Companies under Section 8 of The Companies Act,2013
Section 8 of the Companies Act, 2013 deals with the incorporation of companies to promote charitable objects such as commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, etc. Such companies have to apply their profit in promoting its objects and prohibiting the payment of any dividend to its members.
Section 8 gives power to the Central Government(CG) to incorporate such person or association of persons(AOP) as a company with limited liability without the addition of words ‘Limited (Ltd)’ or ‘Private Limited (Pvt Ltd.)’ to its name, by issuing license on such conditions as prescribed.
The registrar of companies shall on application register such person or association of persons(AOP) as a company under section 8. After incorporation, the company shall enjoy the same benefits and obligations as a limited company. A company incorporated under this section can convert itself into a company of any other kind only after complying with such conditions as may be prescribed in rules. A company incorporated under section 8 which plans to convert itself into a company of any other kind shall pass a special resolution at a general meeting for approval. A firm can be a member of the company incorporated under section 8.
A company incorporated under section 8 is not allowed to alter the provisions of its memorandum or articles except with the prior approval of the Central Government.
The Central Government may by order invalidate the license of the company where the company violates any of the requirements or the conditions given under section 8 subject to which a license is issued or where the affairs of the company are conducted fraudulently, or violate the objects of the company or prejudicial to the public interest, and on revocation, the Registrar shall put ‘Ltd.’ or ‘Private Ltd.’ against the company’s name in the register. Before such invalidation of a license, the Central Government must give the company a written notice of its intention to revoke the license and opportunity of being heard to the company.
In case a license is revoked, the Central Government 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 or amalgamated with another company registered under this section. However, no such order shall be made unless the company is given a reasonable opportunity of being heard. A company incorporated under section 8 shall amalgamate only with another company registered under this section and having similar objects.
Companies incorporated under section 8 can call its general meeting by giving a clear 14 days’ notice instead of 21 days. The requirement of having a minimum number of directors, independent directors, etc. does not apply to section 8 companies. Section 8 companies are not required to constitute a Nomination and Remuneration Committee and Shareholders Relationship Committee.
If a company defaults in complying with any of the provisions given in this section, the company shall be punishable with fine of ₹10 lakh to ₹1 crore 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 3 years or with fine of ₹25 thousand to ₹25 lakh rupees, or with both. And where it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447.
