Strike off Section 8 Companies
Section 8 Company means a company established for the promotion of trade, art, science, sports, research, education, religion, environmental protection, charity or any other object, which intends to apply its income and profits to the promotion of its objects and prohibits the payment of dividends to its members.
Strike off Section 8 Companies means that a company has been legally dissolved by the Ministry of Corporate Affairs (MCA).
Introduction
Conversion of a Section 8 company to a one-person company is not possible. Unlike other companies, according to Section 8, the company’s assets are not transferred to the company’s management or shareholders upon liquidation. The assets of the company according to section 8 are merged with the assets of another company.
Eligibility to Strike off Section 8 Companies
The following conditions must be met before a Section 8 company can choose to be struck off:
- The company did not begin operations within a year of its creation.
- The company has been inactive for two consecutive financial years and has not applied to be designated as a dormant company under Section 455 of the Act.
- The Section 8 Company's objectives have changed and the company is having difficulty achieving the new objectives.
Advantages of Striking off Section 8 Companies
- If the company is inactive and has no creditors, a quick way to close it is to Strike Off. After three months, the company will be struck off the register. However, if the company has any outstanding creditors, they must be given three months' notice before the application is made.
- The cost of sending a strike off application form to ROC is minimal.
- After a company is struck off, there is no formal investigation into the conduct of the directors. As such, there is no risk of being accused of unfair trading unless the company subsequently revives the creditor and files for liquidation.
- Once a company is dissolved, there is no need to file annual returns and accounts with ROC.
Types of Strike-off Section 8 Company
The two types to strike off Section 8 Company include:
- Strike Off by ROC:
The Registrar of Companies may send notices to companies and their directors in Form STK-1 (Removal of Company Names from the Companies Register). This notice would notify the relevant companies that their names had been struck off the register and ask them to provide the necessary paperwork to their representatives within 30 days of the notice’s issuing
- Strike off by Company:
Following the completion of the responsibilities, the business may submit a STK-2 electronic application to the commercial register. This could be accomplished by adopting a special resolution that requires the support of 75% of the membershi
Documents required for Striking off Section 8 Companies
The required documents are as follows:
- A certified true copy of the special resolution, as well as a copy of the notice of the meeting, including the explanatory statement.
- Memorandum of association.
- Articles of Association.
- A copy of the board resolution.
- A certified copy of the special resolution passed to approve any other type of conversion, as well as the notice convening the general meeting and the relevant explanatory statement attached there to.
- Certificate from CA/CS/CWA confirming compliance with the requirements of the law and rules.
- Statement of assets and liabilities of the company as of the date within thirty days of this date, duly verified by the auditor
- A copy of the registered valuer's report on the market value of the assets.
- Financial statements, directors' reports, annual statements, and auditor's reports for each of the two fiscal years immediately preceding the date of application, or for such year if the business exists for only one fiscal year.
- If there are creditors, a power of attorney is required from each of them.
- Declaration by the directors that all conditions of the regional director, if any, have been met.
Procedure for Striking off Section 8 Company
The process for striking off Section 8 Company is-
Benefits of Audit for NGO
- Convening general meetings to get shareholder approval, conducting board meetings, accepting board motions to surrender the license.
- Call a special general meeting and pass a resolution if the shareholders approve of the decision. After then, the closing process can start.
- Within 30 days of the special resolution being approved at the EGM, submit the MGT-14 together with any pertinent papers, DSC, and fees.
- Next, the INC-18 must be finished and sent to the Regional Director with all required documentation and conversion fees.
FAQs on Strike Off Section-8 Companies
What is Section 8 Company?
Under section 8 of the Companies Act of 2013, a non-profit organization may be registered in India as a trust, a corporation, or a private limited company. A famous company under section 25 of the previous Companies Act of 1956, one of the most popular types of non-profit organizations in India, is equivalent to a section 8 business.
Why is it difficult to wind up a Section 8 Company in India?
Prevailing statutes prohibit Section 8 companies from choosing a procedure that, unlike other companies, provides for a direct shutdown.
Which form is required to submit a striking-off request?
STK-1
Which body regulates the procedure and the document on the transformation of the company?
Ministry of Corporate Affairs.
How long does it take for a company to strike off?
It usually takes at least 3 months to officially dissolve a company, but if the process is complex, this time can vary greatly. Generally, however, the company will be dissolved no later than 3 months after the publication of the notice of dissolution in the Gazette.
What can be done if another director is unwilling to strike off?
As the signatures of both directors are required on the documents, this could only be possible when both are available.
What are the types of Section 8 company strike-off?
Compulsory strike-off and Voluntary strike-off.
Who authorizes a company license under Section 8?
The Central Government authorizes the Registrars of Companies of the respective jurisdictions to issue a license to a company under Section 8.
Does Section 8 allow the registration of a company with unlimited liabilities?
According to the Companies Rules 2014, only a limited liability company can be registered under the Act.