Cancellation of License & Winding Up of Section 8 companies

Cancellation of License & Winding Up of Section 8 companies

Section 8 companies – Cancellation of License:

Section 8 companies require a grant of a license by the Central Government. All such licenses are revocable as well on the following grounds:

• the company contravenes provisions of Section 8;
• terms of the license are violated;
• when its conduct is fraudulent, or it violates its own objectives and public policy.

The Government can even order the company to be wound-up or amalgamated with another similar company under certain circumstances. The Government has to hear the company before passing such orders.

Section 8 companies – Winding Up:

Section 8 companies can wind-up or dissolve themselves either voluntarily or under orders given by the Central Government. If any assets remain after satisfaction of debts and liabilities upon such winding-up, the National Company Law Tribunal can order the transfer of these assets to a similar company. It can also order that they must be sold and the proceeds of this sale should be credited to the Insolvency and Bankruptcy Fund.

Restrictions on a Section 8 Company:

• Members of the company cannot get any dividend.
• Officers and directors do not get benefits and allowances.
• Can only use the profits for furthering charitable aims and objectives.
• Amendment of memorandum and articles requires Central Government’s permission.
• The license is revocable on several grounds.