# Section 8 Company - Penalties for Default & Statutory Exceptions

A Section 8 (non-profit) company enjoys certain procedural relaxations but faces strict penalties for any non-compliance.

## Penalties for Contravention

If a company makes any default in complying with Section 8 requirements:

### On the Company

Fine: Minimum ₹10 lakhs — Maximum ₹1 crore

### On Directors and Every Officer in Default

Fine: Minimum ₹25,000 — Maximum ₹25 lakhs

### Additional Penalty for Fraudulent Conduct

If it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under Section 447 (punishment for fraud — which can include imprisonment).

## Exceptions / Relaxations Available to Section 8 Companies

Section 8 companies enjoy the following privileges that distinguish them from regular companies:

Area	Relaxation
Notice for General Meeting	Can call general meeting by giving a clear 14 days' notice (instead of the standard 21 days)
Directors	Requirement of minimum number of directors and independent directors does NOT apply
Committees	Need NOT constitute the Nomination and Remuneration Committee and the Stakeholders Relationship Committee

## Memory Hook

Think of Section 8 companies as having 'lighter governance' in exchange for their non-profit objectives — fewer mandatory directors, shorter notice, no special committees. But the trade-off: heavier penalties if they misuse their privileged status.

Worked example

### Example 1

Example 1 - Penalty: XYZ (Section 8 Co.) violates the conditions of its licence by distributing dividends to members. The company can be fined ₹15 lakhs (within ₹10 lakhs–₹1 crore range), and each director in default can be fined ₹1 lakh (within ₹25,000–₹25 lakhs range). If it is also proved that they fraudulently diverted donations, each director additionally faces prosecution under Section 447.

### Example 2

Example 2 - Notice: ABC (Section 8 Co.) calls its AGM with 14 clear days' notice. Members object claiming 21 days is mandatory. The objection fails — Section 8 companies are expressly permitted shorter notice of 14 clear days.

### Example 3

Example 3 - No NRC: PQR (Section 8 Co.) listed on a stock exchange. The company need not constitute a Nomination and Remuneration Committee or a Stakeholders Relationship Committee, even though listed companies generally must.

⚠️ Common exam mistakes

Mixing up the penalty limits — the company fine (₹10 lakhs–₹1 crore) is much higher than the officer fine (₹25,000–₹25 lakhs).
Forgetting that fraud triggers ADDITIONAL liability under Section 447 on top of the basic fine.
Assuming all listed-company governance norms apply — Section 8 companies are exempt from NRC and Stakeholders Relationship Committee requirements.
Stating the notice period as '14 days' instead of 'clear 14 days' — the word 'clear' is technically important (excludes the day of notice and the day of meeting).

Bare-Act text Section 8 · Companies Act, 2013 · click to expand

If a company makes any default in complying with any of the requirements laid down in this section, the company shall, without prejudice to any other action under the provisions of this section, be punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees and the directors and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to twenty-five lakh rupees: Provided that when it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447.

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Section 8 Company - Penalties and Exceptions

Worked example

⚠️ Common exam mistakes