Section 8 Company is a company formed for charitable or non-profitable purposes. It is defined under section 8 of the Companies Act, 2013.
Section 8 Company can be voluntarily wound up by surrendering its license to run section 8 company. However, the process of surrendering license is not easy as there is no direct process to close the section 8 Company.
The Section 8 Company is required to convert its business structure into a private limited company in order to surrender its license. The key point to note here is that it cannot be converted into One Person Company.
The complete process to convert a section 8 company into private limited company is prescribed under Rule 21 & 22 of the Companies (Incorporation) Rules, 2014.
Surrender License of Section 8 Company
Thus, the first step to voluntarily wind-up a Section 8 Company is to convert it into Private Limited. For Conversion, the section 8 company shall convene a general meeting whereby a special resolution to convert it into private limited shall be passed.
Subsequently, the section 8 company shall file certified true copy of the Special Resolution along with the copy of notice of meeting and explanatory statement with the Registrar of Companies in the Form MGT-14.
Moreover, it shall file the same documents along with proof of filing MGT-14 with the Regional Director of Companies in Form No. INC-18 for approval to convert the company into private limited.
When the Registrar of Companies will approve the conversion then the license of section 8 company shall get surrendered.
File Form STK-2 with the ROC
Thereafter, it requires to undertake the process of winding up of private limited company. For that, it needs to file the Form STK-2 with the Registrar of Companies in accordance with the Companies Act, 2013. (https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf)
Consequently we can say that, closing a section 8 Company is difficult as it requires to surrender a license of section 8 company by converting it into private limited.
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