## Section 8 – Companies with Charitable Objects
### Who can be a Section 8 company?
Section 8 companies can be formed by:
- Incorporating a new company, OR
- Converting an existing company into a Section 8 company [except OPC — OPC cannot become a Section 8 company]
### Conditions for grant of licence by Central Government (RoC)
CG may grant a licence if it is satisfied that the company:
1. Has objects to promote:
- Education, Art, Commerce, Science, Sports, Social Welfare, Research, Protection of environment, Charity, Religion, or any other useful object
2. Intends to apply its profits/income in promoting its objects only; AND
3. Intends to prohibit the payment of any dividend to its members
On grant of licence, the RoC registers the company as a limited company.
Note: The suffix 'Limited' or 'Private Limited' need not be added to a Section 8 company's name.
Examples: Tata Foundation; Azim Premji Foundation (CIN: U93090KA2001NPL028740).
### Rule 19 — Steps to incorporate a new Section 8 company
1. Application to RoC in SPICe+ form with prescribed fees.
2. Attach:
- MoA (INC-13) and AoA (INC-31)
- Estimated income & expenditure for next 3 years
- Declaration by a CA/CS/Cost Accountant/Advocate in practice (INC-14) and by each applicant (INC-15) that: (i) MoA/AoA conforms to Section 8; (ii) all requirements of the Act for registration are complied with.
### Privileges, Obligations and Special Features
- Section 8 company enjoys all privileges and obligations of a limited company.
- A partnership firm CAN be a member of a Section 8 company (otherwise a firm cannot be a member of a normal public company since firm is not a separate legal entity).
### Restrictions on Section 8 Companies
- No alteration of MoA/AoA without prior approval of CG (RoC).
- May be converted to any other kind of company after complying with the procedure below.
### Rule 21 & 22 — Conversion of a Section 8 company into another kind
1. Pass Special Resolution at GM; explanatory statement to give details.
2. Company should have filed FS and Annual Return up to last FY.
- If application is made after 3 months from end of last FY → attach additional FS drawn up to a date not more than 30 days before filing, signed by a CA.
3. Notice of conversion served on:
- Income Tax Authority
- Charity Commissioner
- Chief Secretary of State where RO is situated
- CG/SG department having jurisdiction
These authorities may make representations to RD within 60 days (after OOBH to company).
4. Apply to RD in Form INC-18 with fee + certified copy of resolution + proof of delivery of notice.
5. Forward copy of application to RoC.
6. Within a week, publish notice in Form INC-19 in two newspapers (vernacular + English) and on company's website (at own expense).
7. RD, if satisfied, approves conversion with such terms and conditions as imposed. Before rejecting or imposing conditions, RD gives OOBH.
8. On RD's approval — pass SR at GM for alteration of MoA/AoA.
9. File altered MoA/AoA with RoC; RoC issues fresh CoI.
### Existing company → Section 8 company
An existing company may apply to be converted into a Section 8 company under Section 8(1). CG (RoC) may also suo motu issue a licence u/s 8 to an existing company.
### Revocation of Licence and Conversion to Normal Company
If the company:
- Contravenes Section 8 requirements, OR
- Contravenes any licence conditions, OR
- Affairs conducted fraudulently or in a manner violative of its objects or public interest,
then CG (RD) may, by order (after reasonable OOBH):
- Revoke licence
- Direct conversion of status
- Direct addition of 'Limited' / 'Private Limited' to its name; RoC shall register accordingly.
### Further consequences on revocation
If in public interest, CG may order (after OOBH):
- Winding up under this Act, OR
- Amalgamation with another Section 8 company having similar objects, constitution, powers, rights (as defined by CG).
### Distribution of remaining assets on winding up
If, after liabilities are satisfied, any assets remain:
- Transferred to another Section 8 company with similar objects (subject to T&C imposed by Tribunal), OR
- Sold and proceeds credited to the Insolvency and Bankruptcy Fund formed under Section 224 of IBC.
### Amalgamation Restriction
A Section 8 company can amalgamate only with another Section 8 company having similar objectives.
### Penalty for Default under Section 8
| Defaulter | Fine |
|---|---|
| Company | Minimum ₹10 lakh; Maximum ₹1 crore |
| Directors & every Officer in Default (OID) | Minimum ₹25,000; Maximum ₹25 lakh |
If affairs are proved to be conducted fraudulently → every OID liable under Section 447.
### Exemptions to Section 8 Companies
| Section | Exemption / Relaxation |
|---|---|
| 2(68) & 2(71) | No minimum PUSC required |
| 2(85) | Definition of Small Company does NOT apply |
| 96(2) | Date/time/place of AGM may be decided by Board having regard to directions given by members in GM |
| 101(1) | Notice for GM can be 14 clear days (instead of 21) |
| 118 | Minutes may be recorded within 30 days if Articles provide for confirmation by circulation |
| 136(1) | FS may be circulated 14 days before AGM (instead of 21) |
### Concept Clarity Check
1. Can a Section 8 company be incorporated with unlimited liability? No — only as a limited company.
2. Can an existing company seek a licence under Section 8? Yes; it will then drop the suffix 'Ltd' or 'Pvt Ltd'.
3. Can a partnership firm be a member of a normal public company? No — firm is not a separate legal entity. (But it can be a member of a Section 8 company.)