Section 8: Formation of companies with charitable objects, etc
This section is for the formation and regulation of companies with charitable objects, allowing them to be registered without the word "Limited" or "Private Limited" in their name, and outlining the conditions and consequences for such companies.
Penalty
(11) If a company makes any default in complying with any of the requirements laid down in this section, the company shall, without prejudice to any other action under the provisions of this section, be punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees and the directors and every officer of the company who is in default shall be punishable 2*** with fine which shall not be less than twenty-five thousand rupees but which may extend to 3[twenty-five lakh rupees]:
The section, clause by clause
What the section says
In plain terms
(1)Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company—
The Central Government can allow a company to be registered without the word "Limited" or "Private Limited" in its name if it proves that the company's objects include promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection, and it intends to use its profits for these objects and not pay dividends to members.
(1)(a)has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(1)(b)intends to apply its profits, if any, or other income in promoting its objects; and
(1)(c)intends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.
(2)The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
Companies registered under this section have the same privileges and obligations as limited companies.
(3)A firm may be a member of the company registered under this section. (4) (i) A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
A firm can be a member of a company registered under this section.
(3)(ii)A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.
(5)Where it is proved to the satisfaction of the Central Government that a limited company registered under this Act or under any previous company law has been formed with any of the objects specified in clause (a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in clauses (b) and (c) of that sub-section, it may, by licence, allow the company to be registered under this section subject to such conditions as the Central Government deems fit and to change its name by omitting the word “Limited”, or as the case may be, the words “Private Limited” from its name and thereupon the Registrar shall, on application, in the prescribed form, register such company under this section and all the provisions of this section shall apply to that company.
The Central Government can allow a limited company to be registered under this section if it was formed with charitable objects and has the required restrictions, and can change its name by removing "Limited" or "Private Limited".
(6)The Central Government may, by order, revoke the licence granted to a company registered under this section if the company contravenes any of the requirements of this section or any of the conditions subject to which a licence is issued or the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company or prejudicial to public interest, and without prejudice to any other action against the company under this Act, direct the company to convert its status and change its name to add the word” Limited” or the words “Private Limited”, as the case may be, to its name and thereupon the Registrar shall, without prejudice to any action that may be taken under sub-section (7), on application, in the prescribed form, register the company accordingly:
The Central Government can revoke a company's licence if it contravenes the requirements of this section or conducts its affairs fraudulently, and can direct the company to change its name to add "Limited" or "Private Limited".
provisoProvided that no such order shall be made unless the company is given a reasonable opportunity of being heard:
provisoProvided further that a copy of every such order shall be given to the Registrar.
(7)Where a licence is revoked under sub-section (6), the Central Government may, by order, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act or amalgamated with another company registered under this section:
If a licence is revoked, the Central Government can direct the company to be wound up or amalgamated with another company if it is in the public interest.
provisoProvided that no such order shall be made unless the company is given a reasonable opportunity of being heard.
(8)Where a licence is revoked under sub-section (6) and where the Central Government is satisfied that it is essential in the public interest that the company registered under this section should be amalgamated with another company registered under this section and having similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order, provide for such amalgamation to form a single company with such constitution, properties, powers, rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order.
The Central Government can order the amalgamation of a company with another company having similar objects if its licence is revoked and it is in the public interest.
(9)If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to 1[Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)].
If a company registered under this section is wound up or dissolved, its remaining assets can be transferred to another company with similar objects or sold and the proceeds credited to the Insolvency and Bankruptcy Fund.
(10)A company registered under this section shall amalgamate only with another company registered under this section and having similar objects.
A company registered under this section can only amalgamate with another company registered under this section and having similar objects.
(11)If a company makes any default in complying with any of the requirements laid down in this section, the company shall, without prejudice to any other action under the provisions of this section, be punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees and the directors and every officer of the company who is in default shall be punishable 2*** with fine which shall not be less than twenty-five thousand rupees but which may extend to 3[twenty-five lakh rupees]:
If a company defaults in complying with the requirements of this section, it can be fined between 10 lakh rupees and 1 crore rupees, and its directors and officers can be fined between 25,000 rupees and 25 lakh rupees.
provisoProvided that when it is proved that the affairs of the company were conducted fraudulently, every officer in default shall be liable for action under section 447.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for “the Rehabilitation and Insolvency Fund formed under section 269” (w.e.f. 15-11-2016).
- 2. The words “with imprisonment for a term which may extend to three years or” omitted by Act 29 of 2020, s. 3 (w.e.f. 21-12- 2020).
- 3. Subs. by Act 29 of 2020, s. 3, for “twenty-five lakh rupees, or with both” (w.e.f. 21-12-2020).
This section refers to
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.