Section 8 Companies - Non Profit Company

THE PRIVILEGES OF SECTION 8 COMPANIES: Such company registered under section 8 shall enjoy all the privileges and be subject to all the obligations of limited companies. Other statutory provisions related to Non-Profit making Company

• Firm as a member of Non-Profit making Company: As per section 8(3) a partnership firm may become a member of the non-profit making company registered under section 8. Membership of such firm shall cease upon dissolution of the firm. However, partners of the dissolved firm may continue to be the members of such company in their individual capacity.
• License for existing companies under Section 8: There is also a provision for conversion of existing Companies into a Non-profit making company under section 8 read with Rule 20 of Companies (Incorporation) Rules, 2014. Likewise a Non-profit making company can also be converted into any other Company by following the procedure given in Rule 21 and 22 of Companies (Incorporation) Rules, 2014. We shall discuss these procedures in some other article.
• No Change in AOA and MOA: A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
• REVOCATION OF LICENCE BY CENTRAL GOVERNMENT: The Central Government after giving reasonable opportunity of hearing can revoke the license by passing a speaking order. if the company 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 violate of the objects of the company or prejudicial to public interest and direct the company to convert its status and change its name to add the word “Limited” or the words “Private Limited”, as the case may be,
• Winding up of Company: It can also be wound up if the objects for which it had been established have been fully achieved. And the Central Government may, by order, after giving the company a reasonable opportunity of being heard, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act or amalgamated with another company registered under this section. its clear that such companies are a well regulated form of non-profit organizations and the prescribed incorporation and dissolution procedures and other provisions helps the government in keeping a check on the working of such companies.
• Penalty for violation of Section 8:If a company makes any default in complying with any of the requirements laid down in section 8, the company shall, without prejudice to any other action under the provisions of this section, be punishable with fine which shall not be less than ten lakh (10,00,000) rupees but which may extend to one crore (1,00,00,000) rupees and the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than twenty-five (25,000) thousand rupees but which may extend to twenty-five (25,00,000) lakh rupees, or with both

The entire procedure can be completed on a fast track basis within 25 working days.A Section 8 Company shall not pay any dividend to its members but apply its surplus of receipts over payments for promotion of its objects. These companies need not use the words Limited or Private Limited after the name.The registration process of a Section 8 company is slightly different from a regular limited company. A license for registration must be obtained from the Ministry of Corporate Affairs for registration as a Section 8 Company.These companies are generally registered as Guarantee Company with limited liability with or without capital. This company can be private or public in nature depends on the number of persons involved in it.

STEP BY STEP PROCESS INVOLVED IN INCORPORATING SECTION 8 COMPANY

Procedure for registration of Non-Profit making Company Procedure for getting License under section 8 for new companies with charitable objects is given in rule 19 of Companies (Incorporation) Rules, 2014.

• Check if the proposed promoters / directors have Director Identification No (DIN) or not,
• Apply for digital signatures of directors who do not have DIN.
• Apply for Director Identification Number.
• To file form for Name availability in FORM INC-1 For this you need to decide various items, which are mentioned in Form INC 1. The name once approved by the authority is valid for 60 days. The Subscriber to the Memorandum and Articles of Association shall be the applicant for the availability of name application.
• After getting name approval form concerned ROC there need to prepare ground of application, memorandum and Article of Association and need to file FORM RD-1 for license.
• After getting the License, the MOA and AOA are drafted and sent for MCA Approval.
• After getting approval from RD and getting License there need to file form for
• Incorporation i.e. INC-7, DIR-12 and INC-22 online after the MOA and AOA are drafted.
• If the E Forms are found to be in order and gets approved by ROC. i.e. CERTIFICATE OF INCORPORATION , Once all clarifications are provided, the Certificate of Incorporation is issued by the RoC and the company is deemed to be incorporated from the date of the Certificate of Incorporation.
• PAN and TAN Number are applied after getting the Incorporation Certificate.