Updated on July 06, 2024 11:46:33 PM
Closure of Section 8 company can happen by surrendering the license issued by MCA to operate as a non-profit organisation. To strike off a section 8 license, it can also be initiated by converting the company into another company type such as a private or public entity. The closure of a section 8 company has some complexities, these companies cannot shut down their operations normally. A section 8 company has to convert to a normal company first and then surrender the license before the government authority. There are many complexities that have to be taken care of while planning to strike off a section 8 company.
Section 8 companies, established under the Companies Act, 2013, are non-profit organisations that pursue social and charitable goals without the intention of generating profits. While these companies play a vital role in addressing societal challenges and promoting public welfare, they may encounter circumstances that necessitate their closure.
Go through the page to know everything about the winding up of a Section 8 company such as the process, documents, fees required for closure or strike off of section 8 companies.
The closure of a Section 8 company involves winding down its operations, settling its debts and liabilities, distributing its assets, and surrendering its registration with the Ministry of Corporate Affairs (MCA). This process is typically initiated when the company is unable to fulfill its objectives, faces financial difficulties, undergoes organizational changes, or merges with another entity. The closure process involves several steps, including convening a general meeting, appointing a liquidator, settling debts and liabilities, distributing assets, filing a closure application, and obtaining a closure certificate.
The detailed process of winding up or closure of section 8 company is as follows:
The very first step in closure of a section 8 company is to convene a General meeting. The company's board of directors must take the initiative to call a Special General Meeting (SGM) of the company's members to specifically address the matter of winding up the section 8 company. This meeting serves as a formal platform for the members to consider the proposal for closure and make an informed decision. The notice of the SGM must be sent to all members of the company at least 14 days before the date of the meeting.
The company's members or the court have the authority to appoint a qualified individual to serve as a liquidator, entrusted with overseeing the winding-up process. This appointment ensures that a responsible and competent person is responsible for managing the company's assets, settling debts, and ensuring a smooth transition to closure. The liquidator's duties encompass a wide range of responsibilities, including taking possession of the company's assets, realizing the assets by converting them into cash, paying off the company's debts, and distributing the remaining assets among the company's members in accordance with their respective interests.
The liquidator must diligently identify, verify, and list all outstanding debts and liabilities of the company. This involves a thorough examination of financial records, communication with creditors, and ensuring that all financial obligations are identified and accounted for. The liquidator has a responsibility to notify all creditors of the company's winding up and invite them to submit their claims within a specified time frame.
The liquidator must obtain a valuation of the company's assets by a qualified valuer. This valuation provides an accurate assessment of the company's financial worth and ensures that the assets are distributed fairly among the members. After settling debts and liabilities, the liquidator should distribute any remaining assets among the company's members according to their respective interests. The liquidator must follow a structured procedure for distributing assets, ensuring that each member receives their rightful share.
The liquidator must file Form INC-20 with the Ministry of Corporate Affairs (MCA) to surrender the company's registration and initiate the formal closure process of the section 8 company. This form serves as the official notification to the MCA of the company's intention to close and triggers the process of deregistration. The MCA will thoroughly review the closure application and supporting documents to verify compliance with all requirements.
Upon successful completion of the winding-up process and verification of compliance with all requirements, the MCA will issue a closure certificate, officially marking the end of the Section 8 company's existence. This certificate serves as formal documentation of the company's closure and provides legal recognition of its dissolution. The liquidator must retain all records related to the winding-up process for a period of at least eight years from the date of issue of the closure certificate. This retention ensures that the company's financial and legal records are preserved for future reference, audits, or potential legal inquiries.
Here is the list of documents required for closure of section 8 Company are:
The total cost of Section 8 company closure is ₹ which includes government fee and professional filing fee of Professional Utilities.
| Section 8 Company Closure | Fees |
|---|---|
| Government Fee | ₹ |
| Professional Fee | ₹ |
| Total Fee | ₹ |
Note: For the purpose of company closure a professional fee is charged by the company secretary, and an additional fee for Documents Processing and auditing(Notary and Stamp Paper).
There are a number of reasons why a Section 8 company might choose to close or strike off. These reasons can be broadly classified into three categories:
At Professional Utilities, we leverage our industry knowledge and expertise to help businesses navigate complex regulations, minimize risks, and optimize operations for maximum efficiency and profitability.
The decision to close a Section 8 company is a significant one that should not be taken lightly. It is often a difficult decision, as it can have a significant impact on the company's employees, donors, and beneficiaries. However, in some cases, closing a Section 8 company may be the best way to ensure that its resources are used in a way that is consistent with its mission and that it is able to fulfil its obligations to its stakeholders.
When considering whether or not to close a Section 8 company, it is important to carefully consider all of the factors involved. The company should assess its financial situation, its ability to achieve its objectives, and the impact of its closure on its stakeholders. It should also consult with legal and financial advisors to ensure that it is following the appropriate procedures.
Consult with Professional Utilities for more information on Company closure or liquidation and get the expert advice on your section 8 company closure to avoid any penalty.
The detailed procedure of closure of a section 8 company involves various steps such as Convening a general meeting, Appointing a liquidator, Settle debts and liabilities, Distribute assets, File closure application, Obtain section 8 company closure certificate.
The documents required for closure of section 8 company are Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), Last audited Balance sheet and profit & loss account, Audit report, Copy of newspaper advertisement, Digital Signature Certificate (DSC) of existing directors, Copy of notice sent to the members for calling an extraordinary general meeting (EGM), Copy of special resolution (SR) approving winding up, Copy of list of creditors, Copy of an explanatory statement, Copy of advertisement in the format of INC-19.
The total fee for closure of section 8 company is which includes government fee as well as professional fee of professional utilities.
The closure of a section 8 company is required due to various reasons such as financial factors, operational factors and external or natural factors.
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