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    Exemptions Available to Section 8 Company

    Published Fri, 28 Feb 2020 | Updated Tue, 16 Mar 2021

    A Company registered under Section 8 of the Companies Act, 2013 (popularly known as Section 8 Companies) are the companies that meet the following criteria:

    1. Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
    2. Intends to apply its profits, if any, or other income in promoting its objects and
    3. Intends to prohibit the payment of any dividend to its members


    As the purpose of these companies is purely in the nature of social welfare, various privileges/ exemptions have been provided by the Central Government under the Companies Act, 2013 to these Companies vide notification dated June 5, 2015, which are as follows:

    1. Exemption from Section 2 (24) which provides for the definition of Company Secretary or secretary:
      A section 8 company can appoint a person as a company secretary who does not fall in the definition of company secretary as defined in Section 2(1)(c) of the Company Secretaries Act, 1980
       
    2. Exemption under Section 96(2) related to calling of Annual General Meeting (AGM)
      The time, date and place of each AGM can be decided before hand by the Board of directors having regard to the directions, if any, given in this regard by the company in its general meeting. It implies that a Section 8 company can fix the date of next AGM in the meeting of shareholders and based on the instructions of the shareholders, the board can call for the AGM. In case of companies other than Section 8 companies, the board of directors alone have power to fix the time, date and place of each AGM.
       
    3. Exemption under Section 101(1) related to sending of notice of General Meeting
      Normally, a general meeting of a company may be called by giving not less than clear 21 days’ notice. However, in case of Section 8 companies, a general meeting may be called by giving not less than clear 14 days’ notice.
       
    4. Exemption from Section 118 which deals with minutes of proceedings of General Meeting, Meeting of Board of Directors and other meeting and resolutions passed by Postal Ballot
      This section in its entirety shall not apply on a Section 8 company except that minutes may be recorded within 30 days of the conclusion of every meeting in case of companies where the articles of association provide for confirmation of minutes by circulation.
       
    5. Exemption under Section 136 (1) related to the circulation of Financial Statement
      This section provides for circulation of copies of financial statements (and other related documents) to every member of the company, every trustee for the debenture-holder of any debentures issued by the company and all persons other than such member or trustee not less than 21 days before the date of the annual general meeting but Section 8 companies may send the financial statements not less than 14 days before the meeting.
       
    6. Exemption under Section 149
      By virtue of the said exemption, the following provisions are not applicable on a section 8 company:
      1. Minimum and Maximum number of directors that can be appointed in the company;
      2. Appointment of Independent Director
         
    7. Exemption from Section 150
      Section 150 deals with the manner of selection of Independent Directors and Maintenance of Databank of Independent Directors. As section 8 companies are not required to appoint independent directors, provisions related to the selection of independent directors and maintenance of the databank of independent directors are also not applicable to such companies.
       
    8. Exemption from Section 160 related to the right of persons other than retiring directors to stand for directorship
      The provisions of Section 160 are not applicable on section 8 companies whose articles provide for the election of directors by ballot.
       
    9. Exemption under Section 165 (1)
      The restrictions under section 165(1) with respect to the limit on the number of directorships shall not apply to section 8 companies.
       
    10. Exemption from Section 173(1) related to a number of meetings of the Board
      This section mandates companies to hold a minimum of four board meetings every year with a gap of not more than 120 days between 2 consecutive board meetings but section 8 companies are allowed to hold only 1 meeting within every sixth calendar month.
       
    11. Exemption under Section 174(1) related to a quorum for Board Meeting
      This section states that the quorum for a board meeting shall be one-third of the total strength or two directors, whichever is higher. In the case of section 8 companies, the quorum for board meetings shall be 8 members or twenty-five percent of its total strength, whichever is less.
       
    12. Exemption under Section 177(2) related to the constitution of the Audit Committee
      Companies are required to constitute their Audit Committee with the majority of independent directors. Whereas Section 8 companies can constitute Audit Committee without independent directors.
       
    13. Exemption from Section 178 related to the constitution of Nomination and Remuneration Committee and Stakeholders Relationship Committee
      Section 8 companies have been exempted from the requirement of the constitution of the Nomination and Remuneration Committee and Stakeholders Relationship Committee.
       
    14. Exemption under Section 179(3) related to exercise of powers by the Board at the Board Meeting
      A Section 8 company may transact the following matters by circulation instead of transacting these matters at the board meeting:-
      1. To Borrow Money;
      2. To invest the funds of the Company;
      3. To grant loans or give guarantee or provide security in respect of loans
         
    15. Exemption under Section 184(2) and Section 189 related to disclosure of interest by the Directors
      Directors of Sections 8 companies are not required to disclose their interest in a contract or arrangement entered into by the company with the related parties of directors if the value of such contract or arrangement does not exceed Rs. 100,000.

     

          


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