CLOSURE OF SECTION 8 COMPANY
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If you have stopped operating any business activity in the section-8 company then it is better to apply for section 8 company closure properly as per law to avoid penalties and other consequences.
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Close Section 8 Company
Section-8 company is a non-profit organizations registered only for the welfare of the society without the motive of earning any revenue or profits from its activity, the principal object is to do a charitable activity, to provide benefit to the persons including individuals, body corporates another living organisms. The main objective of the company is to promote education, art, commerce, literature, science, sports, to protect the earth and environment or living beings, and for the development of society, etc. Its synonyms are NGO or NPO. It can be registered either as a Private ltd company or a public ltd company but the procedure of its closure is very different from the closure of other companies.
To operate its activities the money is required and it can be arranged by gathering fund and donations only because the motive of promoters is to provide privilege to the organisation by providing their true service at free or at low rates. The company is prohibited in the distribution of its revenue between its member as a dividend or in any other manner. It can hold movable or immovable properties on its own name including land. Its incorporation is easy but not very easy to close it like by just stopping the operations of the business activity of the company, there is a proper procedure which has to be followed for its closure.
Before the closure of the company, the consent of the shareholders shall be received by BOD. There are certain provisions and conditions that are levied by the CG at the time of licensing for example the affairs of the firm must be legal, objects should be like protection of living creatures or earth, promoting religion, culture, education, and any kind of social welfare in any section of state or district of India, etc. The CG has the power to revoke the license if the company fails to duly comply with the compliance imposed on it or at the event of any default but before revocation, a reasonable opportunity of being heard shall be provided to the applicant. Firstly, it has to apply for surrender its licence to the ROC rather than filing a closure application, once the request is accepted by the ROC, then closure request shall be filed, but before its closing, a form shall be filed for its conversion into any other type of company
Documents Required For Closing Section 8 Company
- Certificate of Incorporation
- Memorandum of Association of company
- Article of Association of company
- Last year audited balance sheet & profit & loss A/c
- Audit report
- Copy of newspaper advertisement
- Digital Signature Certificate of existing director
Process For Section 8 Company Closure
- Conduct director’s meeting and pass the board resolutions for surrendering the license & conducting a general meeting for shareholders’ permission.
- Conduct an EGM and pass a special resolution (SR), if shareholders agree with such a decision, then only the closure procedure can be started.
- File MGT-14 within 30 days from passing the SR in the EGM along with relevant documents, DSC, and fees.
- Then INC-18 shall be filled to the regional director (RD) along with the requisite documents and requisite fees for its conversion.
- The attachments are:
- Copy of notice sent to the members for calling an EGM
- Copy of SR
- Copy of list of creditors, if any
- Copy of an explanatory statement
- Copy of advertisement in the format of INC-19 one in English and one in a vernacular newspaper in English and vernacular language, if any people have any kind of objection in this, it can be raised before
- Copy of application along with the proof of delivery send to the different department to the Chief Commissioner of Income Tax having jurisdiction over the company, Income Tax officer in whose jurisdiction the company is situated, the Charity Commissioner, the Chief Secretary of the state where the registered office of the company is situated, any other organization or department of the Central or State Government or the administration in whose jurisdiction the company is operating its function
- Declaration from the Directors stating that no portion of the earning, assets, or property of the company is paid or transferred to any member or any other person
- Copy of NOC from the special authority if it has obtained any special grant, exemption, privileged from any authorities or governmental department
- Copy of financial statement and annual return which is furnished to the MCA up to the financial year preceding of the application filed to the RD for the surrender of license
- Copy of certificate from the practising professional like Chartered Accountant, Company Secretary, Cost Accountant in practice.
- After the assent of the RD, the company has to file INC-20 along with the copy of the approval of the regional director, altered Memorandum and Articles Of Association, and fees to the registrar
- On receipt of the request the ROC may accept it and the status of the section-8 company will be converted into either a Pvt ltd or public limited company and section-8 company will no longer be in existence.
- Now to close this company, the company has to follow the procedure for closing up of the normal company.
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Frequently Asked Questions
Without the approval of the registrar, a company cannot get closed or wind up. For removing the name of the company from the register of ROC the application for strike off shall be filed to the registrar.
Yes, the compliance of the company must be completed before the filing of the closure application.
A section-8 company can be closed only if it stops operating its business activity but at least one year must be elapsed before filing the closure application.
Yes, the Central Government can revoke the license of the company anytime if it violates the provision and conditions under which the license is issued.
As per the provision of the companies act, it is necessary to make a newspaper advertisement before filing the application to the registrar for closing the section-8 company.
Yes, the company can convert itself into a private limited company as well as a public limited company.
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