company in Form No.- INC -13. 
  • A declaration in Form No. INC-14 by an Advocate, Chartered Accountant , Cost Accountant, Company Secretary in Practice , that the memorandum and articles are in conformity with the  Act and Rules made there under and all the requirements under the Act & Rules have been properly complied regards to section 8.
  • An estimate of income and expenditure for next 3 years specifying source of income and objects of expenditure.
  • A declaration by all applicants in Form No. – INC- 15

ISSUANCE OF LICENSE-  The Central Government may by  licence allow the person or association of person to register as Section 8 company and thereupon, Registrar shall register the company , if  the application is complete in all form and impose such conditions as think fit,

CONVERSION OF SECTION 8 COMPANY INTO A COMPANY OF ANY OTHER KIND

1. Special resolution- A company registered under section 8 with intend to convert itself into a company of any other kind shall pass a special resolution at a general meeting for approving such Conversion

2. Explanatory Note- The explanatory statement annexed the notice convening the extraordinary general meeting shall set out the following reasons for such conversion

A) The date of incorporation of the company,

B) The principal object of the company as set out in the memorandum of association,

C) The reasons as to why the activities for achieving the objects of the company cannot be carried out  as Section 8 company,

D) The principal or main objects of the company are proposed to be altered , what would be the ultimate object and the reason for the alteration

E) The privileges or confessions currently enjoyed by the company such as tax Exemptions , approval for receiving donations or contributions , land and other immovable property if any acquired by the company at concessional rates,

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

3. Filing of Form No. MGT-14 with Registrar of Companies– A certified true copy of the special resolution along with a copy of notice and explanatory statement shall be filed with the registrar in form No.- MGT 14 with in 30 days of passing such resolution.

4. Filing of Form No. INC.18 with Regional Director– The company shall file an application in with the Regional Director in Form No. INC.18  along with such fees as may be prescribed.

The application shall be accompanied by :-

  • Certified true copy of the special resolution ,
  • Copy of notice convening the meeting including the explanatory statement ,
  • Proof of serving the notice to all the authorities.

5. Copy of application to Registrar of Companies- A copy of the application filed with the Regional director shall also be filed with the concerned Registrar of Companies.

REVOCATION OF LICENCE

1) The Central Government is empowered to pass an order for revocation of license granted to a company registered under this section if it contravenes any of the requirements of this section or any of the conditions subject to which a license is issued or the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company and prejudicial to public interest.

2) No such order can be passed unless the company is given a reasonable opportunity of being heard.

3) A copy of every such orders should be given to registrar of companies.

4) The Central Government is empowered to pass an order either to wound up the company under this act or amalgamated with another company registered under this section.

  • If the company is amalgamated, then Central Government may by order provide for such amalgamation to form a single company which such Constitution , properties, right ,interest , authorities and privileges along with liabilities , duties and obligations as may be specified in the order.
  • If the order of winding up of a company has been passed under this section, then after the satisfaction of its debts and liabilities, any asset may be transferred to another company registered under this act section and having similar objects subject to such conditions as the tribunal may impose or maybe sold and the proceeds thereof shall be credited to the Insolvency and Bankruptcy fund formed under section 224 of the Insolvency and Bankruptcy Code 2016.

CONSEQUENCES OF NON COMPLIANCE 

If the company makes any default in complying any of the provisions of this section then the :-

Company – shall be liable for the fine not less than 10,00,00 rupees extending up to 1,00,00,000 rupees .

Directors and every Officer in default – shall be punishable  with imprisonment for a term up to 3 years or with fine Not less than 25,000 rupees  but which may extend to 25,00,000 rupees or with both

If it is proved that the affairs of the company were conducted fraudulently then  every officer in default shall be liable for action against section 447.

CERTIFICATION AND REGISTRATIONS

1) 80G CERTIFICATE FROM INCOME TAX– 80 G certificate is issued to section 8 company by the income tax department. It gives the donor of section 8 company an exemption for his donation under  the income tax.

2) 12A REGISTRATION-  12A is a one time for registration which exempts the Section 8 company to pay income tax on the income earned by such company.

3) FCRA REGISTRATION- FCRA registration is required for those Section 8 companies which are desirous of receiving foreign contribution for the objects specified in the memorandum of association.

For any query or clarifications , drop email at shailja.tiwari16@gmail.com

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