Companies Act Section 8 — Formation of companies with charitable objects, etc
CHAPTER II INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
Commercial / Corporate
Summary
Sub-section (1) explains that if a person or group of people wants to register as a limited company, and the Central Government is satisfied that the group's objects include promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or similar purposes, and the group intends to use its profits or income only for those objects, and it intends to ban paying any dividend to its members, then the Central Government may issue a licence allowing the group to register as a company without using the word "Limited" or "Private Limited" in its name. The Registrar will then register the group as a company upon application in the prescribed form.
Sub-section (2) states that a company registered under this section has all the privileges and is subject to all the obligations of a limited company.
Sub-section (3) provides that a firm can be a member of a company registered under this section.
Under sub-section (4)(i), a company registered under this section cannot change its memorandum or articles without the prior approval of the Central Government. Under sub-section (4)(ii), such a company may convert itself into another kind of company only after following conditions that may be prescribed.
Sub-section (5) says that if a limited company already registered under this Act or any previous company law was formed with the objects and restrictions mentioned in sub-section (1), the Central Government may, by licence, allow that company to be registered under this section, subject to conditions it deems fit, and to change its name by removing the word "Limited" or "Private Limited". The Registrar will then register the company under this section, and all provisions of this section apply to it.
Sub-section (6) allows the Central Government to revoke the licence of a company registered under this section if the company violates any requirement of this section, breaches any condition of the licence, or conducts its affairs fraudulently, in a way that goes against its objects, or in a manner prejudicial to public interest. The government may then direct the company to convert its status and change its name to add "Limited" or "Private Limited". The Registrar will register the company accordingly. However, no such order can be made without giving the company a reasonable opportunity to be heard, and a copy of every such order must be given to the Registrar.
Sub-section (7) states that when a licence is revoked under sub-section (6), the Central Government may, if it is essential in the public interest, order that the company be wound up or amalgamated with another company registered under this section. No such order can be made unless the company is given a reasonable opportunity to be heard.
Sub-section (8) provides that when a licence is revoked under sub-section (6) and the Central Government considers it essential in the public interest, it may order the amalgamation of the company with another company registered under this section that has similar objects, even if this conflicts with other provisions of this Act. The order will specify the constitution, properties, powers, rights, interests, authorities, privileges, liabilities, duties, and obligations of the single resulting company.
Sub-section (9) says that if, upon the winding up or dissolution of a company registered under this section, any assets remain after paying off its debts and liabilities, those assets may be transferred to another company registered under this section with similar objects, subject to conditions imposed by the Tribunal, or they may be sold and the proceeds credited to the Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.
Sub-section (10) states that a company registered under this section can only amalgamate with another company registered under this section that has similar objects.
Sub-section (11) provides that if a company defaults in complying with any requirement of this section, the company is punishable with a fine of not less than ten lakh rupees and up to one crore rupees, and the directors and every officer in default are punishable with a fine of not less than twenty-five thousand rupees and up to twenty-five lakh rupees. However, if it is proved that the affairs of the company were conducted fraudulently, every officer in default will be liable for action under section 447.
Official Text
(1) Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company—
(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.
(2) The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
(3) A firm may be a member of the company registered under this section.
(4)
(i) A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
(ii) A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.
(5) Where it is proved to the satisfaction of the Central Government that a limited company registered under this Act or under any previous company law has been formed with any of the objects specified in clause (a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in clauses
(b) and
(c) of that sub-section, it may, by licence, allow the company to be registered under this section subject to such conditions as the Central Government deems fit and to change its name by omitting the word “Limited”, or as the case may be, the words “Private Limited” from its name and thereupon the Registrar shall, on application, in the prescribed form, register such company under this section and all the provisions of this section shall apply to that company.
(6) The Central Government may, by order, revoke the licence granted to a company registered under this section if the company contravenes any of the requirements of this section or any of the conditions subject to which a licence is issued or the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company or prejudicial to public interest, and without prejudice to any other action against the company under this Act, direct the company to convert its status and change its name to add the word” Limited” or the words “Private Limited”, as the case may be, to its name and thereupon the Registrar shall, without prejudice to any action that may be taken under sub-section (7), on application, in the prescribed form, register the company accordingly:
Provided that no such order shall be made unless the company is given a reasonable opportunity of being heard:
Provided further that a copy of every such order shall be given to the Registrar.
(7) Where a licence is revoked under sub-section (6), the Central Government may, by order, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act or amalgamated with another company registered under this section:
Provided that no such order shall be made unless the company is given a reasonable opportunity of being heard.
(8) Where a licence is revoked under sub-section (6) and where the Central Government is satisfied that it is essential in the public interest that the company registered under this section should be amalgamated with another company registered under this section and having similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order, provide for such amalgamation to form a single company with such constitution, properties, powers, rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order.
(9) If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to 1[Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)].
(10) A company registered under this section shall amalgamate only with another company registered under this section and having similar objects.
(11) 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 2*** with fine which shall not be less than twenty-five thousand rupees but which may extend to 3[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.