A Section 8 Company is a not-for-profit organization which basically, needs to adhere to the following three conditions:
1. The Company has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
2. intends to apply its profits, if any, or other income in promoting its objects; and
3. intends to prohibit the payment of any dividend to its members,
Now, since these Companies are for the benefit of the society as a whole, certain exemptions are being given to them via an exemption notification issued by the Ministry of Corporate Affairs dated 05th Day of June, 2015 on the compliance perspective under the Companies Act, 2013. Accordingly, in this article, we shall study about the exemptions available to the Section 8 Company with regard to Board Meetings, General Meetings and minutisation the business/agendas of these meetings.
1. BOARD MEETINGS
- Number of Meetings (Sec 173):
In view of exemption read with section 173(1), it is sufficient that the section 8 companies shall have at least one meeting within every six calendar months. Other than this, the entire Section 173 of the Companies Act, 2013 is not applicable.
- Quorum for Board Meetings (Sec 174):
As per section 174(1) read with exemption notification, the quorum for board meetings of a section 8 company is either eight directors or 25% of its total strength, whichever is lower.
However, the quorum shall not be less than two members.
To illustrate, if a Section 8 Company has 10 Directors on board, then it shall have at least 3 (nearest whole number) Directors on Board to complete the quorum and convene the meeting thereof.
- Passing of certain resolutions by circulation instead of holding a board meeting (Sec 179):
The Section 179(3) of the Companies Act, 2013 provides for certain powers that must be exercised by the Board at a meeting only. However, out of all the powers mentioned in the Section, the following may be exercised by the Board of a Section 8 Company by circulation only:
1. To borrow monies;
2. To invest the funds of the Company; and
3. To grant loans or give guarantee or provide security in respect of loans.
2. GENERAL MEETING
- Time, Date and Place of Annual General Meeting (Sec 96):
In pursuance of the second proviso to section 96(2), the time, date and place of each annual general meeting is required to be decided upon beforehand by the board of directors having regard to the directions given by the Company in its earlier held general meeting.
- Timeline of AGM Notice (Sec 101):
A Section 8 Company can hold a general meeting i.e., whether the annual or extra ordinary, with minimum 14 days’ notice as against 21 days’ notice otherwise applicable under section 101 (1) of Companies Act.
- Timeline for sending copies of financial statements (Sec 136):
In view of the exemption notification provided under Section 101, the relaxation for sending copy of audited financial statements and every other document required to be annexed to the financial statements required to be laid in its general meeting, has been given to 14 days instead of 21 days for every other Company.
3. MINUTES PROCEEDINGS OF BOARD AND GENERAL MEETINGS (Sec 118)
As per the exemption notification G.S.R. 466(E) dated 5th June, 2015, Section 118 does not apply as a whole over the Section-8 Companies except that the minutes may be recorded within 30 days of the conclusion of the meeting in case of companies where the articles of association provide for confirmation of minutes by circulation.
However, in case the articles of association do not provide for recording of minutes, the Section 8 Company is not required to draft or circulate minutes of any of the meetings.
It is strange an exception given to a section 8 company since the preparing and recording of detailed minutes with fair and correct summary of the meetings held is essential for all classes of companies.
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{The author i.e., Mrs. Kajal Goyal is a Company Secretary in Practice at M/s. Kajal Goyal and Associates and can be reached at (M) +91-9999952595 and (E) cskajalgoyal@gmail.com}
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Madam,
Can u please clarify whether the Exemption for sec 8 company in sec 174(1) is subject to the condition that it has not committed a default in filing its financial statements u/s 137 or annual return u/s 92 with the registrar.