To simplify, Section 8 company registration refers to a corporation that aims to incentivize sciences, arts, education, sports, environment protection, charity, social welfare, or other objectives, according to the Companies Act, 2013.

A sectional entity requires about two directors and subscribers.

A Section 8 organization is formed for charitable purposes or as a non-profit entity. The company can only use its income and profits to further its charitable objectives and activities.

If your company, certified as a Section 8 company, intends to transition into a public company, the guidelines are provided under the Companies Act, 2013, and the Companies Incorporation Rules, 2014.

Section 8 (4) (2) of the Companies Act 2013 states that a section 8 company can convert into any other company under the following conditions and will convert into a private or public firm rather than a one-person company. For the detailed procedure, Section 8 company registration shall be converted into a public company, as mentioned below.

What are the requirements for the conversion of a Section 8 Company into a public company?

There are specific requirements for the conversion of a Section 8 company into a public company, as mentioned below:

  • The requirement for the conversion of a Section 8 Company into a Public Company is that the company’s management must comply with the proposed business plan to bring the conversion to fruition.
  • The company has been given any special privileges, status, exemption, grant, or benefit from the government or other authorities.
  • It should get a no-objection certificate from the government or search authority.
  • The company should file all its annual returns, financial statements, which are up to the fiscal year that precedes the submission of the application.
  • The company should not have transferred its income, profits, or any part of the property through shares or dividends.

Documents required:

There are documents for the conversion of a Section 8 company into a public company, as mentioned in the following:

  • It is a true copy of the special resolution about the conversion passed in the general meeting.
  • The copy of the notice to inform the general meeting and the explanatory statement.
  • The proof of notice that has been served on the requisite authorities.
  • The copy of certified approval required for the conversion granted by the regional director is to be filed under Form INC-20 within the period of 30 days of receiving such permission.
  • You will be required to sign the MOA (memorandum of association) and AOA (articles of association)
  • All the authority is imposed by the regional director and has been complied with by the directors.

Here is a simple step-by-step procedure for Section 8 companies to convert into public companies; check out the list below:

The company needs to hold a general meeting. The General Meeting notice should be along with an explanatory statement that must contain the following details that are mentioned below:

  • The prospective company's objectives are outlined in the memorandum of association (MOA).
  • The reason it exists in the firm cannot meet the main objective of the proposed company.
  • If the firm intends to change its key objects, include a list of the altered objects and the reason for such an alteration.
  • The transformation of the firm into a public corporation significantly affects its members.
  • Any advantages that members of the firm may get from such a conversion.
  • Any benefits that the members of the firm may obtain after this conversion
  • The Section 8 firm has all advantages, exemptions, concessions, and privileges. It may involve a tax exemption, a donation, or international donations.
  • All of the donations the firm has received.
  • The market price of all properties bought by a company, as well as the concessional rates offered by the company for  such properties
  • In the general meeting, the firm should pass a special resolution that approves the conversion of the Section 8 business into a public company.

To convert a Section 8 company into a public corporation, complete Form INC-18 and submit it to the regional director. Additionally, a copy of the application must be sent to the registrar of companies. Ensure the following documents are checked:

  • An authentic, certified copy of the special resolution passed at the general meeting
  • Copy of the notification announcing the general meeting, coupled with the explanatory statement
  • A notice will also be sent to specific authorities, with proof of any notices sent included. These authorities include the income tax officer with jurisdiction over the company, the chief commissioner of the income tax authority with jurisdiction over the company, the charity commissioner, the secretary of the state where the company's registered office is located, as well as state and federal government departments. The notice can be delivered to these authorities in person or via registered post.
  • The board of directors must declare that no portion of the company's revenue or property has been transferred, either directly or indirectly, to the company's members or to any other individual in the form of shares or dividends.
  • The application must also include a certificate from a practicing chartered accountant or company secretary verifying that all of the requirements outlined in the statute for converting a Section 8 business into a public company were met.  
  • The company shall file its annual returns, fiscal statements, and any other returns required by law up to the year preceding the application with the regional director. For example, the application is submitted three months following the preceding fiscal year from the year in which the financial statement was filed. 
  • According to the case, the application should include a declaration indicating that the company's latest financial statement has been filed. In that instance, the application must include a statement of the company's current financial situation, confirmed by a chartered accountant. This statement must be up-to-date within 30 days.
  • The company is required to file a notice in a daily newspaper in the district where the registered office of the company is located. The notice should be published in newspapers in both the vernacular and English languages. The notice also must be posted on the website of the company.
  • After the notice is published, as stated above, the company is required to send a copy of such notices under the form INC-19 of such conversion to the regional director.
  • Once it is received by the applicant, assessed, and reviewed, the regional director shall grant her approval. The company is required to schedule a second general meeting to alter the articles of association, the AOA, the memorandum of association, or the MOA about the conversion. After the general meeting, the c ompany is required to file with the registrar of companies the following:
  • Once the approval is received from the regional director, the company has to file a true certified copy of the regional director's approval under Form INC-20 along with the stated fees.
  • The modified (AOA) articles of association and (MOA) memorandum of association of the corporation.
  • Directors declare that all requirements imposed by the regional director have been complied with.

Conclusion: To conclude, Section 8 company registration companies that need to transition towards a public company can avoid the complex process as Section 8 company certification consultants are available to guide in the process of Section 8 company transitions to a public company. 

Once a Section 8 company has been converted into a public company, it will lose all the benefits and exemptions granted by the central government and other authorities to Section 8 companies. To get expert guidance as this, get connected with JR Compliance.