Converting a Section 8 Company to a Private Limited Company

The Conversion of a Section 8 Company into a Private Limited company is one of the strategic and significant transition is to adapt the changes in the business evolution. While both businesses share a common objective to serve the interest of society, but, their operational framework and structures are different. The article will provide a comprehensive guide by discussing process, benefit of conversion of Section 8 Company into Private Limited Company. 

Brief about Section 8 Company

As per the Companies Act, 2013, a Section 8 Company is a kind of non-profit organization, which is established to promote and encourage charitable causes, art, religion, social welfare, science, education, research, environmental protection, and any other such noble objectives. The Section 8 Companies do not have an objective to earn profit, and any income or profit generated are reinvested into their targets rather than being distributed among shareholders or members.

Process of Conversion of Section 8 Company into Private Limited Company

There is step-by-step procedure of Conversion of Section 8 Company into a Private Limited Company are:

• Board resolution passed by the company for conversion of Section 8 Company into Private Limited Company in the meeting as per the provision of Section 173 of the Companies Act, 2013.
• Special resolution has been passed by the Company in their general meeting for the conversion of the company.
• The notice of General Meeting must be sent with the Explanatory Statement, in which certain details need to mention:

1. • Company incorporation date;
   • Main objects in the Memorandum of Article (MOA) of the proposed company;
   • Reason as the current framework of the Company is not able to achieve the targets;
   • In case, the Company’s main object need to be altered, then mention what will be the amended objectives along with reason;
   • Information of the impact of conversion on the company’s members;

• Benefits that can accrue to the company’s member after the conversion of Section 8 Company into Private Limited Company;

• Privileges and concessions list that are presently enjoyed by Section 8 Company, which includes the foreign contributions, tax exemptions, receiving donations, land or any other immovable properties; 
• Mention the property’s market price acquired by the company and concessional rate given by the Company of such property;
• Information of bequests and details received by the Company.

• Form MGT-14 has filed by the company with the RoC within 30 days of passing the special resolution. It is certified true copy of the special resolution.
• Must obtain a no objection certificate from the authorities like Charity Commissioner, Municipal body, IT department, Central or State government department or any other recognized authority. If the company has obtained special status, benefit, privilege, exemption or grant from any of them.
• The Section 8 Company must file an application to the Regional Director in Form INC-18 along with a copy of RoCs for its conversion to any other kind of Company with certain documents:
• Certified true copy of the resolution passed in the general meeting;
• With the copy of notice of the general meeting with the explanatory statement;
• Notice is serving to all the authorities such as:
• Charity Commissioner;
• Income Tax Officer, 
• To the authority under whose jurisdiction the company is working;
• Chief Secretary of the state where the registered office of the company is situated;
• Chief Commissioner of the Income tax authority as per the company’s jurisdiction.
• Board of directors shall be given declaration to the effect that no part of property or Company’s income has been directly or indirectly transferred or paid by the bonus or dividend to persons or members of the Company, or claiming by any one or more of them.
• The Company shall also require to attach certificate from a practicing CS/CA/CMA certifying along with the application. In which the conditions about to the conversion of Section Company into Private limited company.
• The Company shall file its annual returns, financial statement and fulfil all compliances as per mentioned by the Act up to the previous year of making the application to regional director.
• In certain matter, an application is filed and 3 months have expired from the preceding date of financial year to that financial statement has filed. Then, a financial statement position is duly permitted by the Chartered Accountant up to the date of not preceding 30 days of submitting the application required to be attached. 
• The notice has been published in the district newspaper by the Company with local language. Also published in the English newspaper having a wide circulation and also on the company’s website;

• The Applicant shall file a notice copy in Form INC-19 to the regional director, immediately after the notice publication.

Communicate with the Regional Director 

• From the regional director permission, the Company should hold a general meeting for the alteration of MOA and the Articles of Associations (AoA) for conversion.
• After the general meeting, the Company shall file with the RoC:
• The approval from the regional director of certified copy within 30 days of receipt of approval in Form INC-20 with the prescribed fees.
• The amended MoA and AoA of the Company.
• The director’s declaration that the conditions if any imposed by the regional directors are duly complied with.

Final Thoughts

In the last but not least, the conversion of a Section 8 Company into Private limited company provides more than just a change in legal status. It presents the strategic evolution towards sustainable development and impact, by embracing the transformation, the company can unlock new avenues for investment, innovation, and societal contribution, while exploring the complexities of the modern business environment. The Legal Window has provided the journey of conversion with the comprehensive, if you have further queries, feel free to contact with the Legal Window professionals.