Exemption available to section 8 companies under the companies act, 2013.
Written by "CS Priyanka Yadav" Practicing Company Secretary in Navi Mumbai and Mumbai
Exemption available to section 8 companies under the companies act, 2013.
Section 8 companies, which are formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or any other useful objective, enjoy several exemptions under the Companies Act, 2013. These exemptions are designed to ease their operational burdens and allow them to focus more on their main activities. Below are some significant exemptions provided to section 8 companies under various sections of the companies act, 2013.
| Sr. No. | Section under the Companies Act, 2013 | Exemptions |
|---|---|---|
| 1. | Section 2(24) | Company Secretary: Company secretary means a company secretary as defined in clause (c) of subsection (1) of section 2 of Companies Act, 1980 who is appointed by a company to perform the functions of secretary under this Act. This provision of clause (24) of section 2 shall not apply to section 8 company. |
| 2. | Section 96(2) | AGM: The time, date, and place of each AGM of section 8 company are decided upon beforehand by the board of directors having regard to the directions, if any, given in this regard by the company in its general meeting. |
| 3. | Section 101(1) | Notice of Meeting: In case of section 8 company, a general meeting may be called by giving clear fourteen days’ notice instead of standard timelines. |
| 4. | Section 118 | Minutes: This section will not apply as a whole except that minutes may be recorded within thirty (30) days of conclusion of every meeting in case of companies where the AOA provide for confirmation of minutes by circulation. |
| 5. | Section 136(1) | Right of Member to Copy of Financial Statement: For section 8 companies, 21 days will be substituted by 14 days. A copy of the financial statements, consolidated financial statements, auditor’s report and every other document required by law shall be sent to every member, debenture trustee, and other entitled persons not less than fourteen days before the date of the meeting. |
| 6. | Clause (b) and First Proviso to Sub-section (1) of Section 149 | Appointment and Qualifications of Directors: In case of section 8 companies, 149(1)(b) and first proviso to 149(1) shall not apply. Section 8 companies can appoint more than fifteen directors without passing a special resolution. |
| 7. | Sub-sections (4), (5), (6), (7), (8), (9), (10), (11), Clause (i) of Sub-section (13) of Section 149 | Independent Directors: Requirements for independent directors shall not apply to section 8 companies. Since there is no requirement to appoint an independent director, all consequential sub-sections relating to independent directors shall also not apply. |
| 8. | Section 150 and Proviso to Section 152(5) | Selection of Independent Directors: Manner of selection of independent directors and related provisos shall not apply to section 8 companies. |
| 9. | Section 160 | Right of Person Other Than Retiring Directors to Stand for Directorship: Shall not apply to section 8 companies whose articles provide for election of directors by ballot. |
| 10. | Section 165(1) | Number of Directorship: Under Section 165(1), a person can hold a maximum of 20 directorships. However, this provision does not apply to Section 8 companies, allowing individuals to hold directorships in an unlimited number of Section 8 companies. |
| 11. | Section 173(1) | Meetings of Board: Instead of standard requirements (4 meetings with max 120 days gap), the board of directors of a Section 8 company is mandated to hold at least one meeting within every six calendar months. |
| 12. | Section 174(1) | Quorum for Meetings of Board: For Section 8 companies, instead of "one-third of its total strength or two directors, whichever is higher," the quorum is either "eight members or twenty-five percent of its total strength," whichever is less (quorum shall not be less than two members). |
| 13. | Section 177(2) | Audit Committee: The requirement that independent directors must form a majority of the Audit Committee is omitted for Section 8 companies. |
| 14. | Section 178 | Nomination and Remuneration Committee & Stakeholder Relationship Committee: Section 8 companies need not have a nomination and remuneration committee nor a stakeholders relationship committee. |
| 15. | Section 179 | Power of Board: For Section 8 companies, certain powers that require a board meeting may be exercised by passing resolutions through circulation (e.g., borrowing monies, investing funds, granting loans/guarantees). |
| 16. | Section 184(2) | Disclosure of Interest by Directors: Shall apply only if transaction done with reference to section 188 on the basis of terms and conditions of contract or arrangement. |
| 17. | Section 186(2) | Loan and Investment by Company: Section 8 companies, where 26% or more of the paid-up share capital is held by the central/state governments, are exempt from restrictions on loans provided for funding industrial research and development projects in furtherance of their MOA objectives. |
| 18. | Section 189 | Register of Contracts: The requirement to maintain a register of contracts/arrangements in which directors are interested applies to Section 8 companies only if the transaction is done with reference to Section 188 (related party transactions). |
