COMPANY LAW PROJECT

TOPIC- COMPANY WITHOUT

PROFITS- NATIONAL HERALD &
YOUNG INDIA

SUBMITTED TO:
DR. RAJINDER KAUR
SUBMITTED BY:
PRABHSIMRAN SINGH
ROLL NO. 82/18
SEC-B B.A. LL.B.(Hons.)
SEMESTER-8
INTRODUCTION
History of Company with Charitable purpose
The concept of Section 8 companies was introduced in Companies Act
1913 that permitted companies with charitable objects etc. To be
registered without the words ‘Limited’ or ‘Private Limited’. The
restriction was that the Companies were permitted to use the profits only
for the purpose for which the company was promoted and there was a
prohibition on distribution of dividend.
Recommendation by Bhabha Committee
Based on the recommendation of the Bhabha Committee, Companies Act
of 1956 was passed. The Companies Act of 1956 came into force from 1st
April, 1956 and was largely based on the English Companies Act of 1948.
Section 25 of Companies Act, 1956 was introduced for such companies
based on English Companies Act 1948. Bhaba committee also
recommended to permit partnership firms (though not a legal entity) to be
members of section 25 companies and provided for cession of
membership of a partnership firm in a section 25 companies on the
dissolution of the partnership.
Companies Act, 2013
The Companies Act, 2013 continues with the provision for such
companies and provides for a framework for the same under Section 8 of
the Companies Act, 2013. Section 8 continues to provide for restriction
on application of profits and permits the same only for the purpose for
which the company is promoted, prohibits declaration of dividend,
continues to permit partnership firms to be a member of section 8
companies etc. 2013 Act elaborates on the objects for such companies and
specifies objects like sports, education, research, social welfare and
protection of environment for which the Companies can be formed under
this section.
Section 8 of the Companies Act 2013 provides for the formation of the
companies with charitable objects etc. Section 8 Company, (earlier
Section 25 Company of the Companies Act, 1956), is a legal entity for
Non-Government or Non-Profit Organizations.
Examples of Section 8 Companies
Infosys Foundation, Reliance Foundation, TATA Foundation, Reliance
Research Institute, OTC- Over the Counter Exchange of India, etc

Objectives of Section 8 Company

It is a type of company which is established with the objective to promote
commerce, arts, science, sports, education, research, social welfare,
protection of the environment or any other such object. The main purpose
of Section 8 Company is essentially to work for the welfare of society in
any of the above-mentioned fields and is formed in Public Interest.
A Company, whether Private Limited, LLP or Public Limited, who work
towards the objective of social welfare, without any intention to get any
kind of profit or dividend can function as a Section 8 company.

Eligibility to Apply for Section 8 Company

An individual or an association of individuals are eligible to be registered
as Section 8 Company if it holds below-mentioned intentions or
objectives. The objectives have to be confirmed to the satisfaction of the
Central Government.
 • When the company intends to promote science, commerce,
education, art, sports, research, religion, charity, social welfare,
protection of the environment or alike other objectives;
• When the company holds an intention to invest all the profits (if
any) or any other income generated after incorporation in the
promotion of such objects only;
• When the company does not intend to pay any dividend to its
members.

Procedure for Incorporation of a Section 8 Company

To incorporate a Section 8 Company, an application shall be made to the
Registrar of Companies in Form no. INC.12, which shall be accompanied,
inter alia, by the following documents:
i. Draft Memorandum of Association (MOA) and Articles of association
(AOA) of the Company in prescribed format (Form no. INC – 13) where
the photographs of subscribers are affixed.
ii. A Declaration is to be attached in Form no. INC-14 (on the stamp paper,
duly notarized) by an Advocate, a Chartered Accountant, Cost Accountant
or Company Secretary in practice, that the draft memorandum and articles
of association have been drawn up in conformity with the provisions of
section 8 and rules made there under and all the requirements under
section 8 have been complied with.
iii. An estimate of the future annual income and expenditure of the
company for next three years, specifying the sources of the income and
the objects of the expenditure.
iv. A declaration (in Form no. INC-15) on stamp paper duly
notarized by each of the persons making the application
and
v. Form no. INC-9 from each subscribers and first directors, on
appropriate stamp paper of the State and duly notarized.
As per rule 8(7) of the Companies (Incorporation) Rules, 2014, for the
Companies under Section 8 of the Act, the name shall include the words
foundation, Forum, Association, Federation, Chambers, Confederation,
council, Electoral trust and the like etc
Pre-conditions and the procedure for conversion of companies
already registered under the Companies Act, into a Section 8
Company
Any existing limited company registered under this Act or under any
previous company law can apply for conversion subject to the following:
The Memorandum and Articles of Association either have (or are
amended such that they have) the objects specified in clause (a) of sub-
section (1) of Section 8 and the restrictions and prohibitions as mentioned
respectively in clauses (b) and (c) of that sub-section are incorporated in
the Memorandum/Articles, and the Company is desirous of being
registered under Section 8, without the addition to its name of the word
"Limited" or as the case may be, the words "Private Limited". For
conversion, the procedure prescribed under section 8(5) read with Rule 20
of the Companies (Incorporation) Rules, 2014 shall apply.
A Section 8 Company can also be converted into any other company
including OPC as prescribed under Section 8(4)(ii) read with Rules 21
and 22 of Companies (Incorporation) Rules, 2014. This is further subject
to restrictions and compliances as per other applicable laws including
Income tax Act, 1961.
Section 8 Company Total Exemptions and Reliefs
• The directorship under section 8 companies shall not come under
the computation of the ceiling towards the highest number of the
directorships which has been mentioned beneath Section 165 of the
Act.
• Section 8 Company can hold a meeting with minimum 14 days
notice as against 21 days notice otherwise applicable under section
101 (1) of Companies Act.
• Section 8 firm would conduct at least one meeting every 6 calendar
months rather than holding 4 meetings for a year. The prescription
under section 149(1) of Companies Act 2013 as to having Minimum
of three directors for public limited company and two directors for
private limited company and maximum of fifteen directors is not
applicable to section 8 company and thus there is no prescription
with respect to minimum or maximum directors in a section 8
Company.
• Section 8 Companies are exempted from the requirement of
appointment of independent director and all the consequential
provisions relating to Independent directors under section 149(1) of
the Companies Act, 2013 vide exemption notification dated June 05,
2016.

Amalgamation and Winding Up

• Section 8(10) provides that a company registered under section 8
shall amalgamate only with another company registered under
section 8 company and having similar objects.
• Any asset that remains after satisfaction of its debts will be
transferred to another company registered under section 8 and
having similar objects, subject to such conditions as the National
Company Law Tribunal may impose, or may be sold and proceeds
thereof credited to the Rehabilitation and Insolvency Fund formed
under Section 269 of Companies Act, 2013.
• There in no restriction in demerger of any division of a Section 8
Company. However considering the restrictions placed under
section 8(10) and in Form INC 16 (license issued by the Central
Government) in terms of rule 20 of the Companies (Incorporation)
Rules, 2014, only with another company registered under section 8
of the Act and having similar objects, an analogy can be drawn that
such demerged entity shall also be a Company registered under
Section 8 of the Companies Act, 2013.
• Section 8 Company can be amalgamated with another Section 8
Company. However section 8(10) provides that the other company
be “having similar objects”. What are similar objects is not
specified. Therefore a view is possible that so long as the main
objects of two section 8 companies are within the objects specified
under section 8 (1) (a) the objects will be considered similar because
the similarity between the objects is established by the fact that with
either of such objects the said companies can be registered as section
8 companies. It is not necessary that the objects of the two section 8
companies be identical. The words “having similar objects” should
not be read in a limited sense.

Consequences of contravening Section 8 of Companies

Act, 2013
The Central Government may
(i) Revoke the licence issued and covert the status and change its name
to add the words ‘Limited” or “Private Limited” as the case may be.
(ii) Order for amalgamation of company with similar objects
(iii) Order for winding up.
(iv) Section 8 Company and the respective officer in default is liable
for penalty prescribed.
For Company: fine not less than Rs 10 lakh, which may extend to Rs 1
crore for directors/officers in default.
Imprisonment for a term which may extend to 3 years or a fine not less
than Rs 25000 which may extent to Rs 25 lakhs or with both.
NOTABLE WORK BY NPO TOWARDS SOCIAL ACTIVITIES IN
INDIAN
There are many Non Profit organizations are working in India with
object to eliminate the bad evils of society in India:
Adani Foundation: Company Profile: Adani Foundation was started by
Adani Group of companies in 1996. It contributes to education,
community health, sustainable livelihood development and rural
infrastructure development programs.
Initiatives taken by Adani Foundation:
Education: On February 13, 2012 Adani Foundation partnered with
India Skills, a Joint Venture in vocational training from Manipal
Global Education Services and City & Guilds, a provider of work-
related assessment and qualifications, to set up a skills training centre
in Gujarat. The Ahmedabad-based centre will offer skill-related
courses in retail, hospitality, security, construction and engineering.
 Sustainable Livelihood Development: On May 8, 2013 Gautam
Adani announced that Adani group will set up a hospital and medical
college worth Rs 700 crore to help the poor at Adani’s Shantigram
Township. The hospital will work on a model of “Providing the latest
medical treatment to both who can afford to pay and those who can’t”
Adani Foundation is committed to help fisher folk. The Foundation
started a special scheme for people belonging to Mundra taluka in
Kutch district that envisages providing financial assistance to 500
fishermen of the coastal taluka for purchasing fishing equipment. The
children of the fishermen are also provided with educational facilities
including a sport school for them. Similar facilities will be developed
at Luni village and two other villages.

NATIONAL HERALD & YOUNG INDIA

The National Herald case dates back 10 years to 2012 when BJP leader
Subramaniam Swamy filed a complaint of money laundering against
Congress leaders. He also alleged that Associated Journals Ltd. was
acquired by Young India Ltd in a malicious way.
He claimed that YIL “took over” the assets of the defunct print media
outlet in a “malicious” manner to gain profit and assets worth over Rs
2,000 crore.
What Is AJL?
Associated Journal Ltd. or AJL was founded by Jawahar Lal Nehru and
other freedom fighters in 1938. AJL published three newspapers in
English, Hindi, and Urdu. while it was meant to raise the voice of
liberals during the freedom struggle, National Herald became a
mouthpiece of Congress after independence. In 2008, the paper was
 closed down by AJL after incurring a loss of nearly Rs 90 crore.
Following this, it was taken over by YIL in 2010 whose director was
named Rahul Gandhi.
In 2016, the three dailies were relaunched naming the National Herald
in English, Navjeevan in Hindi, and Quami Awaz in Urdu.
What is Young Indian Pvt Ltd?
Young Indian Pvt Ltd (YIL) is a private company that was set up in
November 2010. Rahul Gandhi, then a general secretary of the Congress
party, was director of the company. While Rahul Gandhi and his mother
Sonia Gandhi hold 76 per cent of the company's shares, the remaining 24
per cent was in the names of late Congress leaders Motilal Vora and Oscar
Fernandes.
How is the Congress involved?

When the National Herald suspended operations in 2008 due to heavy

losses, it is estimated that the newspaper had properties worth Rs 2,000
Crore in Delhi, Lucknow and Mumbai.
In his private complaint before a trial court in 2012, BJP leader
Subramanian Swamy alleged that Congress leaders were involved in
cheating and breach of trust in the acquisition of AJL by YIL, as assets
worth crores of rupees had been transferred to YIL. He alleged that YIL
took over the assets of National Herald, the defunct print media outlet, in
a malicious manner to gain profit and assets worth Rs 2,000 crore. Under
the Income Tax Act, no political outfit can have financial transactions
with a third party. In the revival plan for the newspaper, the Congress
extended a Rs 90.2 crore interest-free loan from the party fund. Swamy
alleged that in 2010, YIL had paid just Rs 50 lakh to obtain the rights to
recover the Rs 90.2 crore AJL owed the Congress party. The BJP leader
also alleged that the loan given to AJL was illegal since it was taken from
party funds.
Some AJL shareholders, including former law minister Shanti Bhushan
and former Allahabad High Court Chief Justice Markanday Katju, said,
according to reports, that their shares in AJL were transferred to YIL
without their knowledge.
In 2014, Magistrate summons all accused stating that the evidence is
against them. In August 2014, ED launched the probe to find out if there
was any money laundering. September 2015, ED reopens the
investigation. December 2015, Patiala House Court grants bail to Sonia
and Rahul Gandhi. In February 2016, SC refused to quash proceedings
against the accused. May 2019, ED attaches National Herald properties
worth Rs 16.38 crore. May 2022, notice is issued against Congress Chief
Sonia Gandhi and Rahul Gandhi by ED.
BIBLIOGRAPHY
• Paranjape N.V.,Company Law 2013, Central Law Agency,11th
edition,2022
• https://ijiset.com/vol2/v2s12/IJISET_V2_I12_41.pdf
• https://blog.ipleaders.in/incorporation-of-a-company-under-
section-8-of-the-companies-act-2013/
• https://www.icsi.edu/media/webmodules/publications/FAQs_on
_Section_8_Companies.pdf