Law Relating To Section 8 Companies (Non-Profit Organisation)

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Law Relating To Section 8 Companies (Non-Profit Organisation)

INTRODUCTION Section 8 of the Companies Act, 2013 provides for a mechanism through which an Association can be registered as a Company, if such association is formed for promoting commerce, art, science, religion or any other useful object and intends to apply its profits/income in promoting its objects. The objective of this provision is to […]

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Law Relating to Appointment, Resignation & Removal of Company Directors

The company must have Board of Directors for the smooth functioning of its affairs. It is the directors under whose supervision, the management team, run the business affairs of the company. A Director may act as Executive or non-executive director of the company.

As per Companies Act, 2013 (Act), a company shall have minimum number of three directors in the case of a public company, two Directors in the case of a private company, and one director in the case of a One Person Company. There shall be a maximum of fifteen directors and that number can be increased beyond fifteen, by passing members special resolution.

Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.

In respect of some specified class of companies independent director and women director are required to be appointed on the board. In case of the appointment of Independent director in General Meeting, an explanatory statement for such appointment should also be annexed with Notice for calling of General Meeting shall include a statement that in the opinion of the board for the fulfillment of the conditions specified in the Act.

Independent director will be appointed for the term for the five years and shall be reappointed after passing the special resolution in General Meeting. The retirement and rotation of the directors does not apply to the Independent Director.

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Related Party Transactions: Legal Provisions & Compliance

The Act puts some restriction on the related party transactions. With the introduction of The Companies Act, 2013, the scope and ambit of related party transactions has significantly enlarged. The Companies Act, 1956 covered only purchase or sale of goods or supply of services and subscription of any shares or debentures of the company under the related party transaction. However, Companies Act, 2013 has brought immovable properties and leasing of property also under the ambit of related party transaction.

The Companies Act, 2013 has removed central government approvals for related party transaction which was mandatory under the Companies Act, 1956 for companies having paid-up share capital of rupees one crore or more.

We will start from the definition of related party, which has been prescribed under the Act.

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Board of Directors : Powers, Roles & Responsibilities

Meeting: Important Deadlines

Every Company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation except in case of One Person Company and shall hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than One hundred and twenty days shall intervene between two consecutive meetings of the Board.

One Person Company , Small Companies and Dormant Companies are required to conduct one meeting in each half of the Calendar year and the gap between the two meetings should not be less than Ninety days.

Quorum and Adjournment provisions

The quorum for a meeting of the Board of Directors of a company as prescribed by Section 174 of the Companies Act 2013 shall be one third of its total strength or two directors, whichever is higher, but if the Articles of Association of a Company prescribe a higher strength of Quorum, then the requirements of the Quorum shall be subject to the Articles of Association. The participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum and if a meeting of the board could not be held for want of quorum, then, unless the articles of the company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.

The quorum should be ascertained before start the meeting for valid transaction of the business to be discussed at the meeting. And any fraction of a number shall be rounded off & deemed as one and Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business.

Director shall not be counted for Quorum in respect of an item in which he is interested and he shall not be present, whether physically or through Electronic Mode, during discussions and voting on such item.

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Incorporation of Section 8 Company (Non-profit organisation)

The concept of non-profit making company is quite old in India. In erstwhile Companies Act, 1956 it was regulated by Section 25 and that is why it was popular as Section 25 Company. However in Companies Act 2013 provisions related to non-profit making company are given in Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014. Such organization can be registered as trusts, societies, or as a non-profit company incorporated under Section 8 of the Companies Act, 2013.

This article is meant for providing information regarding the procedures and process for incorporation of a non-profit making company as given in Section 8 read with Rule 19 and 20 of Companies (Incorporation) Rules, 2014.

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