Jul 01, 2017

Additional Exemptions for Section 8 Companies

By way of notification dated June 13, 2017, the MCA has amended its earlier Notification GSR 466(E) dated June 5, 2015 (‘Section 8 Principal Notification’), by prescribing additional exemptions for companies with charitable objects registered under Section 8 of the Companies Act (‘Section 8 Companies’) from compliance with certain provisions of the Companies Act, which have been summarised below:i. Under the Section 8 Principal Notification, Section 8 Companies were exempted from complying with the minimum and maximum director requirements under Section 149(1) of the Companies Act. Pursuant to the recent amendment, Section 8 Companies are mandatorily required to have a minimum number of 3 directors (in the case of a public company) and 2 directors (in the case of a private company). However, there continues to be no limit on the maximum number of directors.ii. As per Section 186(7) of the Companies Act, loans provided by any company to another person must bear interest not lower than at a rate specified under the Companies Act. Section 8 Companies are exempted from complying with this requirements if: (a) not less than 26% of its paid up share capital is held by the Central Government or any State Government(s) or both; and (b) the loan is being granted for funding industrial research and development projects, in furtherance of the objects stated in the memorandum of association of such Section 8 Company.Benefits of exemptions set out above can only be availed by Section 8 Companies that have not committed a default in filing their financial statements under Section 137 or annual return under Section 92 of the Companies Act.

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