Sections (8) of companies act, 2013 is associated with formation of those companies which are formed with the objective of charity (promotion of art, science, commerce, sports, education, research, welfare) without adding the words “limited” or “private limited” to the name of the newly registered business entity. Some of the important points that support formation of Section 8 Company in India are mentioned below:
1.) The satisfaction of central government is mandatory, that an entity which is proposed to be registered under section 8 of Companies act.
- Includes the context for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment.
- The profits or income of newly formed entity are going to be used for promoting charitable objectives of the corporate .
- The Central Government may issue license on such condition because it deems fit; allow it to be registered as a Ltd. .
2.) Section 8 Company registration shall enjoy the privileges and also are subject to all or any the obligations of limited companies.
- Once the new Company registered under this act then they’re not susceptible to alter the memorandum or articles of association without taking prior permission from the central government.
- Conversion into another sort of Company incorporation is merely possible after complying with such conditions as prescribed from time to time.
3.) Revocation of licence: Central government may revoke the licence if the corporate contradicts with any of the wants mentioned under this section or during a manner violative of objectives of the corporate or prejudicial to public interest, direct the new Company registered to convert its status & change its name.
Subsequently, When the licence is revoked and therefore the Central Government is satisfied that it’s essential within the public interest that the new Company registered should be amalgamated/wound up with another Company incorporation under this, then the Central Government may provide for such amalgamation to make one Company with such features as prescribed by the govt within the order.
4.) Winding up/Dissolution of a corporation registered under section (8) companies act, are often transferred to a different Company registered under this section subject to certain conditions because the Tribunal may impose, or could also be sold and proceeds are going to be credited to the Rehabilitation and Insolvency Fund formed under section 269.
5.) Amalgamation between companies might be done as long as both are registered under an equivalent section of the act, having similar objects.
6.) Compliance default: Any default in complying with the wants specified under this section, be punishable with a fine which shall not be but 10 lakh rupees extending upto 1 crore rupees and therefore the directors/officers of the corporate who found guilty shall be punishable with imprisonment for a term which can reach 3 years or fine not be but INR 25,000 extending to INR 25 lakh or both.