Section 8 Companies and the Companies Act: Notified Relaxations and Their Limits
This article lists the provisions of the Companies Act, 2013 that are disapplied or modified for a Section 8 company under MCA Notification G.S.R. 466(E) dated 5 June 2015, as amended by G.S.R. 584(E) dated 13 June 2017, and explains the filing condition and the other limits on that relief.
Boards and company secretaries of non-profit companies often assume that licensed status carries a general exemption from the corporate governance provisions. It does not. The relief is notified provision by provision, depends on the company's filing record, and leaves most of the Act untouched. Acting on an assumed exemption exposes meetings and resolutions to challenge.
The base rule and the power to relax
Section 8(2) provides that a Section 8 company enjoys the privileges and is subject to the obligations of limited companies. There is no blanket exemption. Section 462 empowers the Central Government to grant specified exceptions, modifications and adaptations by notification, and the notification of 2015, as amended in 2017, was issued under it.
Condition added in 2017
Paragraph 2A of G.S.R. 466(E), inserted in 2017, provides that the exceptions and modifications apply only to a Section 8 company that has not defaulted in filing its financial statements under Section 137 or its annual return under Section 92 with the Registrar. The condition is not confined to the filing that a given relaxation concerns. A default in either filing removes the relief across the notification.
Relief is conditional on filing status at the time it is used. Whether curing a default later validates actions taken while in default must be assessed separately, and retrospective validation should not be assumed.