FAQ on Section 8 Company Issued by Corporate Laws Committee of ICAI

The Corporate Laws & Corporate Governance Committee of ICAI has issued a publication titled “Frequently Asked Questions on Section 8 Companies” to provide clarity on the legal and regulatory framework governing such entities under the Companies Act, 2013.

Section 8 companies are formed for promoting charitable or not-for-profit objectives such as commerce, art, science, education, social welfare, religion, charity, or environmental protection, and any profits earned by them must be applied solely to the promotion of these objects, without distribution of dividends to members.

The document addresses various practical questions relating to incorporation, eligibility conditions, licensing requirements, governance framework and regulatory compliances applicable to Section 8 companies. It explains the process of obtaining a licence from the Central Government, the documentation required at the time of incorporation and the conditions that must be satisfied to operate as a not-for-profit company. The publication also discusses matters relating to alteration of memorandum and articles, conversion of an existing company into a Section 8 company, and revocation of the licence in case of non-compliance.

In addition, the FAQs clarify several operational aspects such as restrictions on distribution of profits, utilisation of income, appointment of directors, maintenance of books of account and filing of statutory returns. The publication also highlights certain relaxations available to Section 8 companies under the Companies Act, 2013, recognising their not-for-profit nature and public welfare objectives.

Overall, the document serves as a practical reference for professionals, promoters and stakeholders by consolidating key regulatory provisions and addressing common queries relating to formation, governance and compliance requirements of Section 8 companies.

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