Frequently Asked Questions On Section 8 Company Formation

In this article we have compiled a list of questions on section 8 company registration mostly based on queries raised by our clients and answers from our experts.

FAQ ON SECTION-8 COMPANY FORMATION

QI. Who can apply for registration of a Section 8 company?

Ans. Any person or Number of associated persons intending to register a limited liability company for objects specified below can opt to apply for Company Registration or Company Formation under Section 8. The following have to be proved to the satisfaction of the Central Government that:

(a) Promotion of commerce, art, science, sports, education, research, and social issues like social welfare, religion, charity, protection of the environment or any other object is also included.

(b) The company after incorporation intends to apply its profits, if any, or other income in promoting such objects only;

(c) Payment of Dividend to the members should be prohibited by the company.

Q2. What is the procedure for incorporation of Section 8 company?

Ans.  To incorporate a Section 8 Company, an application shall be written to the Registrar of Companies in Form no. INC.12, which shall be accompanied, inter alia, by the following documents:

  1. Draft of Memorandum of Association (MOA) and Articles of association (AOA) of the Company in the prescribed format (Form no. INC – 13) with the photographs of subscribers are affixed.
  2. A Declaration is to be attached in Form no. INC-14 on the stamp paper, duly notarized by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions and rules made under Section 8 and all the requirements are fulfilled.
  3. An estimation of the annual income and expenditure of the company for the next three years, the sources of the income and the objects of the expenditure has to be specified.
  4. A declaration (in Form no. INC-15) on stamp paper duly notarized by each of the persons making the application.
  5. Form no. INC-9 from each subscriber and first directors, on appropriate stamp paper of the State and duly notarized.

Q3. Can a company with unlimited liability be registered a Section 8 Company?

Ans. No. Rule 20(1) of the Companies (Incorporation) Rules, 2014  provides that only a limited company registered under this Act or under any previous company law shall make an application to the Registrar for the issue of license. Therefore, a company with unlimited liabilities cannot be registered as a Section 8 Company.

Q4. Is it mandatory that the name of Section 8 company shall include the words like Foundation, Forum, Association, Federation etc.?

Ans. Yes. As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation and the like etc.

Q5. Whether a Foreign Company can be registered under Section 8 company in India?

Ans.  Under the Section 2(42) of the Companies Act, 2013 the term “Foreign Company” is defined as any company or body corporate incorporated outside India which–

  • Has a place in India where business is conducted, whether bought by itself or through an agent, through physically or through online.
  •  Is conducting any business activity in India.

Now since a Company or a body corporate incorporated outside India for doing not for profit activities, which has opened a branch/liaison office in India, cannot fall in the definition of a foreign company as a business activity is missing. Therefore, such a company cannot be termed as a foreign company. However, subject to compliance with FEMA regulations, it can open branch/liaison offices. Such not for profit companies or bodies corporate incorporated outside India can promote and register a Section 8 Company in India as a distinct entity.

Q6. Whether co-operative society can become a subscriber/member of a Section 8 company?

Ans. In terms of section 8, any person or an association of persons intending to register a limited liability company for objects specified in section 8(1)(a), subject to the restrictions provided in section 8(1)(b) and (c), can opt to apply for registration of Section 8 Company.

The term “person” has not been defined in the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that “person” shall include any Company or association or body of individuals, whether incorporated or not. Section 11 of the Indian Contract Act, 1872 provides that every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is sound mind and is not disqualified from contracting by any law to which he is subject. Therefore a Co-operative society can be regarded as a Person and thus capable of becoming a subscriber of a company including Section 8 Company.

Q7. Can a company be treated as Section 8 Company as well as a small company provided that the company has not exceeded the thresholds prescribed for small companies under section 2(85)?

Ans. No. As per proviso to section 2(85), section 2(85) does not apply to a Section 8 Company and accordingly, a Section 8 Company cannot be treated as a small company. Likewise, a small company on conversion to a Section 8 Company shall cease to be a small company.

Q8. Can a company register under Section 8 be converted into any other company?

Ans. Yes, a Section 8 Company can be converted into any other company including OPC as prescribed under Section 8(4)(ii) read with Rules 21 and 22 of Companies (Incorporation) Rules, 2014. This is further subject to restrictions and compliances as per other applicable laws including the Income-tax Act, 1961.

Q9. Can a Limited liability partnership be registered/ converted into a Section 8 Company?

Ans.  Yes. Section 8(1) of the Companies Act, 2013 allows person or association of persons to be registered as a Section 8 Company on the fulfillment of certain conditions and procedure as prescribed therein. The term “person” has not been defined in the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that “person” shall include any Company, or association or body of individuals, whether incorporated or not. Accordingly, a Limited Liability Partnership is a person. Therefore, it can be registered/ converted as a Section 8 Company.

Q10. Can a partnership firm be registered/converted into a Section 8 Company?

Ans. Yes. Section 8(1) of the Companies Act, 2013 allows person or association of persons to be registered as a Section 8 Company on the fulfillment of certain conditions and procedure as prescribed therein. The term “person” has not been defined in the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that “person” shall include any Company, or association or body of individuals, whether incorporated or not. Accordingly, a Partnership Firm is a person. Therefore, a partnership firm can be registered as a Section 8 Company.

If you have any questions on Section 8 Company feel free to consult our experts at Company Registration.

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2018-11-06T05:30:35+00:00Section 8 company|