Objective and Agenda: In order to bring flexibility and to monitor the activities of the charitable organisations in India, non-governmental organisations are given the corporate status by forming companies under Section 8 of the Companies Act, 2013. The scope of the webinar is to cover the objects of forming a Section 8 Company, procedure to obtain license, benefits of forming a Section 8 Company, conversion of Section 8 Company into any other company, effects of non-compliance of objects and the tax benefits available to such companies.

1. Formation of Section 8 Company
CS. Meenakshi Jayaraman
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com

2. Credits and Acknowledgments
Sundar Rajan S

3. Legends
AOA Articles of Association
CG Central Government
DIN Director Identification Number
IBC Insolvency and Bankruptcy Code
IBF Insolvency and Bankruptcy Fund
MOA Memorandum of Association
NPO Non-profit Organisation
PAN Permanent Account Number
RD Regional Director
ROC Registrar of Companies
RUN Reserve Unique Name
SPICe Simplified Proforma for Incorporating Company electronically
TAN Tax collection and deduction Account Number

4. Presentation Schema
Overview Objects Conditions
License for a new
Company
License for an
existing Company
Privileges/
Exemptions
Conversion Other provisions
Revocation of
license
Penal
consequences
Recent update Caveats
Income tax
exemptions
Judicial precedents Statistics

5. Overview
Section 8 Company is a non-profit organisation having corporate structure and registered under Companies Act, 2013
Prior to Companies Act, 2013, these companies were governed u/s 25 of Companies Act, 1956
NPO can be registered in different forms viz., Trust, Societies, Section 8 Company. Registration process is different but
the status of the registered organizations is the status of NGO to get funding.

6. Objects – Section 8(1)(a)
The objects of the Section 8 Company shall be promotion/protection of any of the following
Arts Science Sports
Education Research Social welfare Religion
Charity Environment
Any such
other object
Commerce

7. Conditions to be fulfilled
Shall have objects as enshrined in Section 8 (1) (a)
Profits or other income of the company to be applied only in promoting its objects
Prohibits payment of dividend to its members
All the conditions stated below shall be fulfilled to have the status of a Section 8 Company

8. Procedure for formation
License for a new Company
Name
reservation
RUN application to be made mandatorily for reserving the name of the proposed Company
The name shall mandatorily include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council,
Electoral Trust and the like, etc.
Attachments to RUN application are generally the Board resolution of the existing company with similar name giving no
objection to the proposed company and no objection certificate of the trademark owner
The proposed name, if approved by the ROC, is made available only for a period of 20 days

9. Contd.
Incorporation
Post approval of name, the Company has to apply for incorporation in Form INC-32 (SPICe)
Obtaining license from CG is also done by filing the same form INC-32 (SPICe)
Application for PAN and TAN is also to be made for the proposed Company in the same form INC-32 (SPICe)
Application for allotment of DIN shall also be made in the same form upto a maximum of 3 directors

10. Contd.
Memorandum of Association of the proposed Company in Form INC-13
Articles of Association of the proposed Company
Declaration by first subscribers and directors in Form INC-9 stating that they are not convicted of any offence or guilty of any fraud
Declaration by a professional stating that all the requirements for registration of the Company has been complied with, in Form INC-14
Declaration by subscribers stating that all the requirements for registration of the Company has been complied with, in Form INC-15
An estimate statement of income and expenditure of the proposed Company for the next 3 years
Other attachments like NOC from trademark owner, Board resolution from the company having similar name, address and identity
proof, etc. as required
Attachments
to SPICe form

11. • The procedure is same as that of name reservation for a new CompanyName reservation
• Instead of Form INC-32 (SPICe), the existing company has to file Form INC-12
License to an existing
company under
Section 8
• All the attachments of INC-32(SPICe) form part of INC-12 except declaration in Form INC-9
• Besides, the following documents shall be attached:
• Last 2 years’ Financial Statements, Board’s report and auditor’s report
• Statement of assets & liabilities as on the date of application (or 30 days preceding that date)
• Certified copy of board/members’ resolution approving registration of Section 8 Company
Attachments to Form
INC-12
License for an existing Company

12. Within a week of making application to ROC, the company shall publish notice in the newspaper
(one in vernacular newspaper in the principal vernacular language and one in English newspaper
in English language) and on the websites as notified by CG of its conversion to Section 8 Company
Such advertisement notice to be furnished forthwith to the Registrar after publishing it in the
newspaper
The notice shall be in Form INC-26
Contd.
Public Notice

13. The Registrar shall require the
company to obtain approval
from any other regulatory
body or appropriate
authority, as the case may be
Registrar shall, after
considering any objections
(received within 30 days of
publication of notice) and
after consulting any
regulatory body or authority,
as appropriate, shall decide,
whether to grant license
The license, if granted shall
be in Form INC-16 or INC-17,
as the case may be.
Registrar shall include such
other conditions as may be
deemed necessary.
Registrar, shall direct the
company to include such
conditions of the license in its
memorandum or articles.
Contd.

14. Privileges/Exemptions to Section 8 Company
The Company is not required to use the words “Limited” or “Private Limited” at the end of its name
No requirement of minimum paid up capital
A general meeting may be called by giving notice not less than 14 clear days instead of 21 clear days – Section 101
Limits of maximum directorships shall not apply to a Section 8 Company – Section 165(1)
Recording of minutes of General Meetings, Board Meeting and other resolutions has been withdrawn. However, the minutes may
be recorded within 30 days of conclusion of every meeting where AOA provide for confirmation of minutes by circulation – Sec. 118
Conditions requiring and governing appointment of independent directors have been waived off – covered in Section 149
Minimum number of directors is not applicable for Section 8 Company – Section 149(1)
BOD shall conduct meetings once in every six calendar months. Provisions of Section 173(1) shall not apply

15. Contd.
The quorum requirement for Board meetings shall be either 8 members or 25% of total strength, whichever is less subject to
minimum of 2 directors – Section 174
The requirement of audit committee to have majority as independent directors is also removed consequent to removal of
appointment of independent directors – Section 177(2)
Requirement of constitution of nomination and remuneration committee and related compliances has been removed –
Section 178
BOD shall pass resolution by circulation rather than at a meeting in case of matters related to borrowing monies, investing
funds of the Company and giving loans or guarantee – Section 179(3)
The Director of a Section 8 company, being an interested director, is required to disclose his interest in a transaction,
arrangement or contract and abstain from participating in the relevant Board Meeting only if the value of such transaction
exceeds Rs. 1 Lakh – Section 184(2) read with 188
Loans can be provided for funding Industrial Research and Development Projects in furtherance of its objects, at rate of
interest lower than the prevailing yield of 1 year, 5 year or 10 year Government Security provided that the 26% of Share
Capital of the Company is held by CG or one or more SG or both – Proviso to Section 186(7)

16. Conversion into other kind of Company
Section 8 company to
convert into any other
kind of Company shall
first pass a special
resolution in general
meeting for conversion
Explanatory statement
to the notice shall
contain the details of
Company’s date of
incorporation, its main
objects, reasons for
conversion, impact of
conversion on its
members, privileges
and impact of
proposed conversion
Form MGT-14 should
be filed within 30 days
of passing special
resolution
After filing Form MGT-
14, the Company has
to file Form INC-18
with the RD for getting
approval for
conversion

17. Contd.
Company shall give
public notice in Form
INC-19 (similar to the
procedure prescribed
for license of an
existing company)
Company shall send a
copy of the notice to
all the concerned
regulatory bodies
Representations, if any
by the regulatory
bodies, shall be given
to the RD within 60
days of receipt of
notice, provided
opportunity of being
heard is given
Once approval is given
by RD, the Company
should file Form INC-
20 within 30 days of
receipt of order,
intimating ROC of its
conversion

18. Other provisions
A firm can become a member in a Section 8 Company
Section 8 Company shall not alter the provision of its MOA or AOA except with the prior approval of Central Government
Section 8 Company shall amalgamate only with another Section 8 company having similar objects
On winding up or dissolution, any asset remaining after satisfying the claims of the Company, shall be transferred to another
Section 8 Company having similar objects or proceeds from the asset shall be transferred to IBF u/s 224 of IBC, 2016
Unless there is specific exemption available to a Section 8 Company under Companies Act, 2013, all the provisions of the Act
shall be applicable in par with other Companies

19. Revocation of license
Registrar shall have the power to revoke
the license issued under Section 8 if
Company contravenes any of the requirements u/s 8 or
Affairs of the Company are conducted fraudulently or in a manner violating the objects of the Company or
Affairs of the Company are prejudicial to the public interest
By revoking the license, the Registrar/CG shall direct the Company to perform any of the following
Convert its status from Section 8 to private or public limited as the case may be and intimation of conversion to be made in
Form INC-20 to the ROC for registering the Company with the changed status - Registrar
In the interest of the public, shall direct the company to be wound up or amalgamated with another Section 8 Company – CG
Direction by Registrar or CG shall be made only after giving reasonable opportunity of being heard

20. Penal consequences
Nature Company Directors and other officers in
default
Penalty Rs. 10 lakhs to 1 Crore Rs. 25000 to 25 lakhs
Imprisonment NA Upto 3 years
Contravening the provisions of Section 8 leads to following penal consequences
If proved that the affairs of the Company are conducted fraudulently, every officer in default shall be liable for action u/s 447

21. Recent update
Companies (Incorporation) Sixth Amendment Rules, 2019 brought an amendment in the process
of obtaining license for a new Section 8 Company
Prior to this Rules, for new company to be registered u/s 8, first Form INC-12 has to be filed for
obtaining license from CG, post which Form INC-32(SPICe) has to be filed for incorporation
Whereas, w.e.f. 15th August, 2019, the requirement of filing Form INC-12 for a new Section 8
Company has been dispensed with.

22. Caveats
A private company other than Section 8 Company may convert into a One person Company
One person Company cannot be incorporated or converted into a Section 8 Company
Section 8 Company shall not be treated as a small Company since it is specifically excluded u/s 2(85)
Section 8 Company may invest in a profit making Company

23. Tax exemptions under Income Tax Act, 1961
For a Section 8 Company to avail exemptions under ITA, it should be registered under Section 12AA by making application in
Form 10A. Also activities provided by the Company should fall within the definition of charitable purpose u/s 2(15) of the ITA
Income of Section 8 Company that is registered u/s 12AA is exempt u/s 11 and 12 of the ITA
Further, donations made by persons to Section 8 Company shall be entitled to a deduction of 50% u/s 80-G provided application
in Form 10G has been submitted by the Company and approved by the Commissioner

24. Judicial precedents
Escorts Skill Development v. Commissioner of Income-tax (Exemptions), Chandigarh
[2019] 108 taxmann.com 53 (Delhi - Trib.) – [In favour of assessee]
The assessee (section 8 company) filed application for registration under section 12AA. The primary aim for forming the
company was merely to comply with the requirement of Corporate Social Responsibility (CSR) of its parent company
CIT rejected the application contending that charitable activities under the garb of CSR activities are mere camouflage to
get the registration u/s 12AA and 80G of the Act
Tribunal held that merely because of the fact that the applicant company has been established to comply with the CSR
obligations, the registration u/s 12AA of the Act cannot be denied, particularly when CSR activities are also charitable
activities as defined under the Act

25. Statistics
964
1450
1686
1962
2513
973
0
500
1000
1500
2000
2500
3000
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
(upto July 2019)
Financial Year
No. of Section 8 Companies registered
No. of Companies
(approx. figures)

26. Thank You
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com
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