Conversion of Company into Section 8 Company

Any existing limited Company, i.e., private or public Company, whatsoever registered under this Act or under any previous company law can apply for conversion into Section 8 Companies subject to the following conditions:

• The Memorandum and Articles of Association of the existing Company has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
• The Company is desirous of being registered as a Section 8, without the addition to its name of the word “Limited” or, the words “Private Limited”.
• The Company upon conversion intends to apply its profits, if any, or any other income in promoting its objects only;
• It intends to prohibit the payment of any dividend to its members.

A. BENEFITS OF CONVERSION OF EXISTING COMPANUES TO SECTION 8 COMPANIES

• The Company registered under this section shall enjoy all the privileges of being a Section 8 Company.
• There is an exemption from Stamp Duty during registration of the Section 8 Company.
• A firm can also be a member of Section 8 Company.
• Tax deduction under Section 12A and Section 80G of the Income Tax to the organization’s income and to the donors can be availed after respective registration.

B. REGULATORY FRAMEWORK FOR CONVERSION OF EXISTING COMPANIES INTO SECTION 8

Section 8(5) read with Rule 20 of the Companies (Incorporation) Rules, 2014

• Preliminary, amend the Memorandum and Articles of Association of the Company accordingly to make the same in connivance with the Section 8 Company.
• Make an application for reservation of name through RUN.
• Make application in Form No. RD-1 for seeking the approval for conversion of existing Company to section 8 company along with this Form INC-12 application for granting a license under section 8 company.
• The application shall be accompanied by the following documents, namely: –

a. the altered memorandum and articles of association of the Company.

b. the declaration as given by a Practicing Professional, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and the rules made thereunder.

c. For each of the two financial years immediately preceding the date of the application, or when the company has functioned only for one financial year, for such year: –

i. the financial statements and the Board’s reports,

ii. the audit reports, relating to existing companies

d. a statement showing in detail the assets (with the values thereof), and the liabilities of the Company, as on the date of the application or within thirty days preceding that date.

e. an estimate of the future annual income and expenditure of the company for next three years, specifying the income source and the expenditure.

f. the certified copy of the resolutions passed in general/ board meetings approving registration of the company under section 8; and

g. a declaration by each of the persons making the application in Form No.INC.15.

h. Copy of any approval of NOC required from any authority.

• Once the aforesaid application along with the requisite documents has been filed, within a week of making such application, the Company shall get a notice published in:

Vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is situated; and

English newspaper in English language circulating in that district.

• The copy of the publications as made shall be submitted to the Registrar as well.
• The Registrar shall, after considering the objections, if any, received by it within thirty days from the date of publication of notice and in its discretion, decide whether the license should or should not be granted.

D. GRANT OF LICENSE

If satisfied, the Registrar shall grant license and may direct the Company to include such conditions in the Memorandum or Articles of Association of the Company, if found necessary.

FREQUENTLY ASKED QUESTIONS (FAQs):

1. Is there any minimum time limit for which the Company has to be operative as a Company other than Section 8 Company in order to get itself converted into a Section 8 Company?

Reply: There is no minimum or maximum time limit as such however, if we go by the intent of sub clause of (c) of clause 2 of Rule 20 of the Companies (Incorporation) Rules, 2014, the existing Company must be operative for at least a year or otherwise, it shall not be in a position to submit the financial statement, board reports or audit reports of the existing Company.

2. Can a public and private Company both get itself converted into a Section 8 Company?

Reply: Yes, a private or even a public Company both can get itself converted into a Section 8 Company.