Section 8 Co’s

Licence Co’s
(2013)
Rule 19 & 20
Co's (Incorporation) Rules, 2014
Form No. INC.12
(Sec. 25 Co's (CA, 1956))
 GOI -
Functions as -
Apex Skill
Development
Council for the
Retail Industry
in India
KIIT Technology Business Incubator
(KIITTBI)
Supported by - National Science & Technology
Entrepreneurship Development Board
(NSTEDB) & Department of Science &
Technology (DST), GOI
 Registered Co’s - 5,407 - As on 31.03.2014
 Authorized Capital Rs. 2,849.12 Cr.
Bombay Chamber of Commerce & Industry (1836)
(1924)
 “To encourage a friendly feeling & unanimity among
commercial men on all subjects involving the common
good,
 To promote & protect the general mercantile interests
of this [Bombay] Presidency,
 To collect & classify information on all matters of
general mercantile interest,
 To obtain the removal … of all acknowledged
grievances...”
 Cochin Chamber of Commerce & Industry
 Associated Chambers of Commerce & Industry of
India
Name of the Co. Place Year of
Incorporation
The Coconada Chamber of Commerce Vijayawada 1918
Hyderabad Race Club Limited Hyderabad 1971
Methodist Church of India Hyderabad 1980
Association of Lady Entrepreneurs of &hra Hyderabad 1994
Pradesh
Indian School of Business Hyderabad 1997
Bokaro Club Limited Bokaro 1967
Patna Golf Club Patna 1991
Gujarat Urban Housing Co Vadodara 1966
Reliance Research Institute Ahmadabad 1994
Swimming Education Research & Bangalore 1993
Development Foundation
Indian Coffee Trade Association Bangalore 2000
Bombay Incorporated Law Society Bombay 1895
Maikal Hills Natural Products Bhopal 2004
 Sec. 8
(1) Where it is proved to the satisfaction of
–
CG that
A person / an Assn. of persons proposed to
be Reg. U/T/A as a Ltd. Co. -
(a) Has in its objects:
 Apply its profits?
(b) Intends to apply its profits, if any /
other income in Promoting its objects;
&

Payment of dividend?
(c) Intends to Prohibit the
payment of any dividend to its
members
 Sec. 8 (1)
 CG may, by license issued… & on such conditions as
it deems fit,
 Allow that – Person / Association of persons to be
registered as a Ltd. Co. U/T/S
 Without the addition to its name of the word
“Ltd.”… / Words “Pvt. Ltd.” &
 Thereupon - ROC shall, on application…
register such Person/Assn. of Persons as a Co.
U/T/S.
(2) Co. - Shall
Enjoy all the privileges &
Subject to all the obligations of Ltd. Co’s.
 Can a Firm be a Member?
(3) A firm may be a member of the Co.
registered U/T/S
Not alter… its MOA / AOA?
(4) (i) Co. - Shall not alter… its MOA /
AOA except with the Previous approval of
CG.
May convert – into any other kind ?
(ii) Co. - may convert itself into Co. of any
other kind only after complying with such
conditions as may be prescribed.
 Sec 8 Cont…
(5) Where it is proved to the satisfaction of CG that -
A Ltd. Co. registered U/T/A or Under any previous
Co. law
Has been formed with any of the objects specified in
S/s(1)(a) &
With the restrictions & prohibitions as mentioned
It may, by license, allow the Co. to be registered U/T/S
Subject to such conditions as - CG deems fit & to
change its name by omitting the word “Ltd.”, or as the
case may be, the words “Pvt. Ltd” from its name &
Thereupon - ROC shall, on application… register such
Co. U/T/S & all the provisions of T/S shall apply to that
Co.
 Revoke – Licence ?
 (6) CG may, by order, revoke the licence
granted to a Co. registered U/T/S
 If the Co. contravenes any of the
requirements of T/S/
 Any of the conditions subject to which a
licence is issued/
 Affairs of the Co. are conducted fraudulently/
 In a manner violative of the objects of the Co/
 Prejudicial to public interest, & without prejudice to
any other action against the Co. U/T/A
 Revoke - Licence
Direct the Co. to convert its status &
change its name to add the word “Ltd” / the
words “Pvt. Ltd.”… To its name &
Thereupon - ROC shall - without prejudice
to any action that may be taken U/Ss (7), on
application... Register the Co. accordingly:
P… no such order shall be made unless -
Co. is given a reasonable opportunity of
being heard:
 P… a copy of every such order shall be given to
ROC.
 Steps in public interest
(7) Where a licence is revoked -
CG may, by order - if it is satisfied that it
is essential in the public interest, direct
that the Co. be WU - U/T/A /
Amalgamated with another Co. Registered
U/T/S:
P… No such order shall be made unless -
Co. is given a reasonable opportunity of
being heard.
 Steps in Public Interest
(8) Where a licence is revoked & where CG is satisfied
that - It is essential in the public interest that - Co.
should be amalgamated with another Co. Registered
U/T/S & having similar objects, then -
N/A/T/T/Contrary contained in T/A,
CG may, by order - Provide for such
amalgamation to form a single Co.
 With such
 Constitution – Properties – Powers – Rights –
Interest - Authorities & Privileges &
 With such Liabilities - Duties & Obligations
 as may be specified in the order
 Sec. 8 (9) & (10)
 If on the WU / Dissolution of a Co. registered
U/T/S - There remains –
After the satisfaction of its debts &
liabilities, Any asset
May be transferred to another Co.
registered U/T/S & having similar objects
Subject to such conditions as NCLT may
impose / may
(10) A Co. be sold &
registered U/T/S
Proceeds
 thereof onlycredited
Shall amalgamate to Co.
with another the
Rehabilitation
registered U/T/S & &Insolvency Fundobjects.
having similar formed
U/S 269.
 Penalties - Sec 8 (11)
 (11) If a Co. makes any default in complying with any of the
requirements laid down…, without prejudice to any other action
U/T/P/o/T/S –
Co. shall - Be punishable with fine which Shall not
be less than Rs. 10 lakh - may extend to Rs. 1 crore
&
Directors & every officer of the Co. who is in default
shall be
Punishable with imprisonment for a term - extend
to 3 years or
With fine which shall not be less than Rs. 25,000 -
Rs. 25 lakh, or with both:
 P… when it is proved that the affairs of the Co. were conducted
fraudulently, every officer in default shall be liable for action U/S
447
 Can a Section 8 Co. –
Convert into a Co of any other kind?
Rule 21 – Co. (Incorporation) Rules,
2014
 Rule 21 – Co. (Incorporation) Rules, 2014
Conditions for conversion of a Co. registered U/S
8 into a Co of any other kind.
 (1) A Co registered U/S 8 which intends to
convert itself into a Co of any other kind shall
Pass a Spl. Res. at a GM for approving such
conversion.
 (2) Explanatory statement annexed to the notice
convening the GM shall
 Set out in detail the reasons for opting for such
conversion
 Including the following, namely:-
(a) Date of incorporation of the Co;
(b) Principal objects of the Co. as set out in MOA
(c) Reasons as to why the activities for achieving the
objects of the Co. cannot be carried on in the current
structure i.e. as a Sec. 8 Co.;

(d) If the principal / main objects of Co. are proposed to

be altered, what would be the altered objects & the
reasons for the alteration;

(f) Details of impact of the proposed conversion on the

members of the Co including details of any benefits that
may accrue to the members as a result of the
conversion.
 Explanatory statement…
 (e) What are the privileges / concessions currently
enjoyed by the Co, such as
Tax exemptions
Approvals for receiving donations / contributions
including foreign contributions
Land & other immovable properties (if any) that
were acquired by the Co at concessional rates /
prices / gratuitously
If so, the market prices prevalent at the time of
acquisition & the price that was paid by the Co,
Details of any donations / bequests received by the
Co with conditions attached to their utilization, etc.
 (2) A certified true copy of – Spl. Res. along with a copy
of the Notice… including the explanatory statement
shall be filed with ROC (Form No.MGT.14) along with
the fee
 (3) Co. shall file an application (Form No.INC.18) with
RD with the fee along with
a certified true copy of the Spl. Res. &
a copy of the Notice…
Explanatory statement
 For approval for converting itself into a Co. of any
other kind &
 Co. shall also attach - Proof of serving of the notice
served to all the authorities mentioned in R 22(2)
 (4) A copy of the application with annexure’s as filed with RD
shall also be filed with ROC.
 Other conditions - Rule - 22
 (1) Co. shall, within a week from the date of submitting
the application to RD, publish a notice at its own
expense, & a copy of the notice, as published, shall be
sent forthwith to RD & the said notice shall be in Form
No. INC.19 & shall be published-
 (a) At least once in a vernacular newspaper in the
principal vernacular language of the district in which
-RO of the Co. is situated, & having a wide circulation
in that district, & at least once in English language in
an English newspaper having a wide circulation in that
district; &
 (b) On the website of Co., if any, & as may be notified
or directed by CG.
 Rule - 22
 (2) Co. shall send a copy of the notice, simultaneously with its
publication, together with a copy of the application & all
attachments by RP / hand delivery, to
 The Chief Commissioner of IT having jurisdiction over the
Co.,
 ITO who has jurisdiction over Co.
 The Charity Commissioner
 The Chief Secretary of the State in which RO of the Co. is
situated
 Any organisation / Department of CG / State Govt. /
 Other authority under whose jurisdiction - Co. has been
operating &
 If any of these authorities wish to make any representation to
RD, it shall do so within 60 days of the receipt of the notice, after
giving an opportunity to the Co..
 Copy of proof of serving such notice shall be attached to the
application..
 BOD’s shall give a declaration to the effect that
 No portion of the income / property of the Co.
 Has been / shall be paid / transferred directly / indirectly by
way of dividend / bonus / otherwise
 To persons who are / have been members of the Co. / to any
one / more of them / to any persons claiming through any
one / more of them.
 Where Co. has obtained any special status, privilege, exemption,
benefit / grant(s) from any authority such as IT Dept; Charity
Commissioner / any organisation / Dept. of CG, State Govt.,
Municipal Body / any recognized authority, a “No Objection
Certificate” must be obtained, if required under the terms of the
said special status, privilege, exemption, benefit or grant(s) from
the concerned authority & filed with RD, along with the
application.
 (5) Co. should have filed all its financial statements &
Annual Returns upto the financial year preceding the
submission of the application to RD &
 All other returns required to be filed U/T/A up to the
date of submitting the application to the RD &
 In the event the application is made after the expiry of
3 months from the date of preceding financial year to
which the financial statement has been filed,
A statement of the financial position duly certified by
CA made up to a date not preceding 30 days of filing
the application shall be attached
 (6) Co. shall attach with the application a
certificate from practicing CA / CS. in practice /
Cost Accountant in practice certifying that the
conditions laid down in the Act & these rules
relating to conversion of a Co. registered U/S 8
into any other kind of Co., have been complied
with.
 (7) RD may require the applicant to furnish the
approval / concurrence of any particular
authority for grant of his approval for the
conversion & he may also obtain the report
from ROC
 (8). On receipt of the application, & on being satisfied
 RD shall issue an order approving the conversion of the
Co. into a Co. of any other kind subject to such terms
& conditions as may be imposed in the facts &
circumstances of each case including the following
conditions, namely;-
 (a) Co. shall give up & shall not claim, with effect from
the date its conversion takes effect, any special status,
exemptions / privileges that it enjoyed by virtue of
having been registered U/T/P/O/S. 8 ;
(b) If Co. had acquired any immovable property
free of cost / at a concessional cost from any
Govt. / Authority
It may be required to pay the difference
between the cost at which it acquired such
property &
Market price of such property at the time of
conversion
Either to Govt. / to the authority that
provided the immovable property;
(c) Any accumulated profit / unutilised income
of the Co. brought forward from previous
years
Shall be first utilized to settle all outstanding
statutory dues, amounts due to lenders claims
of creditors, suppliers, service providers &
others including employees &
Lastly any loans advanced by the promoters /
members /any other amounts due to them &
the balance,
If any, shall be transferred to IE & Protection
Fund within 30 days of receiving the approval
for conversion;
 (9) Before imposing the conditions /rejecting the application,
the Co. shall be given a reasonable opportunity of being heard
by RD
 (10) On receipt of the approval of RD
 (i) Co. shall convene a GM of its members to pass a Spl. Res.
for amending its MOA & AOA as required U/T/A consequent
to the conversion of Sec. 8 Co. into a Co. of any other kind;
 (ii) Co. shall thereafter file with ROC -
 (a) A certified copy of the approval of RD within 30 days from
the date of receipt of the order in Form No. INC.20 along with
the fee;
 (b) Amended MOA & AOA of Co..
 (c) A declaration by the directors that the conditions, if any
imposed by the RD have been fully complied with.
 (11)On receipt of the documents referred to in
SR (10) above - ROC shall register the
documents & issue the fresh Certificate of
Incorporation.
 23. Intimation to ROC of revocation of licence
issued /U/S Where the licence granted to a Co.
registered U/S 8 has been revoked,
Co. shall apply to ROC in Form No. INC 20
along with the fee to convert its status &
change of name accordingly.
 Science: Not confined to pure speculative science alone
but includes various branches of science, such as
mechanical / engineering science
 Commissioners of Inland Revenue v Forest (1890) 15 App Cas 334.
 Charity: Includes giving relief to the poor
 Young’s Will Trusts, Re (1955) 3 All ER 689.
 Charity is liberally constructed & is not confined to
such charity as consists of giving relief to the poor
 Comm. for Special Purposes of IT v Pemsel (1891) AC 531.
 Club: It is only a member’s club, as distinguished from
a proprietary club, which is eligible for registration
U/T/S – Registration… is prima facie proof that the
club is not an association for profit.
 Cosmopolitan Club v Dy. CTO, AIR 1952 Mad 814.
 Question whether the Co. is a mutual club / is carrying
on trading activity in the nature of trade is a question
of fact to be determined in each case on the basis of
evidence.
 CIT v Bankipur Club Ltd. (1997) 5 SCC 394
 Chamber of commerce U/T/S & the activities in which
it is engaged are non-profit making activities is not
‘State’ within Art. 12… no writ can lie against it.
 In order to be ‘State’, it must be an ‘authority’ whose
orders are to be obeyed by the citizens of the State.
 Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal
v Joint Charity Commissioner, Maharashtra (1973) 43
Comp Cas 361 (Bom).
 A chamber of commerce registered U/T/T/ Co’s
Act cannot under any circumstances be treated
as such an authority or State.
 Shaw (M L), In re (1982) 1 Comp LJ 146: (1986)
59 Comp Cas 312 (Cal).
 However, in view of the decisions of SC - it
cannot be said that the Indian Co’s Secretaries
of India (ICSI) is not an ‘authority’ … u/Art. 12
of the Constitution.
 Ajay Hasia v Khalid Mujb Seharavardi , AIR 1981 SC
487;
 Som Prakash Rekhi v Union of India AIR 1981 SC 212
Registration… is prima facie proof that the
body is not an association for profit & is
prohibited from paying any dividend to its
members.
 Cosmopolitan Club v Dy CTO, AIR 1952 Mad 814.
However, registration U/T/S - Not
conclusive proof that the Co. is exempted
U/S 2(15), ITA - but is only a relevant
consideration
 Hyderabad Race Club, Hyderabad v CIT, A.P.I.,
Hyderabad 1985 Tax LR 1067.
 Interest of a member of a Co. Ltd. by guarantee
& licensed U/S 25, is transferable in the manner
provided by AOA.
 Saroj Maloo v Magadh SEA, (1995) 4 Comp LJ 135
(CLB-Cal).
 Increase / decrease in the No. of the members of
the Co. Ltd. by guarantee by BOD is permissible
only by Amnt. of AOA by a Spl Res.
 K.G. Khosla Compressors Ltd. v Khosla Extraktions Ltd.
(1986) 1 Comp LJ 211 (Del)
 S. 397, CA is essentially a remedy available to members who
complain that the
 Affairs of Co. are conducted in a manner prejudicial to the
public interest or
 In a manner oppressive to any member / members.
 Unless either of the aforesaid ingredients are established, an
application U/S 397 will not lie, more so in a S. 25 Co. case
 Mohanram Sastry v Swadharma Swarajya Sangha (1995) 83 Comp
Cas 272 (Mad).
 it is permissible for CG to grant exemption either generally /
specifically to a particular Co. from one / more of T/P/O/T/A U/S
25(6), CA. Such exemption should normally be express. Courts
would not be inclined to cull out the implied exemption.
 Singhania (CP) v Garware Club House (2005) 124 Comp Cas 561
(Bom).
 Election of directors
Circular No. 23(29)-CL. IV/64, dated 7 May, 1964.
 Sec. 25, Co’s make provisions in their AOA that the
Co’ in their membership will not be entitled to vote in
the election of directors (committee members) unless
they have paid their subscription for the relevant year.
 Member Co’s are entitled to nominate their
representatives for election to the Committee.
 In case, one of the nominees happen to be nominated
by a member Co., which has not paid the subscription
for the relevant year, a query was raised whether such
nomination & his subsequent election as Committee
member would be invalid under the law.
 Election of directors
Circular No. 23(29)-CL. IV/64, dated 7 May, 1964.

 AOA… concerned do not as such disqualify a

person being nominated for election by a
member Co., which has not paid subscription.
 It was clarified that “there can be no objection
to the nomination & election of a person
nominated by a member Co. which has not paid
the subscription for the relevant year”
THE END