Section 8 Company or Non-profit Company

NOTE ON SECTION 8 COMPANY

A section 8 Company or we can also called a Non-profit Company can be incorporated under the Companies Act, 2013 having the status of limited company without the addition to its name of the word “Limited” or “Private Limited” for Promoting Commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and the Company shall use its profits or other income in promoting its objects only and prohibit the payment of any dividend to its members as well.

Section 8 company shall enjoy all the privileges and be subject to all the obligations of limited companies. A firm may also be a member of section 8 company.

INCORPORATION OF A COMPANY UNDER SECTION 8 OF THE COMPANIES ACT, 2013

 (Power of Central Government Delegated to ROC vide notification dated 21^st May, 2014)

1.      Acquire DSC of the Directors and Subscribers.

2.      Apply for the DIN in e-form DIR-3, if don’t have DIN.

3.      File e-form INC-1 for reservation of Name

4.      After approval of Name, for acquiring license an application shall be made in Form INC-12 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the Registrar within 60 days of filing form INC-1 with following documents:

(a)    The Memorandum of Association (MOA) of the company as per Form INC-13.

(b)   Articles of Association (AOA)

(c)    the declaration in Form INC-14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of Section 8 and rules made there under and that all the requirements of the Act and the rules made there under relating to registration of the company under Section 8 and matters incidental or supplemental thereto have been complied with.

(d)   An estimate of the future Annual income and expenditure of the company for next 3 years specifying the sources of the income and the objects of the expenditure.

(e)    The declaration by each of the persons making the application in Form INC-15.

(f)    List of names, descriptions, addresses & occupation of the promoters as well as Board Members of the proposed company.

(g)   A statement showing details of assets and liabilities of the company as on date with the application.

(h)   A statement giving brief description of work, if any, already done by the association.

(i)     A statement specifying briefly the grounds on which the application is made.

(j)     A letter of authority/Power of Attorney.

5.      The ROC shall issue license in Form INC-16 and the Registrar shall also have power to include in the license such other conditions as may be deemed necessary by him.

6.      After issuing license, file Form SPICe (INC-32) with the following attachments:

(a)    The Memorandum of Association (MOA) of the company as per Form INC-13.

(b)   Articles of Association (AOA)

(c)    Affidavit by Directors and Subscribers in INC-9

(d)   Consent in DIR-2 for becoming directors in the Company

(e)    Deposit undertaking

(f)    PAN card of All the Directors and Subscribers

(g)   Aadhar Card for address Proof of all the Directors and Subscribers

(h)   Electricity bill for registered office address not older than 2 months

(i)     NOC from the owner of registered office address.

(j)     License copy

(k)   letter of authority/Power of Attorney

(l)     If the proposed name is based on a registered trademark or is subject matter of an application pending for registration under the Trade Marks Act, then it is mandatory to attach Approval of the owner of the trademark or the applicant of such trademark for registration of Trademark.

(m) If the promoters are carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied for then it is mandatory to attach NOC from the sole proprietor/ partners/other associates/ existing company.

(n)   If any subscriber to the proposed company is foreign company and/or company incorporated outside India, then it is mandatory to attach Copy of certificate of incorporation of the foreign body corporate and resolution passed.

(o)   Copy of certificate of incorporation in case the subscriber to the proposed company is Body Corporate.

(p)   If any subscriber to the proposed company is a Company itself, then it is mandatory to attach Resolution passed by Promoter Company.

(q)   In case the name is similar to any existing company, then it is mandatory to attach a certified true copy of No objection certificate by way of board resolution / resolution.

(r)     In case any of the directors has any interest in the proposed company, then it is mandatory to attach Interest of first director(s) in other entities.

(s)    If SRN of INC-1 is mentioned in the form and any of the person mentioned in INC-1 as promoter is not subscribing to MOA, then attach NOC in case there is change in the promoters (first subscribers to Memorandum of Association).

7.      Upload the form 49A and 49B for the PAN and TAN within 2 days of filing form SPICe (INC-32).

8.      In few days, the ROC shall issue the Certificate of Incorporation.

Note:

1.      In the case of foreign subscriber the above documents need to be consularised before the Indian Embassy in the respective Country. In case of wholly owned subsidiary, a copy of the Board resolution of Holding Company approving the investment in the proposed Indian Company and authorizing a person to sign the incorporation papers on behalf of the company, duly attested by the officer of the Indian Embassy in the foreign country where the registered office is situate is also required to be attached with the papers.

2.      In case of Section 8 company linked forms INC-33 (eMOA) and INC-34 (eAOA) shall not be filed.

3.      A company shall not alter the provisions of its Memorandum or Articles except with the previous approval of the Regional Directors. (Power of Central Government Delegated to Regional Directors vide notification dated 21^st May, 2014)

CONVERSION OF EXISTING COMPANY INTO THE SECTION 8 COMPANY

A company registered under Companies Act, 2013 or under any previous company law can be converted into the section 8 Company with any of the charitable objects specified above and the restrictions & prohibitions as mentioned above.

1.      Pass the Board resolution for conversion and decide the day, date, time and place for the General meeting.

2.      Take the approval of members by way of Special Resolution for approving conversion, alteration of MOA and AOA as per section 8.

3.      File the Special Resolution in Form MGT-14 with the Notice and explanatory statement.

4.      Make an application in Form INC-12 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the Registrar for a licence with the following documents:

(a)    The Memorandum of Association (MOA) of the company as per Form INC-13.

(b)   Articles of Association (AOA)

(c)    the declaration in Form INC-14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and that all the requirements of the Act and the rules made there under relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with.

(d)   An estimate of the future Annual income and expenditure of the company for next 3 years specifying the sources of the income and the objects of the expenditure.

(e)    The declaration by each of the persons making the application in Form INC-15.

(f)    A statement giving brief description of work, if any, already done by the association.

(g)   A statement specifying briefly the grounds on which the application is made.

(h)   A letter of authority/Power of Attorney

(i)     Audited Financial Statements, Board Report, Annual Return and the Auditors Report of the two previous financial years immediately preceding the date of the application.

(j)     A statement showing in detail the assets (with the values thereof), and the liabilities of the company (The statement should not be older than 30 days from the date of application).

(k)   The certified copy of the Board resolution and Special resolution.

5.      The company shall, within a week from the date of making the application to the Registrar, publish a notice in Form INC-26 at his own expense -

(a)    at least once in a vernacular/local newspaper in the principal vernacular/local language of the district in which the registered office of the company is to be situated or is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district; and

(b)   On the websites as may be notified by the Central Government

6.      A copy of the notice, as published, shall be sent to the Registrar.

7.      The Registrar shall, after considering the objections, if any, received by it within 30 days from the date of publication of notice, and after consulting any authority, regulatory body, Department or Ministry of the Central Government or the State Government(s), as it may, in its discretion, decide whether the license should or should not be granted.

8.      The licence shall be in Form INC-17 and the Registrar shall also have power to include in the licence such other conditions as may be deemed necessary by him.

9.      The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such conditions of the license as may be specified by the Registrar in this behalf.

CONVERSION OF SECTION 8 COMPANY INTO ANY OHER KIND

An existing company registered under section 8 seeks to convert itself into a company of any other kind shall make an application to the Regional Director for conversion of its status. Once the approval is given by the Regional Director, the company shall cease to enjoy all the privileges/ concessions obtained by it on account of being a Section 8 company.

1.      Pass the Board resolution for conversion.

2.      Take the approval of Members by way of passing Special resolution at a general meeting for approving such conversion.

3.      The explanatory statement annexed to the notice convening the general meeting shall set out in detail the reasons for opting for such conversion including the following, namely:-

(a)    the date of incorporation of the company;

(b)   the principal objects 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 on in the current structure i.e. 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 or gratuitously 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 etc.

(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.

4.      A certified true copy of the special resolution along with a copy of the Notice convening the meeting including the explanatory statement shall be filed with the Registrar in Form MGT-14 along with the fee.

5.      The company shall file an application in Form INC-18 with the Regional Director  (Power of Central Government Delegated to RD vide notification dated 21^st May, 2014) along with the fee with followings attachments:

(a)    Memorandum of association

(b)   Articles of association

(c)    Certified true copy of board resolution authorizing conversion

(d)   Certified true copy of the special resolution passed for approval for conversion into any other kind and notice convening the general meeting along with the relevant explanatory statement annexed thereto

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

(f)    The company should have filed all its financial statements and Annual Returns up to the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application to the Regional Director and in the event the application is made after the expiry of three months from the date of preceding financial year to which the financial statement has been filed, a statement of the financial position duly certified by chartered accountant made up to a date not preceding 30 days of filing the application.

(g)   Copy of valuation report by a registered Valuer about the market value of assets

(h)   Audited financial statements, the Board’s reports, annual returns and the audit reports for each of the two financial years immediately preceding the date of the application or, where the company has functioned only for one financial year, for such year

(i)     Proof of serving notice to the Govt Authorities i.e. the 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, any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating.

(j)     Board of directors shall give a declaration to the effect that no portion of the income or property of the company has been or shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise to persons who are or have been members of the company or to any one or more of them or to any persons claiming through any one or more of them.

(k)   NOC from all the creditors if any

(l)     Statement of financial position if applicable

(m) Full details of fixed assets alienated if any, during the preceding three financial years.

(n)   Written consent of the lenders is mandatory if any loan is outstanding.

(o)   Where the company has obtained any special status, privilege, exemption, benefit or grant(s) from any authority such as Income Tax Department, Charity Commissioner or any organisation or Department of Central Government, State Government, Municipal Body or any recognized authority, a "No Objection Certificate" must be obtained, if required under the terms of the said special status, privilege, exemption, benefit or grant(s) from the concerned authority.

(p)   Proof of payment of differential amount if the company has acquired any immovable property through lease or otherwise from any Government or authority or body corporate or person since incorporation at concessional rate or free of cost.

(q)   Details of donation/grant/benefit received since incorporation of company is mandatory if company has received any donation and/or grant/benefits from any person or authority since incorporation.

(r)     Copy of NOC received from sectoral regulatory authority if company is being regulated by any sectoral regulator.

(s)    Any other information can be provided as an optional attachment(s).

6.      A copy of the application with annexure as filed with the Regional Director shall also be filed with the Registrar.

7.      The company shall, within a week from the date of submitting the application to the Regional Director, publish a notice at its own expense, and a copy of the notice, as published, shall be sent forthwith to the Regional Director and the said notice shall be in Form INC-19 and shall be published-

(a)    at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district; and

(b)   on the website of the company, if any, and as may be notified or directed by the Central Government

8.      The company shall send a copy of the notice, simultaneously with its publication, together with a copy of the application and all attachments by registered post or hand delivery, to the 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, any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating and if any of these authorities wish to make any representation to Regional Director, it shall do so within 60 days of the receipt of the notice, after giving an opportunity to the Company.

9.      The Regional Director may require the applicant to furnish the approval or concurrence of any particular authority for grant of his approval for the conversion and he may also obtain the report from the Registrar.

10.  On receipt of the application, and on being satisfied , the Regional Director shall issue an order approving the conversion of the company into a company of any other kind subject to such terms and conditions as may be imposed in the facts and circumstances of each case including the following conditions, namely;-

(a)    the company shall give up and shall not claim, with effect from the date its conversion takes effect, any special status, exemptions or privileges that it enjoyed by virtue of having been registered under the provisions of section 8;

(b)   if the company had acquired any immovable property free of cost or at a concessional cost from any government or authority, it may be required to pay the difference between the cost at which it acquired such property and the market price of such property at the time of conversion either to the government or to the authority that provided the immovable property;

(c)    any accumulated profit or unutilised income of the company brought forward from previous years shall be first utilized to settle all outstanding statutory dues, amounts due to lenders claims of creditors, suppliers, service providers and others including employees and lastly any loans advanced by the promoters or members or any other amounts due to them and the balance, if any, shall be transferred to the Investor Education and Protection Fund within 30 days of receiving the approval for conversion;

11.  Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director.

12.  On receipt of the approval of the Regional Director,

(a)    the company shall convene a general meeting of its members to pass a Special resolution for amending its Memorandum of association and Articles of association as required under the Act consequent to the conversion of the section 8 company into a company of any other kind;

(b)   File the Special resolution with the notice and explanatory statement in the form MGT-14 to the ROC along with the fee.

13.  the Company shall thereafter file with the Registrar.-

(i)     a certified copy of the approval of the Regional Director within 30 days from the date of receipt of the order in Form INC-20 along with the fee;

(ii)   Amended memorandum of association and articles of association of the company.

(iii)  A declaration by the directors that the conditions, if any imposed by the Regional Director have been fully complied with.

14.  On receipt of the documents referred above in the form INC-20, the Registrar shall register the documents and issue the fresh Certificate of Incorporation

REVOCATION OF LICENCE

The Central Government (Power of Central Government Delegated to RD vides notification dated 21^st May, 2014) may, by order, revoke the licence granted to a Company if the company:

1.      contravenes any of the requirements of section 8 of the Companies Act, 2013, or

2.      any of the conditions subject to which a licence is issued, or

3.      the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company or prejudicial to public interest, and without prejudice to any other action against the company under Companies Act, 2013,

and on such revocation or the company itself wants to surrender the license granted, an intimation of such revocation or surrender of license shall be filed with the Registrar by the company in e-Form INC-20. Registrar shall enter the word(s) “Limited” or “Private Limited” as the case may be at the end of the name of the company and the company shall cease to enjoy the exemptions/privileges granted to it under section 8 of the Act.

No such order shall be made unless the company is given a reasonable opportunity of being heard.

Where a licence is revoked the CG may, by order, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act. If on the winding up or dissolution of a company registered under section 8, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under section 8 and having similar objects, subject to such conditions as the tribunal may impose, or may be sold and proceeds thereof credited to the Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.

Where a licence is revoked the CG may, by order, if it is satisfied that it is essential in the public interest, direct that the company be amalgamated with another company registered under section 8 and having similar objects and CG 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.

No such order shall be made unless the company is given a reasonable opportunity of being heard.

PENALTY

1.      The company shall be liable for fine which shall not be less than 10 lakh but which may extend to 1 crore.

2.      Every Director and officer in default shall be liable for imprisonment for a term which may be extended to 3 years or with fine not less than 25000/- but which may extend to 25 lakh or with both.

3.      If it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447 of the Companies Act, 2013 (Punishable with an imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in the fraud but which may extend to 3 times the amount involved in the fraud).

 Contact Details:

VISHAL SHARMA

Company Secretary

Mob: 9716763754

Email: csvishalpbs@gmail.com

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Disclaimer: The Content is prepared on the basis of our general understanding and on the basis of relevant provision of Companies Act, 2013 read with rules made there under. The whole content is only for the knowledge sharing purpose, we do not take any responsibility for the correctness of the same.