CONVERSION OF SECTION 8 COMPANY
A Section 8 Company is a nonprofit organization with the objectives of advancing Sports, Education, Science, Arts, and Charitable endeavors. Such businesses do not split their profits among their shareholders, but rather use them to advance these goals.
Procedure for conversion: –
The requirements of Rules 21, 22, and 23 of the Companies (Incorporation) Rules, 2014 must be followed in order to convert a Section 8 Company into a Private Limited Company.
Following are the detailed steps for such conversion:
1. Publishing the notice, agenda, and agenda notes for the Board Meeting to be held by the Section 8 Company;
2. Holding the Board Meeting to approve the conversion and publish the notice of the General Meeting;
3. Calling a General Meeting:
The Section 8 Company must call a general meeting to pass a special resolution to approve the conversion.
The following details must be included in the explanatory statement that is affixed to the notice calling the general meeting:
- Date of the company’s incorporation;
- The company’s main goals, as stated in the memorandum of association;
- Reasons why the company’s objectives-related activities cannot be carried out as a section 8 company;
- What would be the modified objects and the reasons for the modification if the company’s primary or major objectives were to change;
- What are the privileges or concessions that the company currently enjoys (such as tax exemptions, approvals for receiving donations or contributions, including foreign contributions, land and other immovable properties, if any, that were purchased at discounted rates or prices, and, if so, the price that was paid by the company, details of any donations or bequests received by the company with condition attached to their utilization;
- Information about how the proposed conversion will affect the company’s members, including any benefits that may emerge from the conversion.
- Explanation of the conversion
4. Form MGT-14:-The Registrar must receive Form MGT-14 along with the fee and a certified true copy of the special resolution as well as a copy of the notice calling the meeting and the explanatory statement.
5. The company shall file an application in Form INC-18 with the Regional Director with fees.
Documents to be attached with the Form INC-18:-
- License issued to the Company under Section 8;
- Memorandum of Association;
- Articles of Association;
- Copy of Board Resolution;
- Copy of the special resolution passed and notice of convening the general meeting along with the relevant explanatory statement;
- Certificate from CA/CS/ICWA (in practice) certifying that the conditions laid down in the Act and rules, have been complied with;
- Statement of assets and liabilities of the company, as on the date not earlier than 30 days of that date duly certified by the auditor;
- Copy of valuation report by a registered valuer about the market value of assets;
- Audited financial statements, Board’s report, annual returns and the Audit reports for the last two financial years immediately preceding the date of the application;
- Statement of financial position; Full details of fixed assets alienated, if any, during the preceding three FYs;
- Written consent of lenders, if any loan is outstanding;
- No objection certificate from all the creditors, Details of donation/grant/benefit received since incorporation of the company;
- Proof of serving of the notice served to all authorities mentioned in sub-rule (2) of rule
6. Filing of Form INC-19
Within a week of submitting the application in Form INC-18 to the Regional Director, the Section 8 Company must issue an advertising at its own expense in Form INC-19, and a copy of the notice as published must be given right away to the Regional Director.
Advertisements must appear at least once in a vernacular newspaper with a sizable circulation in the area where the company’s registered office is located, at least once in an English newspaper with a sizable circulation in that area, and if there is one, they must also appear on the company’s website.
7. After Approval of Regional Director
In order to change its memorandum of association and articles of association as required by the Act as a result of the conversion of the section 8 company into a private limited company, the Company must call a general meeting of its members.
8. Filing of Form INC-20
Within 30 days of receiving the order, the company must file with the Registrar an amended memorandum of association and articles of association, along with a certified copy of the Regional Director’s approval and a statement from the directors stating that conditions, if any, have been fully met. The paperwork must be registered with the Registrar, who will also issue a new Certificate of Incorporation (COI).
