Conversion of Private Limited Company into Trust

Conversion of Private Limited Company into Section 8 Company

So, now you have thought to convert your profit making business into non profit making and do good to society. So, you can do so by converting your Private Limited Company into Section 8 Company i.e. Non Profit Organisation

The concept of non-profit making company is quite old in India. In erstwhile Companies Act, 1956 it was regulated by Section 25 and that is why it was popular as Section 25 Company. However in Companies Act 2013 provisions related to non-profit making company are given in Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014.

Definition of Section 8 Company:

Any person or an association of persons intending to be registered as a limited company for charitable purpose can apply for registration of section 8 company.
However, it shall prove to the satisfaction of the Central Government that:

·          its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

·          intends to apply its profits, if any, or other income in promoting such object; and

·          intends to prohibit the payment of any dividend to its members.

The power of the Central government is delegated to the Registrar of Companies (‘ROC’) having Jurisdiction over the area where the Registered office of the company is proposed to be situated. Hence, the application for registering such company is to be made to the ROC.

Key Benefits:

• Many privileges and exemptions under Company Law.
• Exemption of Stamp duty for registration.
• Registered partnership firm can be a member in its own capacity.
• Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.

Steps for conversion of private limited into Section 8 Company:

·         Apply for name:

The promoters should apply for the name of the company to be approved with the concerned ROC of the State where the company has to be formed in E Form- INC- 1 by payment of Rs. 1000 through Credit Card or Net Banking.

·         Make an application in Form RD-1:

A person or an association of persons desirous of incorporating a company with limited liability under sub-section (1) of section 8 without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, shall make an application in Form No.RD-1, along with the prescribed fee, to the Registrar for a license under sub-section (1) of section 8. (Form INC-12 to be attached with form RD-1) accompanied by following documents:

1.      The draft Memorandum of Association as per form no. INC.13 of the proposed company.

2.      The draft Articles of Association of the proposed company.

3.      The declaration in Form No.INC.14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice.

4.      A statement showing details of assets & liabilities of the company, as on the date of application or 30 days prior to that date.

5.      An estimate of future annual income & expenditure of the company for next 3 years.

6.      Board report

7.      Audit report

8.       the certified copy of the resolutions passed in general/ board meetings approving registration of the company under section 8; and

9.      a declaration by each of the persons making the application in Form No. INC.15.

·         Give notice in newspaper:

The company shall publish a notice in newspaper (one in vernacular language & one in English language) in form INC-26 at its own expenses within a week from the date of application. Copy of such notice in newspapers shall be submitted to the Registrar of Companies immediately after their publication

·         License granted by Registrar:

The Registrar shall, after considering the objections, if any, received by it within 30 days from the date of publication of notice, and after consulting any authority, regulatory body, Departments or Ministry of Central or State Government as it may, in its discretion, decide whether the license should pr should not be granted. The license shall be in form INC-16 or form INC-17. The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one or partly in the other, such conditions of the license as may be specified by Registrar.

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