India’s rich experience in philanthropy which received more publicity over last few years and many wealthy individuals are coming forward to donate for country’s poor. Non Governmental organizations (NGO) are also playing great role in this process. Tata Trusts, a CSR wing of Tata Group, is directly involving in charitable activities in pursuance to its policy outlined by Mr. Ratan Tata years back. Tata Trusts, is holding two third of tata sons shares, will constitute various charitable programme in various new geographies jointly with government and corporates as part of its philanthropy.
There are mainly 3 types of NGOs in India involved in charitable activities, the details of which are given below:
Companies incorporated not for profit under Sec 8 of the Companies Act, 2013 either as public company or private company, are considered as best form of organizational framework. The statutory reports and audited financials are available online on public inspection. One Person Company (OPC) cannot be incorporated as a Section 8 Company as per the provisions of the Act. The main purpose of section 8 company is mainly for the social welfare of the society. Infosys Foundation, Reliance Foundation, TATA Foundation, Reliance Research Institute are some of the examples of Sec 8 companies registered under the Act. In this article, an attempt has been made to enumerate on various exemption and major provisions applicable to such Companies.
ABOUT SEC 8 COMPANY
As per Sec 8 (1) of the Companies Act, 2013, where it is proved to the satisfaction of the Central Government* that a person or an association of persons proposed to be registered under this Act as a limited company:
the Central Government* may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar of Companies (RoC) shall, on application, in the prescribed form, register such person or association of persons as a company under this section.
* The powers have been delegated to Registrar of Companies vide notification dated May 21, 2014
FEATURES OF SECTION 8 COMPANIES
Section 8 Company enjoys all the privileges and subject to all the obligations of limited companies. However such companies have following exemptions as detailed below:
INCORPORATION OF SECTION 8 COMPANY:
|1. Apply for name using Reserve Unique Service (“RUN”) using the link www.mca.gov.in
|2. File e-Form INC-12 with the following attachments:
· Draft Memorandum of Association as per Form No. INC-13
· Draft Articles of Association of the Company
· Declaration as per Form No. INC-14 b by professional
· Declaration as per Form No. INC-15 by the applicant
· Estimated income and expenditure for next three years
· Proposed business plan and activities to be undertaken
· Note that the Form INC-12 has to be approved and then only we can proceed with filing of SPICe Forms.
|3. File SPICe (INC-32) along with the following attachments:
· Memorandum of Association.
· Articles of Association.
· Declaration (INC-9) from all subscribers and first Directors.
· Consent to act as Director.
· Proof of identity of all subscriber and first Directors.
· Copy of self attested PAN card.
· Proof of residence of all subscriber and first Directors not older than two months.
|4. RoC issues Certificate of Incorporation along with PAN and TAN.
|5. File INC 22 (for notice of situation of registered office) along with lease deed/ rent agreement along with utility bills and building tax receipt.
REVOCATION OF THE LICENSE
As per the Sec 8(6) of the Act, the Central Government ie RoC may by order revoke the license of the company if the company contravenes
On occurring of such event as given above, the Central Government ie., RoC can direct the company to convert its status to private or public company and change its name by adding the suffix ‘Limited’ or ‘Private Limited’ and there upon the RoC shall register the company accordingly.
The Central Government ie., RoC may, if it is satisfied that it is essential in the public interest, direct such company to be wound up or amalgamated with another company that is registered under this section. But such orders can only be given after the company has been given a reasonable chance to be heard and then a copy of the order shall be filed with RoC.
As per Sec 8 (8) where a licence is revoked under sub-section (6) and where the Central Government is satisfied that it is essential in the public interest that the company registered under this section should be amalgamated with another company registered under this section and having similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order, provide for such amalgamation to form a single company with such constitution, properties, powers, rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order.
In case a company makes any default in complying with any of the requirements laid down in this Section 8 of the Act, the company shall be punishable –
SEC 8 COMPANY VS CORPORATE SOCIAL RESPONSIBILITY
Sec 135 of the Act mandates that every class of companies shall constitute Corporate Social Responsibility (CSR) Committee and spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its CSR Policy read with Sch VII.
It is pertinent to note that Board of Directors of the Company may decide to undertake its CSR acitivies through company established under Section 8 of the Act or registered trust or a registered society established by the Company either singly or jointly with other companies provided that such company/ trust/ society shall have established track record of 3 years in undertaking similar programmes.
Big corporates are moving towards adherence of the social responsibility and the Corporate form of non profit organization is considered as best for philanthropy including CSR.