The Companies Act 2013 regulates Section 8 companies in India. Under Section 8(4)(ii) of the Companies Act 2013, a Section 8 company can convert itself into any other company once it has complied with the conditions.
In accordance with Rule 7(1) of the Companies (Incorporation) Rules 2014, a Section 8 Company cannot be converted into a Person Company as per Rule 7(1) of the Companies (Incorporation) Rules 2014.
What is Section 8 Company?
Companies that are registered under Section 8 of the Companies Act, 2013 are those companies that pertain to Non-Government or Non-Profit Organizations. Such Section 8 companies are formed with the objective to promote the fields of trade, commerce, art, science, sports, education, research, religion, social welfare, environment protection, or any other similar objectives. Any profits earned are utilized towards the object of the company and hence no dividend is paid to the members.
What Are the Conditions to Convert Section 8 Company to Any Other Kind of Company?
Requirements for the conversion of Section 8 Company into any other kind of Company as per Rules 21, 22, and 23 of the Companies (Incorporation)Rules 2014 are enumerated below:
Section 8 Company shall pass a Special Resolution in the general meeting of its members for approval of the such conversion.
- 1. A certified true copy of the resolution and notice of General Meeting along with an explanatory statement is required to be filed to ROC (Registrar of Companies) in form MGT-14 within 30 days of passing the resolution.
- A company must intimate and obtain a ‘No Objection Certificate’, from authorities such as the IT Department, Charity Commissioner, Central or State government department, Municipal body, or any other recognized authority, in case it has obtained special status, privilege, benefit, exemption or grant from any of them.
- The existing Section 8 Company must file an application to the Regional Director in Form INC 18 along with a copy to the Registrar of Companies for its conversion to any other kind of Company.
- The company shall file all its Financial Statements, Annual Returns, and all such Returns as required by the Act up to the previous year of making the application to the Regional Director. In case, an application is filed and 3 months have expired from the preceding date of the Financial year to which the financial statement has been filed, then, a statement of financial position duly approved by the Chartered Accountant up to the date of not preceding 30 days of submitting the application needs to be attached.
- A Declaration shall be given by the Board of Directors to the effect that no part of property or income of the Company has been directly or indirectly transferred or paid by way of bonus or dividend to persons or members of the Company or claiming through any one or more of them.
- Along with the application, the Company shall also need to attach a Certificate from a Practicing CA/CS/CMA certifying that all the conditions relating to the conversion of Section 8 company as laid down in the Act has been duly complied with.
- Within 7 days from the date of applying to the Regional Director, the applicant shall publish a notice in the newspapers at his own expense. Copy of such notices shall be sent to the Regional Director in Form INC 19 immediately after the publication of the notice.
- Simultaneously, proof of serving of notice shall be sent to the below authorities by registered post or in-hand delivery:
- Income Tax Officer or Chief Commissioner of Income Tax having jurisdiction over the Company
- Charity Commissioner
- Chief Secretary of the State in which the registered office of the Company is situated
- Central or State government department in whose jurisdiction the Company is operating
The above authorities may make representations to the Regional Director within 60 days of receiving the notice.
The Regional Director may approve the conversion of a Section 8 company to any other kind of company, subject to all prevailing terms and conditions that may be applicable at the time of conversion.
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