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Conversion of Section-8 Company into Private Limited

A Non-profit Company or Section 8 Company is a company which has promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object as its objects, intends to apply its profits, if any, or other income in promoting its objects and prohibits any payment of dividend to its members. The company registered as a Section 8 company enjoys all the privileges and is subjected to all the obligations of limited companies.

Any Section 8 Company intending to get itself converted into the company of any other kind may do so by passing a special resolution to this effect and making an application with the Regional Director in terms of the provisions of Rule 21 and Rule 22 of the Companies (Incorporation) Rules, 2014.

Under Companies Act, 2013, the concept of Non-Profit Companies is prescribed under Section 8 of the Act. The idea of Non-Profit Companies in our country, India is not quite new. The profits earned from Non-Profit Companies are invested for the betterment and development of society. Furthermore, Section 8(4)(ii) of the Companies Act, 2013, the Section 8 Company can go for Conversion into any other form of Company under the Act.

The Companies (Incorporation) Rules, 2014 also provides for the procedure for the Conversion of Section 8 Company into any other form of Company. In this page, we will discuss the procedure for Conversion of Section 8 Company into Private Company.

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About This Plan

Get your section 8 company converted into private limited company in the fastest possible manner.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 7 to 10 working days.

Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • DSC (2 nos)
  • Filing of SPICe+ Form
  • Issue of Incorporation Certificate along with PAN and TAN
  • Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
  • Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
  • Assistance in Opening Bank Account
Who Should Buy

  • Businesses looking to expand or scale operations on higher level
  • Startups looking to raise capital and issue ESOPs
  • Businesses looking to convert their existing firm structure into private limited company
  • Businesses aiming to work globally or with reputed clients
How It's Done

  1. DSC Application

  2. Name approval form filing

  3. Preparation of Incorporation Documents

  4. Getting those docs signed by the respective stakeholders

  5. Filing of e-Forms with ROC

  6. Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

  1. Name, Contact Number and Email Id of all the Stakeholders.

  2. Directors Identification Number, if already.

  3. Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.

  4. Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.

  5. Latest Month Personal Bank statement of all the Stakeholders.

  6. Specimen Signatures of all Stakeholders.

  7. Few Proposed Business Names along with Objects.

  8. Latest Electricity Bill/Landline Bill of Registered Office.

  9. NOC from owner of registered office, If Owned. (Download Template)

  10. Rent Agreement from Landlord, If Rented/Leased. (Download Template)

  11. Brief description of main business activities of the proposed Company.

  12. Shareholding pattern (50:50 or 60:40) between the Stakeholders.

  13.  Authorised & Paid Up Share Capital of the Company.

What Are a Section 8 Company and a Private Company?

The purpose id Section 8 of company formation is to support and foster various activities linked to education, science, art, religion, sports, charity, social welfare, environmental protection, research, or any other relevant goal. Accordingly, there are no bonuses or dividends paid to section 8 company members. Instead, section 8 uses its income to further its mission by advocating and attaining it. 

A private limited company has been legally restricted from a public company whose assets are offered for sale to the general public. The private Company’s inability to sell shares to the general public does not imply that it is a small business. A private company is what the Companies Act of 2013 defines in Section 2(68). The external validity of shares through the Company’s articles of association (AoA) is prohibited by Section 2(68) of the Companies Act, 2013. Two hundred members are the maximum that a private company can have.

What Are the Legal Provisions Associated With Converting a Section 8 Into a Private Company?

The following legal requirements apply when a Section 8 organization is converted into a private company:

  • The Companies Act, 2015 Section 8
  • Companies incorporation rules, 2014 rule 21
  • Companies incorporation act, 2014 rule 22
  • The 2014 Companies Incorporation Rules’ Rule 23.

What Are The Conditions For Conversion Of Section 8 Company Into Private Company?

As Per Rule 21 Of The Companies (Incorporation) Rules, 2014

The conditions prescribed for the Conversion as per Rule 21 of the Companies (Incorporation) Rules, 2014, are as follows:

  • The Company should pass a Special Resolution in its General Meeting for the Conversion of Section 8 Company into Private Company.
  • The Notice of the General Meeting should be attached to the Explanatory Statement. The Explanatory Statement should include:
  1. The Incorporation date of the Company.
  2. The main objects in the Memorandum of Article (MoA) of the Company.
  3. The reason due to which the current structure of the Company is not able to achieve the main object.
  4. If the main objects of the Company are proposed to be altered then what would be the altered objects and the reason for alteration of such objects.
  5. The details of the impact of Conversion on the members of the Company
  6. The details of the benefits that may accrue to the members of the Company after the Conversion of Section 8 Company into Private Company.
  7. List of privileges and concessions which are currently enjoyed by Section 8 Company. The privileges and concessions include the tax exemptions, receiving donations, foreign contributions, land or any other immovable properties.
  8. The details of the market price of the property acquired by the Company and the concessional rate given by the Company of such property.
  9. The Details of donations and bequests received by the Company.
  • The certified true copy of the Special Resolution passed by the Company in its General Meeting should be filed with the Registrar of Companies (RoC).
  • The certified true copy of Notice for the convening of General Meeting of Company should be filed with the Registrar of Companies (RoC). 
  • The application filed to the Regional Director should include the following Attachments:
  1. A true certifies copy of the Special Resolution passed by the Company in the General Meeting.
  2. The true certified copy of the Notice for the convening of General Meeting of the Company.
  3. The proof of serving Notice should be sent to the following authorities: 
  • To the Charity Commissioner, 
  • To the Income Tax Commissioner who has jurisdiction over the Company, To the Chief Commissioner of Income Tax who has jurisdiction over the Company, 

  • To any central department or state department or any organization or any authority in whose jurisdiction the Company was operating. 

  • The copy of the application filed to the Regional Director should be submitted to the Registrar of Companies (RoC) also.

As Per Rule 22 Of The Companies Incorporation Rules, 2014

The conditions prescribed for the Conversion as per Rule 22 of the Companies (Incorporation) Rules, 2014, are as follows:

  • The Company should publish a notice for the Conversion of Section 8 Company. The Notice should be published in at least one vernacular newspaper in which the registered office of the Company is situated, and at least in one English newspaper having wide circulation in the district where the Companies registered office is located.
  • All the annual returns and financial statements of the Company should be filed before making an application of Conversion to the Regional Director (RD). 
  • The Directors of the Company should submit a declaration before the Conversion, stating that no profit of the Section 8 Company is used and distributed among the members of the Company or any other person claiming through them. 
  • The Company should attach a certificate from a practising Chartered Accountant (CA), Company Secretary (CS), Certified Management Accountant (CMA) certifying that the conditions relating to the Conversion of Section 8 Company into Private Company as laid down in the Companies Act, 2013 has been duly complied with. 
  • The representations if any by the authorities should be made to the Regional Director within 60 days of receipt of the Notice. The representations should be made within 60 days of receipt of the Notice.
  • The copy of proof of serving of Notice should be attached to the application made to the Regional Director (RD).
  • The Regional Director can ask the applicant to get approval from any particular authority for the Conversion and can also obtain the report from the Registrar of Companies (RoC).
  • After the approval from the Regional Director, the Company should hold a General Meeting for the alteration of Memorandum of Association (MoA) and the Articles of Association (AoA) for the Conversion. The Company after the General Meeting shall file with the Registrar of Companies:
  1. The true certified copy of the approval of the Regional Director within 30 days of receipt of approval in Form INC-20 with the prescribed fees. 
  2. The altered Memorandum of Association (MoA) and Articles of Association (AoA) of the Company.
  3. The declaration by the Directors that the conditions if any imposed by the Regional Directors are duly complied with.

Mandatory Checks before Conversion of Section 8 to Private Limited

  1. Company shall seek approval of its Shareholders/Members for conversion by passing a Special Resolution in a duly convened general meeting. 
  2. Company shall annex a detailed explanatory statement indicating the reasons for conversion together with the notice of the general meeting.
  3. Company shall publish a notice pertaining to the proposed conversion at its own expense.
  4. The Board of directors shall furnish a declaration that the company will abstain from directly or indirectly paying or transferring the income or property of the company to any person who is or has been the company’s members or any person who is claiming through any one or more of them.
  5. Company shall procure a No Objection Certificate (NOC), in case of any special status, privilege, exemption, benefit or grant(s) is availed from any authority.
  6. Company shall obtain a Compliance Certificate from any practicing Chartered Accountant (CA) or Company Secretary (CS) or Cost Accountant (CWA) to the effect that all the prescribed conditions of the Act and rules made thereunder pertaining to conversion are adhered to.
  7. Company is required to file all its financial statements, Annual Returns and all other relevant statutory returns required under the Act up to the financial year prior to the submission of application to the Regional Director (RD).
  8. In case the application for conversion is made after the expiry of 03 months from the date of preceding financial year, then a statement of company’s financial position duly certified by Chartered Accountant (CA) made up to a date within 30 days of filing the application shall be attached with such application.

Procedure for Conversion of Section 8 into Private Limited

  1. Convene a Meeting of Board of Directors [As per section 173 & SS-1]:
    The company shall convene a Meeting of its Board of Directors to pass a Board resolution for approving the proposal of converting the Section 8 Company into a company of any other kind. Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
  2. Convene General Meeting [Section 96, 100 and Secretarial Standard (SS-2)]:
    The company shall convene a General Meeting of its Members to pass a Special resolution for approving the proposal of converting the Section 8 Company into a company of any other kind. Refer to the Procedure for Conducting General Meeting for a detailed procedure.
  3. Filing Form MGT-14 with ROC:
    The company shall file Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing Special Resolution in General Meeting along with the requisite documents and fees as specified in the Companies (Registration offices and fees) Rules, 2014.
  4. File Conversion application with the Regional Director (RD) [Section 8(4)(ii) of the Companies Act, 2013 and Rule 21(4) & 21(5) of the Companies (Incorporation) Rules, 2014]:
    • The company shall file an application in Form No. INC-18 seeking approval from the Regional Director (RD) for its conversion into any other kind along with the prescribed fees and the following documents
      • Mandatory attachments:
        • Memorandum of association 
        • Articles of association 
        • Certified true copy of board resolution(s) authorizing conversion 
        • Certified true copy of special resolution authorizing conversion into any other kind and notice convening the general meeting along with explanatory statement annexed thereto 
        • Certificate from practicing Chartered Accountant (CA) or Company Secretary (CS) or Cost Accountant (CWA)certifying that the conditions laid down in the Act and rules have been complied with 
        • Statement of company’s assets and liabilities as on the date not earlier than 30 days of that date duly certified by auditor 
        • Copy of valuation report by a registered valuer w.r.t market value of assets 
        • Audited financial statements, Board’s reports, annual returns and audit reports for each of the 02 financial years immediately preceding the application date or where the company has functioned only for 01 financial year for such year 
        • No-Objection Certificate (NOC) from all the creditors 
      • Optional attachments:
        • Statement of financial position if applicable 
        • Minutiae of fixed assets alienated if any, whilst preceding 03 financial years
        • Lenders written consent in case of any outstanding loan 
        • No-Objection Certificate (NOC) from concerned authority in case company has obtained any special status/ privilege 
        • Testimony in lieu of differential amount paid in case company has acquired any immovable property through lease or otherwise from any Government/ authority/ body corporate/ person since incorporation at concessional rate or free of cost
        • Minutiae of donation/grant/benefit received since its incorporation if company has received any such amount 
        • No-Objection Certificate (NOC) received from sectoral regulatory authority in case company is being regulated by such authority
        • Any other optional attachment(s) as may deem fit.
    • Company shall also ensure filing the copy of application with the Registrar comprising of all the annexures as were filed with the Regional Director (RD).
  5. Serving the notice to all other authorities [Rule 22(2) of Companies (Incorporation) Rules, 2014]:
    Company shall circulate the copy of notice, its publication, application and all the vital attachments by registered post or hand delivery to the following who has jurisdiction over the company:
    • Chief Commissioner of Income Tax 
    • Income Tax Officer 
    • Charity Commissioner
    • Chief Secretary of the State where company’s registered office is situated
    • Any organization or Department of Central Government or State Government or other authority under whose jurisdiction the company has been operating And such authorities shall make their representations, if any to the Regional Director within 60 days of receipt of the notice.
  6. Publish the Notice submitted to Regional Director [Rule 22(1) of Companies (Incorporation) Rules, 2014]:
    • The Company shall at its own expense and within a week from application date of submitting application to the Regional Director (RD) publish a notice about the proposed conversion as under:
      • at least once in a vernacular newspaper and in principal vernacular language of the district where company’s registered office is located having wide circulation in that district, and at least once in English newspaper having a wide circulation in that district and
      • on company’s website as may be notified or directed by Central Government
    • Also, a copy of such published notice in Form No. INC 19 shall be forthwith sent to the Regional Director (RD).
  7. Approval by the Regional Director (RD) [Rule 22(8), 22(9) & 22(10) of the Companies (Incorporation) Rules, 2014]:
    The Regional Director (RD) shall issue an order approving the conversion of section 8 company into a company of any other kind subject to the below-stated terms and conditions:
    • Company shall give up and abstain from claiming w.e.f its conversion date any special status, exemptions or privileges that it enjoyed by virtue of having been registered under the provisions of section 8
    • In case company had acquired any immovable property free of cost or at a concessional cost from any government or authority, then it may be required to pay the difference between cost at which it acquired such property and market price of such property at the time of conversion either to the government or to the authority that provided the immovable property
    • Any accumulated profit or unutilized income of the company brought forward from previous years shall be first utilized to settle all outstanding statutory dues, amounts due to lenders claims of creditors, suppliers, service providers and others including employees and lastly any loans advanced by the promoters or members or any other amounts due to them and the balance, if any, shall be transferred to the Investor Education and Protection Fund within 30 days of receiving the approval for conversion.
  8. Convene a Meeting of Board of Directors [As per section 173 & SS-1]:
    The company shall convene a Board Meeting of its Board of Directors to pass a Board resolution for amending its memorandum of association and articles of association as required under the Act consequent to the conversion of the section 8 company into a company of any other kind. Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
  9. Convene General Meeting [Section 96, 100, SS-2 and Rule 22(11)(i) of the Companies (Incorporation) Rules, 2014]:
    The company shall convene a General Meeting of its members to pass a Special resolution for amending its memorandum of association and articles of association as required under the Act consequent to the conversion of the section 8 company into a company of any other kind. Refer to the Procedure for Conducting General Meeting for a detailed procedure.
  10. Filing of Form MGT-14 [Section 117 of the Companies Act, 2013]:
    The company shall file Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing Special Resolution in General Meeting along with the requisite documents and fees as specified in the Companies (Registration offices and fees) Rules, 2014.
  11. File Conversion Application with the Registrar [Rule 22(11)(ii) of the Companies (Incorporation) Rules, 2014]:
    Company subsequent to the receipt of the approval of the Regional Director (RD) shall file a certified true copy of such approval within 30 days from the date of receipt of order in Form No. INC 20 along with stipulated fee and the following documents with the Registrar:
    • Copy of Order of Central Government
    • Certified true copy of altered Memorandum of Association and Articles of Associations 
    • Declaration of directors for compliance of conditions in case of surrender of license
    • Any other optional attachment(s) as may deem fit.
  12. New Certificate of Incorporation [Rule 22(12) of Companies (Incorporation) Rules, 2014]:
    The Registrar shall register the documents furnished by the applicant company for conversion and thereafter issue a fresh Certificate of Incorporation.
  13. Post Conversion Compliances:
    • Every Alteration made in the memorandum or articles of the company shall be noted in every copy of the memorandum or articles as the case may be. [Section 15 (1) of the Companies Act, 2013]
    • Every Company shall:
      • Have the new Altered Memorandum and Articles of Association with new Certificate of Incorporation printed
      • Paint or affix its name, and the address of its registered office, and keep the same painted or affixed, on the outside of every office or place in which its business is carried on, in a conspicuous position, in legible letters, and if the characters employed therefor are not those of the language or of one of the languages in general use in that locality, also in the characters of that language or of one of those languages [Section 12(3)(a) of the Companies Act, 2013] 
      • Have its name engraved in legible characters on its seal, if any [Section 12(3)(b) of the Companies Act, 2013] 
      • Get its name, address of its registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications [Section 12(3)(c) of the Companies Act, 2013]
      • Have its name printed on hundies, promissory notes, bills of exchange and such other documents [Section 12(3)(d) of the Companies Act, 2013]
    • Send the new address of its registered office to all the Banks, authorities and other Basic Utility Service providers as may be applicable.
  14. File Necessary Amendment Application under the following Acts:
    • Goods and Services Act
    • Shops & Establishment Act
    • Factories Act
    • Inter-State Migrant Workmen Act
    • Private Security Agency Act
    • EPF and ESIC
    • Other Labor Laws
    • Industry Specific Laws.

Takeaway

As per the Companies Act, 2013 under Section 8 the conversion of any company into any other type of company takes place. When there is no method to attain the aim within the present structure of the company, companies turn to conversion. Moreover, the Companies Act 2013 governs the conversion of a Section 8 corporation into a private corporation.

Furthermore, the major cause for conversion is that businesses are unable to achieve their targeted goals within their current Organizational structure. Furthermore, converting a Section 8 corporation to a private corporation is a time-consuming and complex procedure that requires professional guidance.

Our experts will guide you through the conversion process and ensure that your job took place flawlessly.