Strike off Section 8 Company

Striking off Section 8 companies involves a more regulated and detailed process due to their non-profit nature which is to be made with the regulations and the need to ensure that the dissolution is certainly made in line with the legal requirements set out in the Companies Act, 2013. Sections 248 and 255 play a very crucial role in the winding up of Section 8 Company and to be made in a proper manner. Striking off of Section 8 Company is a little bit different and complicated in comparison to striking off other corporate bodies. Hence it takes extra efforts to do the strike off of section 8 companies under the Companies Act.

What is Section 8 Company Meaning?

Section 8 of Companies Act 2013 describes the Section 8 company meaning. Such companies focus on nurturing art, sports, commerce, education, charity, social welfare, religion, and natural resource protection, committing profits to these charitable subjects without member or shareholder distribution. Section 8 companies, under the Companies Act which came in 2013 govern, primarily aim for charitable goals and serve trusts. They are ideal for those promoting and serving charitable trusts, but cannot operate as private or public limited companies.

Voluntary Winding up of Section 8 Company in India

Section 8 of the company talks about promoting commerce and other related activities as the companies cannot apply for the process of voluntary strike that is to be made in regulation with Section 248 of the Companies Act, 2013. These regulations provide a beneficial role so that the companies are certainly dissolved in the more specified process. The Companies Act, 2013 does not provide for the voluntary winding up of section 8 companies but can only be made in compliance with the National Company Law Tribunal.

Key Reasons to Strike off Section 8 Company Registration

The different situations under which Section 8 company can opt for strike off are mentioned below:

• If the company fails to manage its operations in one year of its incorporation.
• In case, the company remains non-operational for two continuous financial years and fails to pursue the status of Dormant Company which has been mentioned under section 455 of the company law.
• It has become difficult for the Section 8 companies to align with the new objectives that have been changed by the governing body.

Benefits Regarding Strike off Section 8 Company Registration

In India, the benefits of striking off Section 8 Company registration are given below:

• Section 8 companies are able to avoid compliance under the Companies Act, 2013 including their ever-evolving compliances.
• The companies can avoid fines and hefty penalties that may restrain the company directors from serving another company. In this case, strike-off is an ideal solution.
• Rather than running a business without generating any income, striking off the company is a better option as it is cheaper.

Documents Required for Strike Off Section 8 Company

The documents that are required for the strike off section 8 company registration are:

Mandatory Documents
• Decision of company members and notice for calling the meeting.
• Resolution of the board.
• Memorandum of Association(MoA) of the company.
• Articles of Association(AoA) of the company.
• Company’s verdict and notice of the general meeting.
• A certificate that is issued by practicing CA/CS/CWA.
• No Objection(NOC) by all the creditors and shareholders.
• Declaration certificate by the directors of the company.
• Incorporation Certificate.
• Audited balance sheet.
• Profit as well as loss accounts of the previous year.
• DSC(Digital Signature Certificate) of the existing director.
Optional Documents
• Documents mentioning financial position, if applicable.
• Complete details of the fixed assets that were alienated during the last three financial years.
• In case of any unfinished loan, written consent from the lender is compulsory.
• In case, if the company has acquired any special status/privilege, a No Objection Certificate(NOC) must be issued by the concerned authority.
• If the company has obtained any secured property from any corporate body, government authority or from any person since incorporation by an agreement or for free, proof of payment of a differential amount is compulsory.
• If the company has received any donations, grants or benefits from any authority or individual since incorporation, then they must provide details about their respective gain.
• If the company is being managed by any sectorial manager, then a copy of NOC by the regulatory authority is mandatory.
• After the conversion of the company into a normal company, the company can finally opt for the procedure of strike off as per the procedure mentioned under the Insolvency and Bankruptcy Code, 2016 or under the Companies Act, 2013.

Procedure for Winding Up of Section 8 Company

The Section 8 Company registration does not have a standardized procedure for winding up of their business affairs. The procedure for winding up of section 8 company is:

• Step1: Conversion of Company into a Normal Company

  The first step in this procedure is to convert into a normal company. For this purpose, the applicant company has to submit an application to the MCA along with the documents mentioned above.

• Step2: Scrutiny of Application and Documents

  Once receiving the application and the documents, the authorities must do legal checks and ensure compliance under the governing legislation.

• Step3: Approval by MCA

  An approval is granted by the MCA for the conversion of the applicant company if they do not find any errors or any kind of mismatch during the verification of documents.

• Step4: Application for Strike Off Section 8 Company

  After conversion, the formalities for the procedure of strike off are addressed by the applicant. The applicant of the application needs to submit the application to the MCA along with the necessary documents and required fees.

• Step5: Final Approval for Strike Off

  After verification of the application and the supportive documents, approval for the strike-off is granted to the company.

Governing Law Provisions for Strike off of Section 8 Company

The below mentioned are the governing provisions in relation to strike off of section 8 company registration:

Consequences of Strike Off of Section 8 Company in India

Some of the key consequences of strike off of Section 8 Company are given below:

• After the strike off, the Section 8 companies are no longer able to continue their business operations in legal terms.
• The Incorporation Certificate will be canceled.
• No operations can be performed or executed and the annual returns will also not be possible.
• The name of the company will be removed by the Registrar of Companies.

Forms Need to be Filed for Striking off Section 8 Company

The below mentioned are the required forms that are required to be filed:

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Conclusion

Section 8 company needs to comply with the Companies Act, 2013 in order to work in the industry. If they fail to function or generate earnings, they may strike off, as it is cheaper to run a business without earnings than to run it in losses. There is no standard procedure for winding up of section 8 companies, granted by the MCA. Such Companies have a critical procedure for shutting down their own business affairs, unlike other registered corporate bodies. In order to shut down such a company, first of all, they need to convert themselves into a normal company and surrender their business license to the governing authority. After the strike off, their names are discarded and their Incorporation Certificate is canceled and that is how the procedure for winding up of section 8 company works.

Frequently Asked Questions (FAQs)