LICENSE FOR PROPOSED COMPANIES WITH CHARITABLE OBJECT

With notification of the Companies (Incorporation) 6^th Amendment Rules, 2019 on 7^th June 2019 to come into force with effect from 15^th August 2019, the Government of India further centralized incorporation and registration of new companies to Central Registration Centre, Manesar in Haryana. Let us discuss the law.

According to Section 8(1) of the Companies Act, 2013 where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company—

(a) 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;

(b) intends to apply its profits, if any, or other income in promoting its objects; and

(c) intends to prohibit the payment of any dividend to its members,

the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.

Company to be licensed under Section 8 shall have an object to promote –

1. commerce,
2. art,
3. science,
4. sports,
5. education,
6. research,
7. social welfare,
8. religion,
9. charity,
10. protection of the environment or
11. any such other object.

Such companies shall prohibit distribution of any dividend to its members and shall not distribute its profit but utilized any profit generated by it for promoting its objects.

Rule 19 of the Companies (Incorporation) Rules, 2019 prescribes the licensing procedure. Present amendment simplifies the procedure with all pro and cons of such centralization.

According to Rule 19(1), a person or an association of persons (hereinafter referred to in this rule as “the proposed company”), desirous of incorporating a company with limited liability under sub-section (1) of Section 8 without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, shall make an application in Form INC-32 (Form SPICe) along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the Registrar for a license under sub-section (1) of Section 8.

One thing must be clear that any company with unlimited liability never required to add word limited or private limited in its name. In addition to unlimited companies, companies with limited liabilities may after the license, may have their name without the addition to its name of the word “Limited”, or the words “Private Limited”.

Now form INC – 12 has been dispensed of for the purpose of new companies and such proposed companies may apply for such license directly in the Incorporation form called INC-32 (Form SPICe). In case of an application for such license by any existing company, Form INC – 12 shall still be there with certain amendments.

The memorandum of association of the proposed company shall be in Form INC – 13.  There is no change in this form. This form is a standard format for a memorandum of association of such companies licensed under Section 8.

The application under sub-rule (1) shall be accompanied by the following documents, namely:—

(a) the memorandum and articles of association of the proposed company;

(b) the declaration in Form INC-14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

(c) an estimate of the future annual income and expenditure of the company for the next three years, specifying the sources of the income and the objects of the expenditure;

(d) the declaration by each of the persons making the application in Form INC – 15.

Accordingly, the form INC – 32 (Form SPICe) shall have the facility to attach the declaration by professionals in Form INC – 14 and Declaration by each applicant in Form INC – 15.

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