Is your private limited company driven by a passion for social good? Do you envision your profits contributing to a greater cause rather than shareholder dividends? If so, converting your private limited company into a Section 8 company could be the transformative step your organization needs.
At Praman Advisors Private Limited, we specialize in guiding companies through this seamless transition, ensuring full compliance with regulatory norms and maximizing the benefits of a non-profit structure. Leveraging cutting-edge AI and innovative technology, we provide intelligent compliance solutions to make your conversion journey effortless.
1. Overview: What is a Section 8 Company?
Section 8 Company, established under Section 8 of the Companies Act, 2013, is a non-profit organization (NPO) formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any other similar objective. The key differentiator is that any profits or income generated by a Section 8 company must be applied solely towards promoting it’s objectives and cannot be distributed as dividends to it’s members. Essentially, it is a company with a charitable mission, operating with the credibility and structure of a corporate entity.
Converting your private limited company to a Section 8 company offers a multitude of advantages for organizations committed to social impact:-
- Enhanced Credibility and Trust: Being registered under the Companies Act, 2013, a Section 8 company enjoys greater credibility and public trust compared to other NGO structures like trusts or societies. This often translates to easier fundraising and partnerships.
- Tax Benefits (12A & 80G): Section 8 companies are eligible for significant tax exemptions. After 12A registration, the income of the company will be exempted from tax, provided it is used for it’s specified objectives. Furthermore, donations made to an 80G registered Section 8 company are eligible for tax deductions for donors, making it highly attractive for contributions.
- No Minimum Share Capital Requirement: Unlike other company types, Section 8 companies do not require a minimum share capital, making them accessible for startups or smaller philanthropic initiatives.
- Exemption from "Private Limited" Tag: A Section 8 company can drop the "Private Limited" or "Limited" suffix from its name, further emphasizing it’s non-profit nature (e.g. "XYZ Foundation" instead of "XYZ Foundation Private Limited").
- Professional Management: Governed by a Board of Directors, Section 8 companies adhere to robust corporate governance norms, ensuring transparency, accountability and professional management.
- Limited Liability: Like private limited companies, members of a Section 8 company avail limited liability, safeguarding their personal assets.
Converting your private limited company to a Section 8 company involves preparing and submitting several crucial documents. While the exact list may vary slightly based on specific circumstances, here are the common requirements:-
- Company's Existing Documents:
- Memorandum of Association (MoA) and Articles of Association (AoA) of the private limited company.
- Audited Financial Statements, Board's Reports and Audit Reports for the two financial years immediately preceding the application date (or one year if the company has functioned only for one year).
- Statement showing details of assets and liabilities of the company as on a date not earlier than 30 days of the application.
- Certified true copy of the Board Resolution and Special Resolution passed for the conversion.
- Copy of the notice convening the General Meeting along with the explanatory statement.
- Proposed Section 8 Company Documents:
- Draft MoA (in Form INC-13) and AoA for the proposed Section 8 company, aligning with the new objectives.
- Statement of estimated future expenditure and annual income for the next three years, detailing sources of income and objects of expenditure.
- Declaration in Form INC-14 by a practicing CA/CS/CWA affirming compliance with the Companies Act provisions.
- Director and Shareholder Documents:
- PAN Card and Aadhar Card of all directors and subscribers.
- Proof of address for registered office (electricity bill, rent agreement, NOC from owner).
- Consent to act as director (DIR-2).
- Other Essential Documents:
- No Objection Certificate (NOC) from all secured creditors (if any loan is outstanding).
- NOC from concerned authorities if the company has received any special status, privilege, exemption or grant.
- Proof of publication of notice in newspapers (Form INC-26).
The conversion process is meticulous and involves several steps, generally taking 30-40 working days depending on government approvals and query resolution. Praman Advisors simplifies this complex journey:
- Board Meeting & Special Resolution:
- Convene a Board Meeting to approve the conversion and decide on the new name.
- Pass a Special Resolution in a General Meeting for the conversion and alteration of MoA/AoA.
- File Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing the Special Resolution.
- Name Reservation (RUN Form):
- Apply for name reservation for the proposed Section 8 company using the RUN (Reserve Unique Name) form on the MCA portal. The name should align with the charitable objects and can omit "Private Limited."
- Application for License (RD-1 & INC-12):
- File an application in Form RD-1 to the Registrar of Companies (RoC) for conversion, seeking approval to register as a Section 8 company.
- This application is accompanied by Form INC-12 (application for granting a license under Section 8) and all the required supporting documents mentioned above.
- Newspaper Advertisement (INC-26):
- Publish a notice in Form INC-26 within one week of applying to the ROC. This notice must appear in one vernacular newspaper and one English newspaper circulating in the district of the company's registered office and also on the company's website.
- A copy of the published notice must be submitted to the ROC.
- ROC Scrutiny and Approval:
- The ROC will review the application and consider any objections received within 30 days of the notice publication.
- The ROC may consult with other authorities (e.g. Income Tax Department, Charity Commissioner) before deciding whether to grant the license.
- Grant of License (INC-16/17) & Final Incorporation:
- Upon satisfaction, the ROC issues the license in Form INC-16 or INC-17.
- On receipt of the license, the final application for incorporation of the Section 8 company is made.
- The ROC then issues a fresh Certificate of Incorporation, effectively converting your private limited company into a Section 8 company.
The fees for converting a private limited company to a Section 8 company typically involve government filing fees (for forms like RUN, MGT-14, RD-1, INC-12 etc.), stamp duty (though Section 8 companies are generally exempt from registration stamp duty) and professional fees charged by consultants like Praman Advisors.
- Government Fees: These are prescribed by the Ministry of Corporate Affairs (MCA) and vary based on authorized capital (though not applicable for Section 8 minimum capital), form types and state-specific stamp duties.
- Professional Fees: Praman Advisors provides transparent fee structures for our comprehensive services, which include document preparation, application filing, follow-ups and expert guidance throughout the process.
Please contact Manju Laur at 📞 +97119 94042 for a personalized quote tailored to your specific requirements.
Timelines: The entire process usually takes 30 to 40 working days, provided all documentation is accurate and there are no significant queries from the ROC or other authorities
