Section 8 Company: Privileges & Exemptions

Section 8 of Companies Act, 2013 empowers Central Government to register a special type of company as limited company having charitable objects to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment, etc., without adding to its name the words ‘Limited’, ‘Private Limited’.

Such company intends to apply its profits or any income of the company for promoting the objects of the company and intends to prohibit the payment of dividend to members. The company registered under Section 8 shall enjoy all the privileges and subject to all the obligations of limited companies.

Following are the exemptions available to them:

1. Section 2(24): The definition of the ‘Secretary’ isn’t applicable to them.

2. Section 2(68): No requirement of having minimum paid up share capital. Herein the section defines what is a ‘private company’, and though the minimum prescribed limit has been done away with but still now the government has power to prescribe any such limits.

3. Section 2(71): No requirement of having minimum paid up share capital; everything is same as what is stated above, and the only difference here is that this provision pertains to what is a ‘public company’.

4. Section 101(1): This section pertains to giving notice for general meeting, and 21 clear days notice is prescribed but the same is substituted, and for section 8 companies, a 14 clear days notice will work.

5. Section 118: It deals with the minutes of Board Meeting/ General Meeting or other meetings and this provision won’t apply to section 8 companies except where the minutes need to be recorded within 30 days from conclusion of such meeting only in that case where the Articles of that company provide for confirmation of minutes by circulation.

6. Section 136(1): This section pertains to the right of members to copies of audited financial statements that need to be send at least 21 days prior to date of AGM, but in case of section 8 company, the same is 14 days.

7. Section 149(1): The said section as well as the proviso attached to such sub-section pertaining to minimum and maximum number of directors not applicable to them.

8. Section 149(7)/(8)/(9)/(10)/(11): Said sub-sections pertaining to independent directors are also not applicable here.

9. Section 150: This section pertaining to manner of selection of independent directors and maintaining their database isn’t applicable to them.

11. Section 165(1): This section pertaining to restriction on number of directorships isn’t applicable here.

12. Section 173(1): This section pertaining to hold minimum 4 board meetings in a calendar year, plus holding first board meeting within 30 days of incorporation isn’t applicable here and section 8 companies are required to conduct at least one board meeting in each half of calendar year.

13. Section 174(1): This section pertaining to quorum for a board meeting that has to be 1/3rd of total strength or two directors, whichever is higher, and allied procedures isn’t applicable here, as section 8 companies need to have a quorum of 1/4th of total strength or eight members, whichever is less, subject to minimum strength of two members.

14. Section 177(2): This section pertaining to having majority of independent directors in audit committee stands inapplicable.

15. Section 178: This section pertaining to having nomination and remuneration committee and stakeholders relationship committee not applicable.

16. Section 179(3): The section pertains to resolutions to be passed at Board meeting, wherein clauses (d), (e), and (f) of sub-section (3) pertaining to borrowing monies, investing companies fund and granting loans or giving guarantee in respect of loans granted can be decided by the Board by circulation rather than on meeting.

17. Section 184(2): This section pertaining to prohibition regarding participation of interested directors stands applicable here only and only if the transaction pertaining to section 188 of CA’13 exceeds one lakh rupees.

18. Section 186(7): This section pertains to a loan that shall not be given at an interest rate lower than prevailing yield of 1/3/5/10 years govt. security closest to tenor of that loan, wherein the same isn’t applicable here to a company in which twenty-six per cent. or more of the paid-up share capital is held by the Central Government or one or more State Governments or both, in respect of loans provided by such company for funding Industrial Research and Development projects in furtherance of its objects as stated in its memorandum of association.”, through a notification dated 13th June, 2017.

19. Section 189: This section pertains to register of contracts or arrangements where directors are interested, and same stands applicable here only an only if the transaction pertaining to section 188 of CA’13 exceeds one lakh rupees.