Introduction
Companies Act, 2013 in Section 8 provide for formulation of companies with charitable objects, etc. It can be established only after the Central Government is satisfied that a person or an association of persons proposed to be registered under this Act as a limited company has its object for the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and that it intends to apply its profits or other income in promoting its objects. Further, it prohibits to pay dividends to its members.
Important Points to Consider
- Rule 3(5) of the Companies (Incorporation) Rules, 2014 prohibits an OPC (One person company) to be converted into Section 8 company.
- As per Section 8(1)(a) the entity should have its object for the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and that it intends to apply its profits or other income in promoting its objects. Further, it prohibits to pay dividends to its members.
- License will be given by the Central Government when it is satisfied that the objectives of Section 8 are met.
Procedure
Step 1- Conduct a Board Meeting
- A board meeting should be called to consider and approve the conversion of existing company into a section 8 company and to determine the new name.
- Alteration of MOA/AOA(Memorandum of association and Articles of Association) would be considered to align MOA with Form no INC 12 and AOA with Form no INC 31.
- Determine a day, date, time, and agenda for passing a special resolution to give effect to the change.
- Approve draft notice for the general meeting along with an explanatory statement giving reason behind passing the special resolution.
- Authorize CS or any other officer to issue notice of the general meeting under the authority of the Board to every member.
Step 2- Filing of Application and Documents
- Reserving the name: As per Section 4(4) read with rules 8 and 9 of the Companies (Incorporation) Rules, 2014, make application for reservation of name of the company with the Registrar, CRC (Central Registration Centre) through www.mca.gov.in by using RUN (Reserve Unique Name) along with requisite documents and fee of Rs.1000. RUN web service allows two names and one re-submission.
- Currently name reserve and registration facility is available on the MCA website through SPICE+.
Step 3- Name Approval Letter
- Upon receiving the application, the CRC as per Section 4(5)(i) read with rule 9 of the Companies (Incorporation) Rules, 2014, may either approve or reject. Once the name is approved by the CRC, it remains valid for 60 days from the date of approval.
Step 4- Call a General Meeting
- Call a general meeting to pass a special resolution for conversion of existing company into section 8 company and change of name.
- It has to be in compliance with Section 8, 100 and 110 of CA, 2013 and Secretarial Standards- 2.
Step 5- Filing of Forms and Documents
- Copy of the special resolution along with explanatory statement has to be filed with the ROC (Registrar of Company) in 30 days in Form MGT-14. This has to be in compliance with Section 117 read with Rule 24 of the Companies (Management and Administration) Rules, 2014.
- Application has to be filed with the Central government (power delegated to ROC) for name change of the company in Form INC-24.
Step 6- Certificate from ROC
- When ROC is satisfied, he shall issue new Certificate of Incorporation (COI) in Form INC-25 to the company.
Step 7- Arrangement of Declaration, Approval, Statement, etc.
- A statement showing details of assets and liabilities of the company as on the date of application or within 30 days preceding has to be submitted as per Section 8(5) read with Rule 20(2)(d) of the Companies Incorporation Rules, 2014.
- Further, an estimate of future annual income and expenditure of the company for the next 3 years is to be given. It should specify the sources of income and expenditure.
- Obtain approval from the authority, regulatory body, department or ministry of the central government or the state government wherever necessary.
- Thereafter, a declaration is required from the shareholder and the director making the application to the Central Government in Form INC-15 confirming that the MOA/AOA of the company are in conformity with the provisions of the Act.
- Further, a declaration is required from an advocate, a chartered accountant, cost accountant or company secretary in practice in Form INC-14 that the MOA/AOA of the company are in conformity with the provisions of the Act.
Step 8- Form and Document Filing
- An application is filed before the Central Government (power delegated to ROC) for obtaining the license under section 8. Application is filed in Form INC-12. ROC might raise queries to which applicant has to give appropriate reply.
Step 9- Advertisement in Newspaper
- As per section 8(5) read with rule 20(3) of the Companies (Incorporation) Rules, 2014, the company has to publish a notice in Form INC-26 within a week from date of making the application to ROC.
- Has to be at the expenses of the company.
- At least once in the principal vernacular language newspaper of the district where registered office is situated and at least one English language newspaper.
Step 10- Form and Documents Filing
- A copy of this notice shall be sent to the ROC in Form GNL-2, along with the fees.
Step 11- License from ROC
- ROC, upon considering the objections, if any, received in 30 days from date of publication of notice and upon consultation with authority, regulatory body, department or ministry of the central government or the state government, decide whether license should be granted.
- If satisfied, license is given in Form INC-17 on such conditions as deemed necessary.
Step 12- Post Compliances
- To be in conformity with section 15(1) ensure that alterations in MOA/AOA are noted in every copy of MOA/AOA.
- Further, to conform to section 12(3), paint or affix new name outside office; print new letter heads, engrave name on official seal.
- Inform the change in the name to concerned authorities.
Estimated Timeline
- The whole process can take between 49 days to 130-134 days depending upon time taken at different stages.
- Board meeting may take a minimum of 1 day to maximum of 8-10 days.
- Application to CRC and getting approval from CRC will take minimum of 1 day to maximum of 7 days.
- Thereafter, the general meeting can take between 1 day to 23-25 days.
- Filing of a copy of special resolution with ROC will take between 1 day to 30 days.
- Filing of application with the central government and grant of approval will take 7 days to 20 days.
- Application to ROC for conversion will take 5 days.
- Advertisement in newspaper will take minimum of 3 days to maximum of 7 days.
- License from ROC will take 30 days.
Conclusion
Section 8 companies are charity-based company. It is provided various privileges and exemptions under the Companies Act, 2013. In order to avail benefits of such exemption, private companies choose to convert to section 8 company.
