Meetings of Section 8 Company |

When a company decides to establish itself as a Non-Profit Organization (NPO), it means that its primary goal is to utilize any profits or earnings towards supporting and advancing areas such as the arts, commerce, education, charitable endeavors, environmental protection, sports, scientific pursuits, research, social welfare, or religious activities. In legal terms, such a company is categorized as a Section 8 Company.

An Non-Profit Organization (NPO) is prohibited from distributing its funds as dividends to its members. Instead, these funds must be dedicated to advancing charitable objectives. These entities are obligated to adhere to governmental guidelines and must obtain an incorporation certificate from the central authorities.

As per the rules, the government has the authority to close down the corporation if it fails to fulfill its responsibilities to the Central Government. Furthermore, if the company’s declared objectives are untrue, severe legal measures will be pursued against all its members.

Eligibility to Apply for Section 8 Company

If an individual or a collective wishes to qualify for registration as a Section 8 Company, their intended purposes or aspirations must align with certain criteria. These goals must be confirmed to meet the Central Government’s standards to ensure eligibility.

When a company seeks to advance trade, scientific endeavors, learning, artistic expression, athletic pursuits, investigations, philanthropy, societal well-being, preservation of nature, or similar objectives.
When a company plans to utilize any profits (if generated) or additional revenue acquired after its establishment solely for advancing its objectives.
When the company has no plans to distribute dividends to its shareholders.

Exemptions Provided To A Section 8 Company Under The Companies Act, 2013

A directorship position within a Section 8 company does not count towards the maximum directorship limit specified in Section 165 of the Act.
Upon issuing a notice, it’s possible to convene a general meeting.
In contrast to other companies, a Section 8 Company is not obligated to inform its members about the general meeting’s proceedings before a 21-day period. This timeframe has been reduced by seven days according to the Act.
A Section 8 corporation is restricted from holding more than four meetings within a span of six calendar months. They are only allowed to conduct a single meeting during the designated period as per the current law.
These companies are exempted from various regulations, including the requirement to maintain minutes of board and general meetings, as well as other resolutions. However, if the company’s articles necessitate confirmation through the distribution of minutes, these meeting records can be documented within thirty days following the conclusion of the meeting.
Any business or establishment has the eligibility to become a part of a Section 8 company.
Section 8 entities are not bound by the provisions of Section 149(1) of the Act, thus they are not obliged to appoint independent directors. Additionally, due to the aforementioned reason, the audit committee of such corporations is not mandated to include Independent Directors on its Board.
Businesses encompassed by Section 8 are not compelled to appoint a practicing Company Secretary (CS) as their company secretary. Moreover, certain businesses are exempted from adhering to secretarial requirements.
A Section 8 Company is excluded from the purview of Section 178 of the Act. Consequently, there is no obligation for these companies to establish a Remuneration and Nomination Committee. Furthermore, they are not required to institute a Stakeholders Relationship Committee.
Certain provisions, such as Sections 150, 152(5), 160, and others, are not relevant to corporations governed by Section 8.

Exemption Provided Under Income Tax Act, 1961

Section 8 companies can take advantage of specific exemptions provided by the IT Act. These entities are eligible for various privileges, including tax benefits outlined in Section 80G of the Income Tax Act of 1961, owing to their focus on serving a “charitable purpose.”

Presented below are the various exceptions or benefits that are ordinarily granted to these enterprises:

Corporations falling under the purview of Section 8 enjoy an exemption from the usual stamp duty applied to other companies, resulting in notably reduced stamp duty expenses.
Under the provisions of the Income Tax Act of 1961, contributors to Section 8 organizations are eligible for a reimbursement of 50% of their contributions. This benefit remains valid for a period of 1 to 3 years as outlined in Section 80G of the Act.
When a Section 8 company is registered under the provisions of Section 12AA of the Income Tax Act, any profits it generates are not subject to taxation.
Annually, the Central Government releases regulations designed to alleviate the tax burden carried by these enterprises.

Exemption Provided Under Indian Stamp Act, 1899

The Indian Stamp Act of 1899 governs the imposition of stamp duty on the Memorandum of Association (MOA) and Articles of Association (AOA) of Section 8 companies, as well as any augmentation in their share capital.
Numerous states, Maharashtra and Delhi among them, provide discounted stamp duty rates for AOAs, MOAs, and instances where Section 8 companies raise their share capital.

Board Meeting For Section 8 Company

Number of Meetings (Section 173): A Section 8 company is required to hold a minimum of one board meeting every six calendar months, considering the exemption under section 173(1). The entirety of Section 173 of the 2013 Companies Act is not pertinent here, except for this provision.
Quorum Requirement for Board Gatherings (Section 174): In the context of a section 8 company, the minimum number of attendees needed for a board meeting is calculated as the lesser of two options: either eight directors or a quarter (25%) of the entire board’s authorized capacity, as outlined in section 174(1) in conjunction with the exemption notification. However, the quorum must never be fewer than two individuals. For instance, if a Section 8 Company has 10 directors on its board, it must ensure a quorum of at least 3 directors (rounded to the nearest whole number) to convene the meeting.
Passing of Resolutions via Circulation (Section 179): Certain powers stipulated in Section 179(3) of the Companies Act of 2013 can only be exercised by the Board during a physical meeting. Nevertheless, a Section 8 Company’s Board can utilize a selection of these powers through a process of circulating documents among its members, excluding others mentioned in the same section.

To:

Borrow money
Invest Company funds
Grant loans or provide guarantees for loans

General Meetings In A Section 8 Company

Annual General Meeting Schedule (Section 96): As per the second proviso of section 96(2), the board of directors is obligated to pre-determine the time, date, and venue for every annual general meeting of a section 8 company. This scheduling should consider the directives given by the company during its preceding general meeting.
Notice Timeline for AGM (Section 101): In contrast to the 21-day notice period mandated by section 101(1) of the Companies Act for an annual general meeting of a section 8 company, such a company can convene either an annual or extraordinary general meeting with a minimum notice period of 14 days.

Minutes of the proceedings of board and general meetings (as per Section 118)

The exemption notification G.S.R. 466(E) dated June 5, 2015, specifies that the provisions of Section 118 do not normally apply to Section-8 Companies. However, there is a specific condition that if the articles of association of such a company require the minutes to be circulated for confirmation, then the minutes can be documented within 30 days after the meeting’s conclusion. It is not mandatory to prepare or circulate meeting minutes unless the articles of association necessitate their documentation.

Conclusion

Section 8 companies leverage government support to advance their philanthropic objectives. These organizations rely on steady funding and special dispensations to facilitate their missions, as their primary aim is not profit-oriented. These granted exemptions enhance the likelihood of these enterprises receiving the necessary aid. Additionally, by utilizing companysuggestion’s services, you can expedite your company’s legal processes. Please contact our team for additional details.