From charity to commerce. Expert-guided Section 8 conversion with full legal compliance.
Introduction and Its Compliance
A Section 8 Company (a company formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object), can be converted into a Public Company or a Private Company, in accordance with the Companies Act, 2013. The procedure is prescribed under Rule 21 and 22 of the Companies (Incorporation) Rules, 2014 and is subject to the approval of the Regional Director (RD). Conversion will enable the company to go from a non-profit to a commercial profit-making one. Professionals Law helps you with all your legal, financial & procedural requirements for your conversion like Drafting of Documents, NOCs, RD Approval & Post Conversion Compliances. With Professionals Law, you know you will receive streamlined, certified transition from Section 8 to business-logic legal system.
Why It Is Needed
Organizations may seek conversion from Section 8 to a private or public limited company when they wish to expand operations into commercial activities, raise equity capital or change their object from charitable to for-profit. Since Section 8 companies are not permitted to distribute profits or dividends, this structure may restrict growth. Professionals Law Private Professionals Law assists companies in the transition, while also managing to adhere to legal approvals, public notices and Regional Director orders through all-in-one compliance, leaving behind the narrow wedge of doing businesses with little and less fear.
Benefits and Advantages
Freedom to Earn and Distribute Profits
Once converted, the company can legally generate and distribute profits among shareholders, unlike a Section 8 entity.
Access to Equity Capital
Conversion allows the company to raise capital through equity shares and attract private investors or venture capital.
Expanded Business Scope
The company can now undertake commercial, revenue-generating activities without restrictions imposed by charitable object clauses.
No Restrictions on Dividend Declaration
Post-conversion, the company can declare and distribute dividends to shareholders from its profits.
Better Market Credibility
Private/Public Companies enjoy higher investor confidence and regulatory recognition in the commercial marketplace.
Eligibility Criteria
- The company must be registered as a Section 8 Company under the Companies Act.
- It must have a valid reason for conversion and must amend its objectives accordingly.
- No outstanding dues should exist with any government body, including Income Tax and GST departments.
- It must have filed all annual returns and financial statements with the Registrar of Companies.
- A Special Resolution must be passed in a general meeting with member approval.
- Consent/NOC must be obtained from creditors, members and stakeholders.
- It must not have violated any provisions of Section 8 during its existence.
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Documents Required
Steps for Applying
Board Meeting
Pass a board resolution approving conversion and fixing an EGM date.
Conduct General Meeting
Pass a special resolution with at least 3/4th majority for the conversion.
Newspaper Publication
Publish a public notice of proposed conversion in both English and vernacular newspapers.
File Application with RD
Submit Form INC-18 along with attachments to the Regional Director.
Approval from RD
Upon review, RD may call for clarifications, then issue conversion approval.
File with ROC
File INC-20 with the ROC along with RD order and altered MOA/AOA.
Receive COI
ROC issues a new Certificate of Incorporation reflecting the new status.
Frequently Asked Questions
Can any Section 8 Company convert into a private or public company?
Is the approval of shareholders required for conversion?
Can profits be distributed post conversion?
Is tax applicable during conversion?
Do we need to publish a public notice?
What happens to existing licenses?
Can Professionals Law assist with RD approval?
Do we need to draft a new MOA and AOA?
How long does the process take?
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