Strike Off Section 8 Company

Striking off a Section 8 Company is a significant legal and procedural process governed under the Companies Act, 2013, with special provisions due to the unique nature of Section 8 entities. These companies operate not for profit but for charitable purposes such as education, social welfare, arts, commerce, and other public good ventures. Unlike regular companies, the process to cease or strike off a Section 8 Company is more complex and regulated, ensuring that all legal, financial, and charitable obligations are met before dissolution.

This comprehensive blog covers all the main points involved in the strike off process of Section 8 Companies, each explained in detail with professional clarity, alongside the role and expertise of Kyna Fintax in assisting you through this journey. This content is also optimized for SEO keywords such as “section 8 company,” “strike off section 8 company,” and related terms to help your blog rank high in searches.

Points for Strike Off of Section 8 Company

Understanding Section 8 Company and Its Nature
Reasons for Striking Off a Section 8 Company
Legal Framework Governing Strike Off
Mandatory Conversion of Section 8 Company Before Strike Off
Key Compliance and Documentation Requirements
Board Meeting and Shareholder Approval Process
Filing Form INC-18 and Related Applications with MCA
Public Notice and Objection Mechanism
Settlement of Liabilities and Distribution of Assets
Final Strike Off Approval and Consequences
Post Strike Off Procedures & Director Responsibilities
Benefits of Opting for Strike Off of Section 8 Company
Potential Challenges and Common Mistakes to Avoid
Role of Kyna Fintax in Section 8 Company Strike Off

1. Understanding Section 8 Company and Its Nature

A Section 8 Company is a non-profit entity registered under Section 8 of the Companies Act, 2013, dedicated exclusively to promoting charitable objectives such as commerce, art, science, sports, education, social welfare, religion, or environmental protection. Unlike other companies, Section 8 Companies are prohibited from distributing profits to their members or shareholders; all earnings must be reinvested to achieve their objectives. They enjoy tax benefits but must comply with stringent regulatory and compliance requirements, including periodic filings and governance standards. Due to their non-profit status and special license from the Central Government, their closure or strike off commands additional regulatory scrutiny.

2. Reasons for Striking Off a Section 8 Company

Section 8 Companies may seek strike off due to several reasons including but not limited to: prolonged inactivity or dormancy, inability to sustain operations financially, changes in objectives that make continued functioning impractical, merger or amalgamation with other entities, or to avoid non-compliance penalties arising from missed statutory obligations. Since such companies operate under charitable purposes, a clean, legal exit via strike off ensures assets and responsibilities are handled transparently and within the law.

3. Legal Framework Governing Strike Off

The strike off of Section 8 Companies is governed primarily by the Companies Act, 2013, especially Sections 248 and 255, along with the Companies (Incorporation) Rules, 2014. Unlike normal companies, Section 8 entities must first comply with additional steps such as license surrender with the Ministry of Corporate Affairs (MCA), and conversion to a private or public limited company before initiating the strike off. The strike off process involves applications to the Regional Director (RD) and Registrar of Companies (ROC), public notices in newspapers and the official gazette, and verification of compliance of all legal provisions relating to asset disposal and liability extinguishment.

4. Mandatory Conversion of Section 8 Company Before Strike Off

A crucial and mandatory step before striking off a Section 8 Company is its conversion into a non-Section 8 company type (private or public limited company). This step is necessary to surrender the special license granted under Section 8 and to bring the company under the standard company laws applicable to regular companies. This conversion involves obtaining approval of the Board and shareholders, filing Form MGT-14 (special resolution), and submitting Form INC-18 with the Regional Director along with a certificate of compliance and mandatory documents such as Chartered Accountant statements.

5. Key Compliance and Documentation Requirements

For a successful strike off, the company must prepare and submit required documentation that includes: Board Resolution and Special Resolution passed in meetings; financial statements certified by a Chartered Accountant; compliance certificates confirming adherence to applicable laws; proof of public notice publication; and an application in Form INC-18 for conversion. Additionally, clearance certificates regarding tax dues, GST, TDS, and other statutory dues are critical. Ensuring all documentation is accurate and thoroughly prepared reduces the risk of rejection or delays.

6. Board Meeting and Shareholder Approval Process

The company’s Board of Directors must convene a meeting to propose the strike off and conversion plan, followed by an Extra-Ordinary General Meeting (EGM) of shareholders where a special resolution is passed with at least 75% approval. Shareholders sanction the closure decision, license surrender, and authorize specific individuals to file applications with MCA. These proceedings must comply with statutory notices and procedures under the Companies Act and Secretarial Standards.

7. Filing Form INC-18 and Related Applications with MCA

Form INC-18 is the formal application to the Regional Director requesting approval to convert the Section 8 Company to a normal company. Alongside Form INC-18, Form MGT-14 and other compliance certificates are filed. Once approved, the company proceeds with strike off formalities, submitting prescribed forms (like STK-2) to the Registrar of Companies. The MCA undertakes scrutiny and verifies compliance before issuing confirmation or directions.

8. Public Notice and Objection Mechanism

Strike off procedure mandates publication of notices in both English and vernacular newspapers and in official gazettes. This public notification invites objections from creditors, stakeholders, or the public. If objections arise, the process may be delayed or halted pending resolution. This step ensures transparency and protects the interests of all parties involved before the company’s name is removed from the register.

9. Settlement of Liabilities and Distribution of Assets

Before strike off, the company must extinguish all its liabilities—pay off creditors, settle employee dues, and fulfill contractual obligations. Any remaining assets must be distributed in accordance with the company’s objectives or transferred to similar charitable entities. Special care is taken to ensure no misappropriation or unlawful distribution, as Section 8 Companies’ assets are dedicated to charitable purposes.

10. Final Strike Off Approval and Consequences

Upon satisfactory completion of all formalities, the MCA removes the company’s name from the register, effectively dissolving the company. The company ceases to exist as a legal entity and can no longer carry on activities related to its objects. Directors are relieved from ongoing compliance responsibilities but must ensure the closure process was conducted lawfully to avoid legal liabilities.

11. Post Strike Off Procedures & Director Responsibilities

Directors should maintain records related to the strike off process for prescribed periods to comply with legal audit or investigation requirements. Any failure in adhering to due process can attract penalties or prosecution. Proper closure protects directors from future claims and helps preserve reputations.

12. Benefits of Opting for Strike Off of Section 8 Company

Eliminates ongoing compliance burdens and associated costs of running a dormant or inactive company.
Prevents penalties, fines, and legal action arising from non-compliance with MCA filings or tax laws.
Provides a clean legal closure with transparency and due diligence.
Frees directors and members from liabilities and responsibilities linked with continued registration.
Assures proper handling of charitable assets and obligations in line with governing laws.

13. Potential Challenges and Common Mistakes to Avoid

Failure to convert before strike off leads to rejection or legal complications.
Overlooking public notification or objection processes can delay closure.
Not settling all liabilities or improper asset distribution may invite penalties.
Ignorance of filing deadlines for forms like INC-18 and MGT-14 causes procedural issues.
Lack of professional guidance can result in inefficient or incomplete closure, risking director liabilities.

14. Role of Kyna Fintax in Section 8 Company Strike Off

Kyna Fintax offers expert end-to-end advisory and facilitation services in striking off Section 8 Companies. With deep knowledge of MCA regulations, compliance requirements, and procedural intricacies, Kyna Fintax ensures smooth license surrender, company conversion, document preparation, public notification compliance, and application filing. Their team also manages tax clearance, audits, and asset distribution planning to protect your interests.

Choosing Kyna Fintax means leveraging professional expertise to minimize risks, avoid common pitfalls, and complete strike off in a timely and legally compliant manner—allowing directors and members to confidently close their charitable ventures without undue burden or future liabilities.

Striking off a Section 8 Company is a legally sensitive, multi-step process designed to ensure that non-profit entities cease operations with full compliance, transparency, and responsibility. It includes mandatory conversion, approvals at multiple levels, strict documentation, and public scrutiny. Proper planning, professional execution, and mindful asset/liability management are essential.

For anyone looking to strike off their Section 8 Company efficiently and with expert guidance, Kyna Fintax stands out as a trusted partner. With their comprehensive knowledge of company law, tax compliance, and procedural nuances, they simplify this complex process, ensuring your charitable organization is closed legally, ethically, and swiftly.

FAQ: Strike Off Section 8 Company

1. What is a Section 8 Company?

A Section 8 Company is a non-profit entity registered under Section 8 of the Companies Act, 2013. It is established for promoting charitable objectives such as education, arts, social welfare, commerce, and other public benefits. Such companies cannot distribute profits to members; all earnings must be used solely for their objectives.

2. Why would a Section 8 Company need to be struck off?

Common reasons include prolonged inactivity, financial difficulties, changes in business objectives, mergers, or avoiding penalties due to non-compliance. Strike off provides a lawful and transparent way to dissolve the company when it can no longer operate effectively.

3. Can a Section 8 Company be struck off directly?

No. Unlike regular companies, a Section 8 Company must first convert to a non-Section 8 company type (private or public limited) before applying for strike off. This ensures the surrender of the special license issued under Section 8 and compliance with all regulatory norms.

4. What are the key compliance steps before strike off?

The company must hold board and shareholder meetings to approve the conversion and strike off process, prepare and file all required documents including Form INC-18 and MGT-14, publish public notices inviting objections, settle all liabilities, and handle asset distribution in line with charitable purposes.

5. What happens after the strike off application is approved?

Once the Registrar of Companies removes the company’s name from the register, the company ceases to exist legally. The directors are released from their duties, although they should maintain records of closure for potential future audits or scrutiny.

6. Are there any liabilities for directors after strike off?

If the strike off is completed following proper legal procedure, directors bear no further liability. However, failure to comply with due process or improper handling of assets and dues can expose directors to penalties or legal actions.

7. How long does the strike off process take?

The duration varies depending on the company’s compliance status, public objections, and processing by the Ministry of Corporate Affairs. Typically, it can take a few months to several months.

8. What are the risks of not striking off a dormant Section 8 Company?

Non-compliance with MCA filings, tax filings, and statutory requirements can lead to penalties, fines, increased scrutiny, and personal liability for directors.

9. How does Kyna Fintax assist with Section 8 Company strike off?

Kyna Fintax provides end-to-end support including company conversion, document preparation, regulatory filings, public notice management, liability settlement advisory, tax clearance assistance, and smooth coordination with MCA to ensure timely and compliant strike off.

10. Why is professional help recommended for striking off a Section 8 Company?

The process is legally complex, requiring strict adherence to procedural steps, compliance with tax and corporate laws, and careful asset/liability management. Professional guidance ensures risks are minimized, delays avoided, and the closure is legally sound.