{"id":51693,"date":"2023-01-11T11:30:35","date_gmt":"2023-01-11T06:00:35","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=51693"},"modified":"2023-01-11T11:30:36","modified_gmt":"2023-01-11T06:00:36","slug":"conversion-of-a-section-8-company-into-a-public-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/","title":{"rendered":"Conversion of a Section 8 Company into a Public Company"},"content":{"rendered":"\n<p>A Section 8 company cannot put its profits or income to any\nother use other than advancing its objectives. Section 8 companies cannot pay\ndividends towards members. A Section 8 organisation is\nestablished for charitable or not-for-profit purposes. As per Section 8 of the\nCompanies Act, 2013, for an organisation to operate as a Section 8 company, it\nmust be established for objects like &#8220;<em>promotion <\/em><em>of commerce, art, science, social\nwelfare, religion, sports, education, research, charity, protection of the\nenvironment and any other similar object\u201d<\/em>. A\nSection 8 company can only use the income and profits from the Company for the advancement\nof the charitable objects of the Company. It is barred from distributing\ndividends to its shareholders and providing any remuneration to its promoters,\nmembers, founders and directors. In this blog, we will discuss the Conversion of a Section 8 Company into a Public\nCompany.<\/p>\n\n\n\n<p>A Section 8 company can be easily converted into a public\ncompany or any other company by following the procedure and the framework laid\ndown under the Companies Act, 2013 and Companies Incorporation Rules, 2014. Section\n8(4)(ii) of the Companies Act 2013 states that a Section 8 company can convert\nitself into any other company by following the prescribed conditions. It can be\nconverted into a private or public company rather than a one-person company. <\/p>\n\n\n\n<p>Rule 21, Rule 22, and Rule 23 of the Companies Incorporation Rules,\n2014, govern the conversion of a Section 8 company into any other company. The\nprocedure for converting Section 8 company into any other company is laid down\nin Section 8(5) of the Companies Act, 2013 and Companies Incorporation Rules,\n2014- Rule 20. Rule 21 provides conditions where a Section 8 company can be\nsimply converted into any other company. Rule 22 provides for the Company&#8217;s\nrequirement to inform the registrar of companies under form INC-20 with the requisite\nfee after the Section 8 licence of the Company has been revoked. Rule 23 deals\nwith telling the registrar of companies of the revocation of the Section 8\nlicence of the Company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Requirements_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\" >Requirements for the Conversion\nof a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Important_Documents_Required_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\" >Important Documents\nRequired for the Conversion of a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Essential_Forms_to_be_filed_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\" >Essential Forms to be\nfiled for the Conversion of a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Procedure_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\" >Procedure for the\nConversion of a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Post_Approval_Compliances_after_conversion_of_a_Section_8_Company_into_a_Public_Company\" >Post Approval\nCompliances after conversion of a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Consequences_of_Conversion_of_a_Section_8_Company_into_a_Public_Company\" >Consequences of Conversion\nof a Section 8 Company into a Public Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/conversion-of-a-section-8-company-into-a-public-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Requirements for the Conversion\nof a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are specific\nprerequisites for the Conversion\nof a Section 8 Company into a public company. Below mentioned are\nthe requirements:<\/p>\n\n\n\n<ul><li>The Company&#8217;s management must be Reddy with\nthe proposed business plan to bring the conversion to fruition<strong><\/strong><\/li><li>Where the Company has obtained any special\nprivilege, status, exemption, grant or any other benefit from the government or\nany other authority, it should get a no-objection certificate from the search\nauthority or government.<strong><\/strong><\/li><li>The Company must have filed all its annual\nreturns and financial statements up to the fiscal year which precedes the\napplication submission.<strong><\/strong><\/li><li>The Company must not have transferred its\nincome, profits, or any part of its property through shares or dividends.<strong><\/strong><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Important_Documents_Required_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Important Documents\nRequired for the Conversion of a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are certain documents for\nthe Conversion of a<strong> <a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/section-8-company-registration\">Section 8 Company<\/a><\/strong>, into a public\ncompany and they are as follows:<\/p>\n\n\n\n<ul><li>a true copy of the special resolution about\nthe conversion passed in the general meeting.<\/li><li>Copy the notice informing the general meeting\nand the explanatory statement.<\/li><li>Proof of notice which has been served on\nrequisite authorities.<\/li><li>A certified copy of the approval for the\nconversion granted by the regional director is to be filed under Form INC-20\nWithin 30 days of receiving such permission.<\/li><li>The altered memorandum of association and the\narticles of association.<\/li><li>All the mandates imposed by the regional\ndirector have been complied with by the directors.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Essential_Forms_to_be_filed_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Essential Forms to be\nfiled for the Conversion of a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Certain forms are required to\nbe filed with the registrar of companies for the process of conversion of a Section\n8 company. Below mentioned are some of the necessary forms:<\/p>\n\n\n\n<ul><li>Form DIR-12: this form is filed to intimate\nthe registrar of companies to the appointment of directors of the Company if\nany. A public company requires a minimum of three directors. A third director\nmust be appointed if the Section 8 company has only two directors. Form DIR-12\nis to be filed within 30 days of the appointment of such director.<\/li><li>RUN Form: This form is to be filed if the\napplicants want to change the Company&#8217;s name after its conversion. The Reserve\nUnique Name application is available on the MCA website. It can be used to\nsearch the database for existing company names and reserve a unique name for\nthe Company which is not similar or identical to any existing company name.<\/li><li>Form MGT-14: this form is filed to intimate\nthe registrar of companies of resolutions passed in the board meetings of the\nCompany. Form MGT-14 is to be filed within 30 days of giving a special\nresolution for conversion by the Company.<\/li><li>Form INC-18:&nbsp;\nthe application seeking approval of the regional director to convert the\nCompany into a public company is filed under this form.<\/li><li>Form INC-19: after the notices have been\npublished in the newspaper, a copy of notice of the Company&#8217;s conversion is to\nbe sent to the regional director and filed under this form. This form must be\nfiled within seven days of filing Form INC-18.<\/li><li>Form INC-20: this form must be filed within\n30 days of the receipt of the copy of approval from the regional director to\napply to revoke the license granted under Section 8.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_the_Conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Procedure for the\nConversion of a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 8 companies looking\nto convert into a public company must follow the below-mentioned steps:<\/p>\n\n\n\n<ul><li>The Company must hold a board meeting to approve the conversion of the Section 8 company into a public company and to send notice of the general body meeting.<\/li><li>The Company is required to hold a general meeting. The notice of the General Meeting (GM) must be sent along with an explanatory statement which must contain the following details:<ul><li>The date of incorporation of the Company.<\/li><li>The objects of the proposed Company as laid down in the memorandum of association over MOA.<\/li><li>The reasons why the existing Company cannot achieve the main object of the proposed Company.<\/li><li>If the Company is looking to alter the main objects of the Company, then a list of the altered objects and the reason for such alteration.<\/li><li>The impact of the Company&#8217;s conversion into a public company on its members.<\/li><li>Any benefit that the members of the Company may receive after such conversion.<\/li><li>All the benefits, concessions, exemptions, and privileges enjoyed by the Section 8 company. This may include donations, exemption from tax, and foreign contributions.<\/li><li>All donations that the Company has received.<\/li><li>The market price of all the properties acquired by the Company and the concessional rates given by the Company for such properties.<\/li><\/ul><\/li><li>In the general meeting, the Company must pass a special resolution approving the conversion of the Section 8 company into a public company.<\/li><li>Within a period of 30 days of passing the special resolution, the Company is required to file Form-MGT-14 giving details of the special resolution passed by providing a true certified copy of the special resolution passed. The Company is required to file the form with the registrar of companies.<\/li><li>Suppose the Section 8 company has obtained any benefits, grants, or concessions from departments of the central government, the state government, municipal bodies, or any other recognised authorities. In that case, it shall obtain a no-objection certificate from search departments or sources.<\/li><li>Section 8 company must apply form INC-18 with the regional director to convert the Company into a public company. A copy of the application shall also be sent to the registrar of companies. The application must be attached with the following documents:<ul><li>A true certified copy of the special resolution passed in the general meeting.<\/li><li>Copy of the notice giving intimation of the general meeting along with the explanatory statement.<\/li><li>A notice is also to be sent to certain authorities. Proof of the notices sent to all of these authorities must also be attached. The authorities include the income tax officer who has jurisdiction over the Company, the chief commissioner of the income tax authority who has jurisdiction over the Company, the charity commissioner, the Secretary of the State in which the Company&#8217;s registered office is situated, departments of the State Government and the Central Government. The notice can be sent to these authorities through in-hand delivery or registered post.<\/li><\/ul><\/li><li>A declaration must be given by the board of directors stating that no part of the Company&#8217;s income or any part of the Company&#8217;s property has been transferred directly or indirectly or has been paid by means of shares or dividends to the members of the Company or to any other persons.<\/li><li>The application must also be attached with a certificate from a practising-chartered accountant or company secretary certifying that all requirements as laid down under the law pertaining to the conversion of a Section 8 company into a public company have been complied with.<\/li><li>The Company must file its annual returns, fiscal statements, and any other returns that it must file as per the provisions of law up to the year preceding when the application is made to the regional director. Suppose the application is made after three months from the previous fiscal year from the year for which the financial statement has been filed. In that case, the application must be attached with a statement as to the Company&#8217;s current financial position, which has been duly certified by a chartered accountant. This statement must be up to a date not more than a period of 30 days from the filing date of the application.<\/li><li>The Company is also required to file a notice in a daily newspaper circulated in the district where the registered office of the Company is situated. The notice must be published in newspapers in the vernacular language and the English language. The notice must also be posted on the website of the Company.<\/li><li>Once these notices have been published, as stated above, the Company is required to send a copy of such notices under form INC-19 of such conversion to the regional director.<\/li><li>Once the regional director has received the applicant and assessed and reviewed the submissions made, the regional director shall grant her approval. The Company is required to hold a second general meeting to alter the articles of association, the AOA, the memorandum of association, or the MOA pertaining to the conversion. After the general meeting, the Company is required to file with the registrar of companies the following:<ul><li>Once the approval has been received from the regional director, the Company is required to file a true certified copy of the regional director\u2019s approval under Form INC-20 along with the prescribed fees.<\/li><li>The altered articles of association and memorandum of association of the Company.<\/li><li>Declaration by the directors that all the mandates imposed by the regional director have been complied with.<\/li><\/ul><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Post_Approval_Compliances_after_conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Post Approval\nCompliances after conversion of a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Once the approval has been\nreceived from the regional director, the Company is required to file a true\ncertified copy of the regional director&#8217;s approval under Form INC-20 along with\nthe prescribed fees. The applicants also have to submit the altered articles of\nassociation and memorandum of association and the Company, along with a declaration\nby the directors that all the mandates imposed by the regional director have\nbeen complied with.<\/p>\n\n\n\n<p>Once the registrar of\ncompanies has received the application under Form INC-20 and has reviewed and\napproved it, the registrar shall issue a fresh incorporation certificate. The\nSection 8 company will, in effect, have wound up and ceased to exist.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Consequences_of_Conversion_of_a_Section_8_Company_into_a_Public_Company\"><\/span>Consequences of Conversion\nof a Section 8 Company into a Public Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Once a Section 8 company has been converted into a public\ncompany, there are certain specific conditions that the regional director shall\nimpose in accordance with Rule 22 of the Companies Incorporation Rules, 2014,\nonce the regional director has granted approval for conversion:<\/p>\n\n\n\n<ul><li>The\nCompany can no longer receive any benefits, privileges, exemptions, or\nconcessions previously granted to the Section companies.<\/li><li>While\nthe Company was a Section 8 company and had acquired specific properties from\nthe government in its name in such capacity by paying concessional rates, the Company\nis required to pay the difference in amount after it has been converted into a\npublic company.<\/li><li>If\nthe Company happens to have any income or profits which have remained\nunutilised, then such income or gains must be used to clear any outstanding\ndues of the Company. After the payment of such outstanding dues, if such any balance\namount remains, it shall be transferred to the IEPF or the Investors Education\nand Provident Fund.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Section 8 organisation is an entity which has been established for charitable purposes or not-for-profit purposes like the promotion of science, social welfare, commerce, research, sports, religion, art, charity, education, protection of the environment and for any other similar purposes. A Section 8 company in India can be converted into a public company or any other company by following the procedure and the framework laid down under <strong>the Companies Act, 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/companies-act\/companies-act-2013.html\"><strong>[1]<\/strong><\/a><\/sup> and Companies Incorporation Rules, 2014. Once a Section 8 company has been converted into a public company, it shall lose all the benefits and exemptions granted by the central government and other authorities to Section 8 companies. If it had acquired properties from the government as a Section 8 company by paying concessional rates, the Company is required to pay the difference in amount after it has been converted into a public company.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/conversion-of-section-8-company-into-private-company\/\">Conversion Of Section 8 Company Into Private Company: Complete Overview<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Section 8 company cannot put its profits or income to any other use other than advancing its objectives. Section 8 companies cannot pay dividends towards members. A Section 8 organisation is established for charitable or not-for-profit purposes. As per Section 8 of the Companies Act, 2013, for an organisation to operate as a Section [&hellip;]<\/p>\n","protected":false},"author":47,"featured_media":51694,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[325],"tags":[185],"acf":{"service_id":"11"},"authorName":"Sherin Jose","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/11\/MicrosoftTeams-image-4-e1668575330329.jpg","authorDescription":"Sherin has degrees in Law and English Literature from the University of Delhi. She is adept at legal research and writing and enjoys discussing and analysing important legal developments. Her primary interests lie in Corporate, FinTech and IPR Law and she is always on the lookout for exploring new developments in the area. She is an avid reader who loves classics and contemporary fiction. She likes to travel, bake and obsess over cat videos in her free time.","postViews":5020,"readingTime":8,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51693"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=51693"}],"version-history":[{"count":2,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51693\/revisions"}],"predecessor-version":[{"id":51696,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51693\/revisions\/51696"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/51694"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=51693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=51693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=51693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}