The latest amendment to the Companies Act, 2013 has brought significant changes to the rules and regulations governing Section 8 companies, making it easier for non-profit organisations to operate and carry out their charitable activities.
Section 8 companies are non-profit organizations established under the Companies Act, 2013. They are known as Section 8 companies because they are registered under Section 8 of the Companies Act, 2013. These companies are formed with the sole purpose of promoting a social cause or a charitable objective.
The latest amendment to the Companies Act, 2013, introduced several changes to the rules and regulations governing Section 8 companies. In this blog post, we will discuss the latest amendment and its impact on Section 8 companies.
Introduction to Section 8 Companies
As mentioned earlier, Section 8 companies are non-profit organisations that are established with the objective of promoting a social cause or a charitable purpose. These companies are not formed with the intention of making a profit, and any surplus generated by them is reinvested in the company for furthering its objectives.
Section 8 companies are required to comply with the provisions of the Companies Act, 2013, and are regulated by the Ministry of Corporate Affairs. They are exempt from certain provisions of the Act, such as the requirement to use the word ‘Limited’ or ‘Private Limited’ in their name.
Latest Amendment to the Companies Act, 2013
The latest amendment to the Companies Act, 2013, was introduced through the Companies (Amendment) Act, 2020. The amendment made several changes to the rules and regulations governing Section 8 companies, including the following:
Alteration of Memorandum and Articles of Association
Under the amended provisions, Section 8 companies can now alter their memorandum and articles of association with the approval of the central government. Previously, any alteration to the memorandum or articles of association required the approval of the National Company Law Tribunal (NCLT).
Relaxation in Restrictions on Dividend Payments
Section 8 companies are not allowed to pay any dividend to their members. However, the amendment now allows Section 8 companies to pay a dividend to their members, subject to certain conditions. (benzinga.com) The company must have been in existence for at least three years, and the dividend cannot exceed 5% of the paid-up share capital of the company.
Extension of Validity of License
Section 8 companies are required to obtain a licence from the central government to operate. The licence is valid for a period of five years, after which it must be renewed. The amendment now allows the central government to extend the validity of the licence by up to three years.
Removal of Minimum Paid-Up Share Capital Requirement
Section 8 companies were previously required to have a minimum paid-up share capital of ₹ 1 lakh. However, the amendment has removed this requirement, making it easier for smaller organisations to register as Section 8 companies.
Introduction of Simplified Incorporation Process
The amendment has introduced a simplified incorporation process for Section 8 companies. The central government can now issue a certificate of incorporation within 7 days of the application, provided that all the necessary documents and information have been submitted.
Introduction of Electronic Voting for Members
The amendment has introduced the provision of electronic voting for members of Section 8 companies. This allows members to vote on resolutions remotely, without the need for physical attendance at the general meeting.
Simplified Procedure for Conversion to Other Forms of Companies
Section 8 companies can now convert to other forms of companies, such as private limited or public limited companies, with a simplified procedure. The conversion process can now be completed through a fast-track mode, subject to the approval of the central government.
Requirement of CSR Spending
Section 8 companies are required to spend a certain percentage of their profits on Corporate Social Responsibility (CSR) activities. The amendment has now introduced the provision of spending CSR funds on incubators and research and development projects in the field of science, technology, engineering, and medicine.
Provisions for Foreign Contributions
Section 8 companies can now accept foreign contributions, subject to the approval of the central government. The amendment has introduced provisions for the utilisation and monitoring of foreign contributions, to ensure that they are being used for legitimate purposes.
Enhanced Disclosure Requirements
The amendment has introduced enhanced disclosure requirements for Section 8 companies. They are now required to disclose more information in their financial statements, such as details of grants received, donations made, and the amount spent on administrative expenses.
Conclusion:-
In this regard, Vakilsearch has played a crucial role in helping non-profit organisations navigate the legal requirements of registering as a Section 8 company.
As a legal services provider, Vakilsearch has assisted numerous organisations in registering as Section 8 companies, and has helped them comply with the various rules and regulations governing such companies.
Vakilsearch has also helped organisations understand the changes brought about by the latest amendment to the Companies Act, 2013, and how it affects their operations as a Section 8 company. Their expert team of lawyers and legal advisors has provided guidance and support to organisations looking to register as Section 8 companies, helping them navigate the complex legal landscape and ensure compliance with all regulatory requirements.
In conclusion, Vakilsearch has been a valuable partner to non-profit organisations looking to register as Section 8 companies, and their role in facilitating the registration process and ensuring compliance with regulatory requirements cannot be overstated. The latest amendment to the Companies Act, 2013, has made it easier for non-profit organisations to register as Section 8 companies, and with the support of Vakilsearch, more organisations can take advantage of this opportunity to carry out their charitable activities and contribute to society.
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