Companies Act 2013

Section 16: Rectification of name of Company.

Rectification of name of Company.

16. (1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which,—
(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, whether under this Act or any previous company law, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of three months from the issue of such direction, after adopting an ordinary resolution for the purpose;
(b) on an application by a registered proprietor of a trade mark that the name is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within three years of incorporation or registration or change of name of the company, whether under this Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles to an existing trade mark, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of six months from the issue of such direction, after adopting an ordinary resolution for the purpose.
(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a period of fifteen days from the date of such change, give notice of the change to the Registrar along with the order of the Central Government, who shall carry out necessary changes in the certificate of incorporation and the memorandum.
(3) If a company makes default in complying with any direction given under sub-section (1), the company shall be punishable with fine of one thousand rupees for every day during which the default continues and every officer who is in default shall be punishable with fine which shall not be less than five thousand rupees but which may extend to one lakh rupees.

This provision is covered by Chapter II on INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO [Section 3 to 22].

Section 16 is brought to force from April 01, 2014.
For this chapter, the Companies (Incorporation) Rules, 2014 (‘the Rules’) are notified with effect from April 01, 2014. However no rule is specified under the Rules.

Corresponding provisions of the Companies Act, 1956:
Section 22

Corresponding provisions of the English Companies Act, 2006:
Sections 67, 68 and 69.

Applicability:
This section is applicable to all companies.

Comments:
This section confers power to the Central Government to order companies to rectify its name where the name is allowed to the company through inadvertence or otherwise which in its opinion is identical with or too nearly resembles with the name
(a) by which a company is already incorporated under the 2013 Act or any previous company law; or
(b) of registered trade mark under the Trade Marks Act, 1999.

(a) Where the Central Government suo motu frames an opinion that either through its inadvertence or otherwise, a company is registered by a name or changes its name, which is identical with or too nearly resembles with the name of another company registered under the Companies Act (of 2013 or earlier Company law), then it may (at its discretion) after giving opportunity of hearing to the company, direct it to change its name.

The Central Government necessarily looks at name application of change of name application, as the case may be, and frames  an opinion as to whether name was allowed inadvertently or otherwise, which should not have been allowed.
Upon receipt of order of the Central Government to change the name, the company shall mandatorily change its name within a period of three months by obtaining consent of shareholders by ordinary resolution.

(b) If a company is registered by a name or changes its name, which is allowed by the Central Government either through inadvertence or otherwise, and is identical with or too nearly resembles a registered trade mark under the Trade Marks Act, 1999, then the owner of such a registered trade mark can  apply to the Central Government to direct such company for rectification of its name. Such application shall be made within 3 years of its incorporation or change of name by a company, as the case may be. [Section 16(1)(b)].
Under 1956 Act, such an application could be made within 5 years of coming to notice of registration of company. Thus, under 2013 Act, lesser time is given to owners of registered trade marks to apply the Central Government.

The Central Government, after giving opportunity of hearing to applicant and the company, need to frame an opinion as to whether the name of the company is identical or too nearly resembles with the registered trade mark or not. After hearing, if the Central Government frames such an opinion, then it may direct the company to change its name.

Upon receipt of order of the Central Government to change the name, the company shall mandatorily change its name within a period of six months by obtaining consent of shareholders by ordinary resolution.  [Section 16(1)(b)]. Under 1956 Act, the company was required to change its name within three months of receipt of order of the Central Government.

Where the Central Government frames an opinion that the name of the company is not identical or too nearly resembles the registered trade mark of the applicant, then it may reject the application. In such cases, applicant is left with civil remedies (injunction including ad interim / temporary injunction, stay, damages, appointing commissioner (akin to an “Anton Pillar Order”) to search, seizure (seal) of goods, accounts etc.) as there is no appeal provision under the Companies Act. It is pertinent to note that the Indian trademark law protects the vested rights of a prior user against a registered proprietor which is based on common law principles.

Within 15 days of changing name, the company shall give notice to the Registrar of Companies along with the order of the Central Government and the Registrar shall carry out necessary changes in the certificate of incorporation and the memorandum (name clause of memorandum).

Penalty:
If order of the Central Government is not obeyed,
(i) the company shall be punishable with a fine of Rs.1000/- for every day until the order of the Central Government is obeyed; and
(ii) every officer of the company who is in default shall be punishable with a fine of not less than Rs.5,000/- and which may extend upto Rs.100,000/-.

Adjudication:
Under Section 454, the officer appointed by the Central Government, not below the rank of Registrar of Companies, may adjudicate and impose monetary penalty for violation of this section. However, before imposing penalty, an opportunity of hearing shall be given to the Company and its officers.

Compounding:
It may be noted that under section 441, where offence is punishable with fine only, the same may be compounded by the National Company Law Tribunal or where the fine does not exceed Rs.5,00,000/- by the Regional Director or any other officer authorised by the Central Government.

Summary of forms and records:
No format of application to the Central Government is prescribed.

Standard
Companies Act 2013

Section 13: Alteration of memorandum.

Chapter II
INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETOProvisions of the Companies Act, 2013:
Section 13: Alteration of memorandum.
Rules 2.26 to 2.29 of the Companies Rules, 2013
[Section 13 is not yet brought to force and the Companies Rules, 2013 is not yet brought to force]Corresponding provisions of the Companies Act, 1956:
Sections 16, 17, 18, 19, 21, 23 and 37Corresponding provisions of the English Companies Act, 2006
Sections 37, 77 to 81 (change of name) and 87

Applicability:
This section is applicable to all companies.

Memorandum of association contains following clauses:
(a) Name of the Company,
(b) State of India where registered office of the company is situated,
(c) Main objects of the Company and matters considered necessary in furtherance thereof,
(d) Liability of members of the company; and
(e) Authorised share capital of the company.

Alteration made under section 13 shall have any effect until it has been registered. [section 13 (10)].

Special resolution: [section 13 (1) and (6)]
For alteration of any of the clauses [as aforesaid, except (e)] of memorandum of association, consent of members by way of special resolution is required. However, in case of alteration of authorised share capital (as stated in (e) above), consent of members by way of ordinary resolution as stated in section 61 is required.

The company is required to file special resolution passed by shareholders for alteration of memorandum of association with the Registrar of Companies [section 13(6)].

Change of name clause of memorandum: [section 13 (2) and (3)]
For change of name of the company, which is part of memorandum of association of the company, written approval of the Central Government is required and provisions of section 4 (2) and (3) of the Act shall be complied with.
However, in case of conversion of status of a company from one class to another, procedure prescribed for conversion shall be followed and consequential addition or deletion of word ‘Private’ in name of the company shall not require approval under section 13. [proviso to section 13(2)].

Draft Rule 2.26
As per the sub-rule (1), change of name shall not be allowed by Central Government in following cases:
(a) Company which has defaulted in filing any document or annual return or financial statement, as required to be filed under the Act, with the Registrar of Companies,
(b) Company which has defaulted on repayment of matured deposits, matured debentures or interest due on deposits or debentures.

The company is required to file with the Registrar of Companies, approval of the  Central Government for change of name of the Company.  [section 13(6)].

Change of name shall be take effect only upon Registrar of Companies issuing fresh certificate of incorporation. [section 13 (3)].

Draft Rule 2.26
As per the sub-rule (2), fresh certificate of incorporation shall be in Form no. 2.27.

Change of registered office clause of memorandum: [section 13 (4), (5), (7)]
For shifting of registered office from one State to another State of India, prior approval of Central Government is required. For this purpose application in form no. 2.28 shall be made to the Central Government and a copy thereof shall also be filed with the Chief Secretary of the State [Rule 2.27 (1) and (5)].

The Central Government shall dispose application within a period of 60 days [section 13 (5)].

Shifting of registered office shall not be allowed where any inquiry, inspection or investigation has been initiated under the Act against the company or any prosecution under the Act is pending against the company. [proviso to rule 2.27 (10)].

An application shall be accompanied with several documents including list of creditors and debenture holders, if any. Said list shall be prepared as on latest practical date which shall not be older than 30 days.
Further, an affidavit verifying the said list shall be given by Company Secretary, if any and atleast two of the directors of the Company, one of whom shall be managing director, if any. [rule 2.27(2)].
An affidavit from directors is also required to be submitted, along with the application, stating that no employees shall be retrenched as a consequence of shifting of registered office. [rule 2.27(3)].
To dispose of application, hearing shall take place. The company shall atleast 14 days before the date of hearing, [rule 2.27(6)]:
(i) give advertisement (about date, time and venue of hearing) in newspapers in vernacular and English language, in vernacular and English newspapers, respectively, circulating in the district where registered office of the applicant company is situated at time of application;
(ii) serve notice of hearing  (about date, time and venue of hearing) by registered post acknowledgement due
(a) individually to all creditors and debenture holders,
(b) to Registrar of Companies; and
(c) along with copy of application to SEBI, in case of listed company, and to other regulatory body if the company is regulated by any special law.

Objections, if any, received by the applicant company shall be forwarded to the Central Government on or before the date of hearing. [rule 2.27 (7)].

Where no objections are received, an application may be disposed of without hearing. [rule 2.27 (8)].

The Central Government shall ensure that the applicant company either obtains consent of objecting creditors or satisfies debt or secures the debt of objecting creditors. [rule 2.27 (9) and section 13 (5)].

Central Government may put terms and conditions while granting the approval, including order as to costs. [rule 2.27 (10)].

Within 30 days of receipt of order of the Central Government approving the alteration of registered office clause of memorandum of association, the Company shall file file the certified true copy of the order in Form no. 2.29 with the Registrar of Companies of each of the States. The Registrar of Companies shall register the same.  Further, the Registrar of the State where the registered office is being shifted to, shall issue a fresh certificate of incorporation indicating the alteration. [section 13 (7) and rule 2.28].

Change of object clause of memorandum: [section 13 (8), (9)]
Where money is raised by a company from public by issue of prospectus and still has got those money unutilised then for change of object clause of memorandum of association, the company would require consent of members by way of special resolution with specific prescribed disclosures.

While section 13 (8) speaks generally of change of object clause where money is raised from public by issue of prospectus and remaining unutilised, draft rule 2.29 prescribes procedure only when there is a change in the objects as stated in prospectus, stating which the money was raised.

Postal ballot and contents of notice: [rule 2.29 (1)]
Consent of members by special resolution shall be obtained by way of postal ballot.  The notice to members shall contain the following:
(a) total money received (from public by issue of prospectus which remained untilised at time of seeking consent for change of object);
(b) total money utilized for the objects stated in the prospectus;
(c) unutilized amount out of the money so raised through prospectus,
(d) particulars of the proposed alteration/ change in the objects;
(e) justification for the alteration/change in the objects;
(f) amount proposed to be utilized for the new objects;
(g) estimated financial impact of the proposed alteration on the earnings and cash flow of the company;
(h) other relevant information which is necessary for the members to take an informed decision on the proposed resolution;
(i) place from where any interested person may obtain a copy of the notice of resolution to be passed.

Newspaper advertisement [section 13 (8)(i) and rule 2.29 (2)]
The details of such resolution shall also be published in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated and shall also be placed on the website of the company, if any, indicating therein the justification for such change.
Advertisement shall be in form no. 2.30 which shall be published simultaneously with the dispatch of postal ballot notices to shareholders.

The notice shall also be placed on the website of the company, if any. [rule 2.29 (3)].

Dissenting shareholders [section 13 (8)(ii)]
The dissenting shareholders shall be given an opportunity to exit by the promoters and shareholders having control in accordance with regulations to be specified by the SEBI. SEBI is yet to notify regulation for the same.

While money is received from public by the company, exit opportunity shall be given by promoters and shareholders having control.

Above procedure of postal ballot, newspaper advertisement and exit opportunity to dissenting shareholders shall not apply
(a) where money is raised by a company from public by issue of prospectus and has got those money fully utilised; and
(b) where the company has not raised any money from public.

The Registrar shall register any alteration of the memorandum with respect to the
objects of the company and certify the registration within a period of thirty days from the date of filing of the special resolution. [section 13 (9)].

Change of liability clause of memorandum: [Section 13(11)]

In the case of a company limited by guarantee and not having a share capital, any alteration of the memorandum made in order to give or has effect of giving any person (except member) a right to participate in the divisible profits of the company otherwise than as a member, shall be void.

Penalty:

Since no specific penalty or punishment is prescribed for contravention of section 13, general penalty prescribed under section 450 of the Act is applicable. Accordingly, the company as well as its officer who is in default or such other person shall be punishable with fine upto Rs.10,000/-. For continuing offence, they are punishable with further fine upto Rs.1,000/- for every day after the first during which contravention continues.
 
It may be noted that for second or subsequent contravention of the provision of this section, if made within a period of three years, then the company as well as its officer who is in default shall be punishable under section 451 with twice the amount of fine.

Adjudication:

Under Section 454, the officer appointed by the Central Government, not below the rank of Registrar of Companies, may adjudicate and impose monetary penalty for violation of this section, where it decides that no prosecution be launched. However, before imposing penalty, an opportunity of hearing shall be given to the Company and its officers.

Compounding:
It may be noted that under section 441, where offence is punishable with fine only, the same may be compounded by the National Company Law Tribunal or where the fine does not exceed Rs.5,00,000/- by the Regional Director or any other officer authorised by the Central Government.
Both company and every officer who is in default may apply for compounding for violation of section 12.

Summary of forms and records:
Fresh certificate of incorporation in Form no. 2.27 consequent to change of name.
An application for obtaining approval of the Regional Director is required to be made in Form no. 2.28 along with the fees (Rule 2.27)  for shifting of registered office from one State to another.
An order of the Regional Director approving shifting of registered office from one State to another shall be filed with ROC in form no. 2.29 (rule 2.28).
Format of notice to be given in newspaper in Form no. 2.30 (rule 2.29(2)).
Standard
Companies Act 2013

Section 8: Formation of companies with charitable objects, etc.

Chapter II
INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
Provisions of the Companies Act, 2013:
Section 8: Formation of companies with charitable objects, etc.; Section 2(85).
Rules 3(5), 19, 20, 21, 22 and 23 of the Companies (Incorporation) Rules, 2013
[Section 8 (except sub-section (9) ) is brought to force with effect from 01 April 2014 ]
Corresponding provisions of the Companies Act, 1956:
Section 25
Corresponding provisions of the English Companies Act, 2006:
Sections 42, 181 and 226Applicability:
This provision is applicable to companies incorporated for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
A Section 8 company cannot be treated as a small company,as per definition of ‘small company’ ((under clause (B) of proviso to section 2(85) )).

Application for registration of new Section 8 Company

Any person or an association of persons intending to be registered as a limited company for charitable purpose can apply for registration of section 8 company.
However, it shall prove to the satisfaction of the Central Government that:
(a) its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(b) the company on incorporation intends to apply its profits, if any, or other income in promoting such object; and
(c) the company intends to prohibit the payment of any dividend to its members.After perusal, the Central Government may issue license with such conditions as it deems fit and allow the registration of such person or association of persons as a limited company without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”. ((Section 8(1) ))

The power of the Central government is delegated to the Registrar of Companies (‘ROC’) having Jurisdiction over the area where the Registered office of the company is proposed to be situated. ((Vide Notification No. S.O. 1353 (E) dated 21 May 2014)) Hence, the application for registering such company is to be made to the ROC.

Steps to incorporate new Section 8 Company:

1. Make an application.
To incorporate a new company under section , an application  shall be made in Form no. INC.12 ((Rule 19(1) )).
And application shall be accompanied with following documents: ((Rule 19 (3) ))
(i) draft Memorandum of association (MOA) and Articles of association (AOA) of the Company, in Form no. INC-13 ((Rule 19(2) and Rule 19(3)(a) )). Ensure to affix the photographs of the subscribers in subscriber pages of MOA and AOA ;
(ii) Declaration (in Form no. INC-14) by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made there under and all the requirements under section 8 have been complied with ((Rule 19(3)(b) )). It shall be on appropriate stamp paper of the State and duly notarised;
(iii) an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure ((Rule 19(3)(c) ));
(iv) A declaration (in Form no. INC-15) by each of the persons making the application ((Rule 19(3)(d) )). It shall be on appropriate stamp paper of the State and duly notarised; and
(v) Form no. INC-9 from each subscribers and first directors, on appropriate stamp paper of the State and duly notarised

2. Approval of other authorities.
The Registrar of Companies may require the applicant to furnish the approval or concurrence of any appropriate authority, regulatory body, department or Ministry of the Central or State Government(s). ((Rule 2.17(2) ))

3. To decide on granting of license under section 8.
The Registrar will wait for 30 days for objections, if any, of any person pursuant to notice published in newspapers.The Registrar may also consult necessary authorities and regulatory bodies.
Thereafter, the Registrar of Companies at its discretion, may grant the licence. And such licence may contain conditions as deemed necessary by the Registrar. ((Rule 2.17(3) ))

The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such conditions of the license as may be specified by the Registrar in this behalf. ((Rule 2.17(4) ))

Effect of Registration:
The Section 8 Company shall enjoy all the privileges and be subject to all the obligations of limited companies. [Section 8(2)].

A firm can be a member of a section 8 company. ((Section 8(3) ))

To alter the provisions of its memorandum or articles of association, section 8 company will have to obtain the previous approval from the Central Government. ((Section 8(4)(i) ))

Revocation of licence:
The Central Government may, by order, revoke such licence granted under section 8, if:
a) the company contravenes section 8; or
b) the company contravenes the conditions subject to which licence is issued; or
c) affairs of the company are conducted in a fraudulent manner or in violation of object of the company or prejudicial to the interest of the public.
Further, the Central Government may direct the company to change its status from section 8 company to either private or public limited company. And also direct it to change its name to include the word “Limited” or words “Private Limited”.
However, before making order, the Central Government shall give reasonable opportunity of hearing to the company.
Upon receiving such an order, Where the licence granted to a company registered under section 8 has been revoked, the company shall intimate to the Registrar and apply in Form no. 2.23 to convert its status and change of name accordingly. ((Rule 2.20))
The revocation of licence does not absolve the company from the punishment that may follow under the Act. ((Section 8(6) ))

On revocation of licence the Central Government may, in public interest, order such company to be wound up or amalgamate with another company registered under this section having similar objects. However, before making order, the Central Government shall give reasonable opportunity of hearing to the company. ((Section 8(7) ))

Where the licence is revoked and the Central Government is satisfied that in public interest, such company shall amalgamate with another company registered under section 8 and having similar objects, then the Central Government may order details of amalgamation like forming a single company, transfer of assets and liabilities etc. This right of the Central Government prevails even if they are contrary to other provisions of the Companies Act, 2013. ((Section 8(8) ))

Winding up of section 8 company:
Upon winding up or dissolution of section 8 company and after satisfaction of its debts and liabilities, if there remains any asset then the same shall be transferred, as per direction of the National Company Law Tribunal either to another section 8 company with similar object or to the credit of the Rehabilitation and Insolvency Fund formed under section 269. ((Section 8(9) ))

Amalgamation of section 8 company:
Section 8 company can amalgamate only with other section 8 company and having similar objects. ((Section 8(10) ))

Conversion of existing limited company into Section 8 Company

A limited company registered under any previous company law or under the Companies Act, 2013, with any of the objects specified in (a) above and the restrictions and prohibitions as mentioned respectively in (b) and (c) above and which is desirous of being registered under section 8, without the addition to its name of the word “Limited” or as the case may be, the words “Private Limited”, shall make an application in Form No. INC.12 (Part B) to the Registrar of Companies. ((Rule 20(1) ))

Step 1: Application to accompany certain documents. 

Following documents shall be attached to the application ((Rule 20(2) )):

(a) the memorandum and articles of association of the company;

(b) the declaration as given in Form No. INC.14 by an Advocate, a Chartered accountant, cost accountant or Company Secretary in practice, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

(c) For each of the two financial years immediately preceding the date of the application, or when the company has functioned only for one financial year, for such year

(i) the financial statements,

(ii) the Board’s reports, and

(iii) the audit reports,
relating to existing companies

(d) a statement showing in detail the assets (with the values thereof), and the liabilities of the company, as on the date of the application or within thirty days preceding that date;
(e) an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
(f) the certified copy of the resolutions passed in general/ board meetings approving registration of the company under section 8; and
(g) a declaration by each of the persons making the application in Form No. INC.15.

Step 2: Give notice in newspapers.
Within a week from the date of making the application to the Registrar of Companies, the applicant shall publish a notice, in Form no. INC.26, at his own expense ((Rule 20(3) )):
1. At least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated, and circulating in that district, and
2. at least once in English language in an English newspaper circulating in that district; and
3. On the websites as may be notified by the Central Government.

Copy of such notice in newspapers shall be submitted to the Registrar of Companies immediately after their publication.

Conversion of existing Section 8 Company into other form of company

Section 8 company may convert itself into company of any other kind after complying with conditions as may be prescribed. ((Section 8(4)(ii) ))
Rules 21 and 22 contains detailed procedure to this effect. Briefly the same is as under:

Step 1: Consent of members
1. Section 8 company shall get approval of its members by way of a special resolution at a general meeting for approving such conversion. ((Rule 21(1) ))
2. The explanatory statement annexed to the notice convening the general meeting shall set out details as mentioned in the rule 21(2), including the reasons for such conversion.
3. A certified true copy of the special resolution along with a copy of the Notice and the explanatory statement shall be filed with the Registrar in Form No. MGT.14.

Step 2: Intimate other authorities and obtain NOC
Where the company has obtained any special status, privilege, exemption, benefit or grant(s) from any authority such as Income Tax Department, Charity Commissioner or any organisation or Department of Central Government, State Government, Municipal Body or any recognized authority, Company shall give them notice in writing and proof of service shall be filed along with the application for conversion. ((Rule 21(4) ))

Where the company has obtained any special status, privilege, exemption, benefit or grant(s) from any authority such as Income Tax Department, Charity Commissioner or any organisation or Department of Central Government, State Government, Municipal Body or 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 and filed with the Regional Director, along with the application. ((Rule 22(5) ))

Step 3: Make application

The existing section 8 Company shall make application in Form no. INC.18 to the Regional Director with a copy to Registrar of Companies for converting itself into a company of any other kind. ((Rule 21 (4) and (5) ))

The company should have filed all its financial statements and Annual Returns upto the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application to the Regional Director.

The company should have filed all its financial statements, Annual Returns upto the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application. ((Rule 22(6) ))

In the event the application is made after the expiry of three 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 chartered accountant made up to a date not preceding thirty days of filing the application shall be attached. ((Rule 22(6) ))

Step 4: Declaration of Board of Directors
The Board of directors shall give a declaration stating that no part of the income or property of the company has been or shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise to persons who are or have been members of the company or to any one or more of them or to any persons claiming through any one or more of them. ((Rule 22(4) ))

Step 5: Certificate from professionals
The company shall attach with the application, a certificate from practicing Chartered Accountant/ Company Secretary in practice/ Cost Accountant certifying that the conditions laid down in the Act and these rules about conversion of a company registered under section 8 into any other kind of company, have been complied with. ((Rule 22(7) ))

Step 6: Give notice in newspapers.
Within a week from the date of making the application to the Registrar of Companies, the applicant shall publish a notice, in Form no. INC.19, at his own expense:
1. At least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated, and circulating in that district, and
2. at least once in English language in an English newspaper circulating in that district; and
3. On the websites of the Company, if any and as may be notified or directed by the Central Government.

Copy of such notice in newspapers shall be submitted to the Regional Director immediately after their publication. ((Rule 22(1) ))

Step 7: Inform other authorities
The company shall send the copy of the notice, simultaneously on its publication and copy of the application and all attachments by registered post or hand delivery to:
(i) The Chief Commissioner of Income Tax having jurisdiction over the company,
(ii) Income Tax Officer who has jurisdiction over the company,
(iii) the Charity Commissioner,
(iv) the Chief Secretary of the State in which the registered office of the company is situated,
(v) any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating.
Such authorities shall make representations, if any, to the Regional Director within sixty days of the receipt of the notice. ((Rule 22(2) ))

There is no provision in the Rules of keeping the company informed of the representation, if any made by other authorities before the Regional Director.

Rule 21 (4) and Rule 22 (3) requires proof of serving such notice to be attached with the application. However, Rule 22 (2) requires notice to be served on aforesaid authorities simultaneously with publication of newspaper advertisement (which needs to be given within a week from date of filing application)! This anomaly may be resolved by MCA by amending Rule 22(2) and providing that before making application, notice shall be served on other authorities and where so require as per terms of any special status, privilege, exemption, benefit or grant(s), NOC shall also be obtained from such authorities.

Step 8: Regional Director may approve or reject the conversion

The Regional Director may require the applicant to furnish the approval or concurrence of any particular authority for grant of his approval for the conversion and he may also obtain the report from the Registrar. ((Rule 22(8) ))

On being satisfied , the Regional Director shall issue an order approving the conversion of the company into a company of any other kind subject to such terms and conditions as may be imposed as it may deem fit. ((Rule 22(9) ))

The Rule prescribes several conditions which may also be imposed. These are as under:
a) The company shall give up and shall not claim, with effect from the date its conversion takes effect, any special status, exemptions or privileges that it enjoyed by virtue of having been registered under section 8;
b) If the company had acquired any immovable property free of cost or at a concessional cost from any government or authority, it may be required to pay the difference between the cost at which it acquired such property and the market price of such property at the time of conversion either to the government or to the authority that provided the immovable property;
c) Any accumulated profit or unutilized income of the company brought forward from previous years shall be first used to settle all outstanding statutory dues, amounts due to lenders claims of creditors, suppliers, service providers and others including employees and lastly any loans advanced by the promoters or members or any other amounts due to them and the balance, if any, shall be transferred to the Investor Education and Protection Fund. within thirty days of receiving the approval for conversion.

Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director. ((Rule 22(10) ))

Step 9: If conversion is approved, alter memorandum and articles
On receipt of the approval of the Regional Director the company shall pass a special resolution for amending its memorandum of association and articles of association consequent to the conversion of the section 8 company into a company of any other kind. ((Rule 22(11)(i) ))

Step 10: Obtain fresh certificate of incorporation
The Company shall thereafter file with the Registrar:
a) a certified copy of the approval of the Regional Director within 30 days of receipt in Form No.INC.20,
b) Amended memorandum of association and articles of association of the company; and
c) A declaration by the directors that the conditions, if any imposed by the Regional Director have been fully complied with. ((Rule 22(11)(ii) ))

On receipt of the aforesaid documents, the Registrar of Companies shall register the documents and issue a fresh Certificate of Incorporation. ((Rule 22(12) ))

Penalty: ((Section 8(11) ))
Section 8 company who makes default in complying with the provisions of section 8 shall be punishable with fine which shall not be less than Rs. 10,00,000/- but which may extend to Rs. 1,00,00,000/-.

Further, the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 3 years or fine which shall not be less than Rs. 25,000/- but may extend to Rs. 25,00,000/- or with both, imprisonment and fine.

Nature of offence:
Since officers of section 8 company may be punished with imprisonment, it is necessary to decide nature of offence.
As violation of section 8 is not covered under sub-section 6 of section 212, it is non-cognizable offence as provided in section 439.
Court to take cognizance of offence of section 8 only upon complaint filed by either:
a) shareholders of the company; or
b) the Registrar of Companies; or
c) a person authorised by the Central Government.
And offence shall be triable only by a special court, as provided under clause (a) of sub-section 1 of section 436.

Adjudication:
Under Section 454, the officer appointed by the Central Government, not below the rank of Registrar of Companies, may adjudicate and impose monetary penalty for violation of this section, where it decides that no prosecution be launched. However, before imposing penalty, an opportunity of hearing shall be given to the Company and its officers.

Compounding:
It may be noted that under section 441, where offence is punishable with fine only, may be compounded by the National Company Law Tribunal or where the fine does not exceed Rs.5,00,000/- by the Regional Director or any other officer authorised by the Central Government.
Only company may apply for compounding for violation of section 8. Since directors and officers of section 8 company who is in default are punishable with fine or imprisonment or both, they cannot avail compounding mechanism to settle the contravention.

Summary of forms and records:
Form no. INC-9 from each subscribers and first directors, on appropriate stamp paper of the State and duly notarised.
Form no. INC-12 for application to be made for obtaining the license.
Form no. INC-13 for Memorandum of Association of the proposed company.
Form no. INC-14  for declaration about compliance of section 8 and rules made there under by any of the prescribed professionals.
Form no. INC-15 for a declaration by each person making the application.
Form no. INC-26 for notice to be published in the newspaper.
Form no. INC-16 and form no. INC.17 as applicable for the form of license to be granted by the Registrar.
Form no. MGT-14 for filing certified true copy of the special resolution along with a copy of the Notice and the explanatory statement with the Registrar.
Form No. INC-18 for filing an application for approval for converting itself into a company of any other kind with the Regional Director.
Form No.INC-19 for publishing a copy of the notice shall be sent immediately to the Regional Director.
Form No. INC-20 for intimating to the Registrar by the company to convert its status and change of name accordingly in case of revocation of license.

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