Overview on Strike off Section 8 Companies

A Section 8 company is established with the intention to promote charitable goals, such as art, commerce, sports, science, education, social welfare, religion, or the protection of natural resources. These companies are required to allocate their profits to further these objectives. The concept of distributing dividends among members is not applicable to Section 8 companies. Their overall operations are focused on charitable purposes and fall under the Companies Act, 2013. These companies are similar to trusts and societies and are ideal for promoters with charitable intentions. The use of terms like "private limited" or "public limited" in their name is prohibited under the governing Act.

Why Voluntary Strike off is Not Available to Section 8 Companies?

Unlike other companies, Section 8 entities do not have a simple procedure to shut down their operations. To close a Section 8 company, it first needs to convert into a regular company and then surrender its license to the relevant authority as per the governing legislation.

Reasons to Strike off Section 8 Companies

Conditions Under Which Strike off Can Be Opted by Section 8 Companies:

• The company has failed to undertake operations within one year of its incorporation.
• The company has been non-operational for the last two financial years and has not applied for dormant status under section 455 of the Companies Act.
• The company has changed its objectives and is struggling to align with its original charitable purposes.

Benefits of Striking off Section 8 Companies

Here are the main benefits of striking off a Section 8 company:

• Avoid Compliance: A Section 8 company is required to follow ongoing compliances under the Companies Act, 2013. For companies lacking proper management to handle these compliances, striking off may be the best option.

• Avoid Fines: Non-compliance with statutory requirements often leads to heavy fines and penalties. In some cases, penalties can be so severe that they prevent directors from holding positions in other companies. Striking off can prevent such issues.

• Low Cost: Running a non-operational company can be more expensive than striking it off. Therefore, striking off a dormant Section 8 company is a practical solution.

Mandatory Documents for the Strike off Procedure

To strike off a Section 8 company, the following documents are typically required:

• Special resolution and notice for the meeting
• Memorandum of Association (MoA)
• Articles of Association (AoA)
• Board resolution
• Special resolution and notice of the general meeting
• Certificate issued by a practicing CA/CS/CWA
• Statement of assets and liabilities authenticated by an auditor
• Company’s asset valuation report by a registered valuer
• No Objection Certificate (NOC) from creditors, if applicable
• Declaration by the company’s directors
• Certificate of Incorporation
• PAN card
• Last audited balance sheet and profit & loss statement
• Audit report
• Newspaper advertisement
• Digital Signature Certificate (DSC) of the existing director

Procedure to Strike off Section 8 Companies

1. Application with MCA for Conversion: The first step is to submit a prescribed application to the Ministry of Corporate Affairs (MCA) along with the necessary documents.

2. Application and Documentation Scrutiny: The MCA will verify the documents and ensure compliance with the rules mentioned under the governing legislation.

3. Approval by MCA for Conversion: If the application is error-free, MCA will approve the conversion of the Section 8 company to a regular company.

4. Application for Strike off: After conversion, the company can apply to strike off its name by submitting a prescribed application along with standard documents and fees.

5. Approval for Strike off: After a thorough verification of the submitted documents, MCA will grant approval for the strike off.

Outcome After the Strike off of a Section 8 Company

Once the company is struck off:

• The company will cease to exist legally.
• The certificate of incorporation will be canceled.
• No further operations can be carried out, and no annual return can be filed.
• The company’s name will be removed from the Register of Companies (ROC).

Let Fastzeal Support Be Your Guide for Handling Strike off Compliances

Fastzeal is a tech-savvy business agency offering end-to-end services for compliance, incorporation, and management consultancy. We specialize in simplifying the process of striking off Section 8 companies. Our experts handle all aspects of the strike off procedure, ensuring a smooth and cost-effective experience. Additionally, we offer services related to annual filing, secretarial compliance, and more. Connect with a Fastzeal expert for a free consultation today!