Introduction
Why More NGOs Are Eyeing This Shift
It is a noble endeavor to operate a Section 8 Company in India — for the benefit of promoting charity cases, education, the environment, arts, etc. But what if the organization grows beyond its philanthropic endeavor? The majority of these companies then wish to venture into revenue-making activities or reorganize themselves into an economically viable business model. This is when the procedure of converting Section 8 Company into another company is involved.
In the past few years, this has become more so. Whichever you want to be — a private limited company, public limited company, or an LLP — this change opens up new possibilities for you. But it’s not all about growth — it’s about tapping potential, accessing funds, and redefining yourself.
In this blog, we’ll break down the 7 most compelling reasons why converting your Section 8 Company can be a smart move — along with the process, documentation, and legal requirements.
What is a Section 8 Company and Why Consider Conversion?
Section 8 Company is a non-profit company as per the Companies Act, 2013, established with the objective of furthering commerce, art, science, sports, education, research, social welfare, or religion. Section 8 Companies do not have the permission to distribute the profit among the members, in contrast to other companies.
But then again, companies change. Maybe your operations today involve profit-making companies, or you require finance that only comes from a for-profit company. Under these circumstances, conversion of a Section 8 Company is not only logical but also advantageous.
7 Convincing Reasons to Transform Your Section 8 Company Structure
1. Freedom to Make Profits
- Section 8 Companies are required to invest all their revenues towards their social goals. After conversion, you can generate and distribute profits — making your company financially independent.
2. Raise Investors and Capital
- Private or public limited companies can raise capital by issuing equity, venture capital, or IPOs. This is a game-changer when your project requires large-scale finance.
3. Business Operations Flexibility
- Post-conversion, greater control of decision-making, allocation of resources, and diversification of business without the constraints of Section 8 compliance.
4. Improved Market Presence
- A commercial form facilitates having a robust brand in the corporate sector. Customers, investors, and stakeholders want to view private businesses as stronger and scalable.
5. Release Tax Benefits and Business Perks
- Even though Section 8 Companies are exempt, converted companies can take advantage of other tax planning vehicles, deductions, and GST benefits available to business organizations.
6. Easy Expansion and Collaboration
- Foreign associates can easily join hands with converted companies, set up subsidiaries, and venture into new markets than a Section 8 Company.
7. Align Structure with Shifting Goals
- Whenever your objectives change in your organization, the structure also needs to change accordingly. Conversion helps you match your legal structure with your new business path and growth direction.
How to Seamlessly Convert a Section 8 Company into Another Business Entity
Conversion of a Section 8 Company is a complicated legal procedure and Regional Director’s approval. Below is the people-friendly step-by-step:
Step 1: Board Meeting and Resolution
- Conduct a board meeting to sanction the conversion decision. Sanction a resolution to call an EGM of members.
Step 2: Pass Special Resolution
- Secure at least 75% approval from members by passing a special resolution during the Extraordinary General Meeting (EGM) for the conversion.
Step 3: Submit Conversion Application to the Regional Director
- File Form INC-18 along with attachments such as:
Copy of resolutions
- Amended MOA and AOA
- Financial statements
- Statement of assets and liabilities
- Declaration by Directors
- List of members and creditors
Step 4: Public Notice and Objections
- You have to advertise a notice in newspapers calling objections from the regulators, creditors, or public. If no objection is received within 21 days, the application moves on.
Step 5: Approval by RD
- In case so satisfied, the Regional Director shall sanction the conversion by way of an order.
Step 6: File Conversion with ROC
- After approval, file Form INC-20 along with the RD order to legally complete conversion.
Conversion Documents Required
- Memorandum and Articles of Association (altered)
- Most recent financials and audit reports
- List of members, directors, and creditors
- Copy of special resolution
- Affidavits and declarations of directors
- Income and expenses statement
- Copies of newspaper publicity
- Chartered Accountant certificate of verification of financials
Legal Restrictions to Be Remembered
At the time of conversion, there are some restrictions as follows:
- Assets of Section 8 Company have to be transferred either to some other non-profit or as hereinafter mentioned.
- The company has to settle/pay obligations prior to conversion.
- Regulatory approvals (e.g., Income Tax Department) could be needed in certain situations.
- A properly guided procedure with professional guidance is strongly advisable, therefore.
Challenges Most Encountered and How to Overcome Them
Delays in Compliance
Make certain that all documents are accurate and complete. Delays often occur due to missing or improperly prepared documents.
Creditor and Stakeholder Objections
Give clear communication to stakeholders and creditors prior to releasing the public notice.
Legal and Tax Challenges
Hire a CA or CS professional to manage tax implications and legalese when converting.
Why Professional Guidance is Crucial
Section 8 Company conversion is a technical procedure under the Companies Act and requires careful attention to legalese. Professional professionals advise you:
- In preparing all the compliance papers
- Guarantee ROC and RD filing on time
- Get over objections (if any)
- Deal with post-conversion restructurings
- Avoid rejection or penalty risk
- With expert advice, the process is hassle-free and seamless.
Last Words: A Brave But Strategic Business Move
The conversion of Section 8 Company is not only legal in nature — it’s a strategic move that can open the gate to profit, partnership, and growth with a purpose. If your vision now demands commercial flexibility, finance, or expansion, let Section 8 not tag retard you. And move forward with a business structure that truly reflects your evolving vision
At LEGAL DALAL, we simplify complex registrations like Tax Filing, FSSAI, GST, Shop Act, and 300+ Service—so you can focus on growing your business with complete peace of mind. Our in-house team of professionals ensures quick, affordable, and hassle-free documentation support across India.
📌 Still unsure which license your business needs?
Get expert advice tailored to your industry, turnover, and operations.
📞 Call us: +91-8094237237
💬 Whatsapp link – https://wa.me/+918094237237″
🌐 Visit us: www.legaldalal.com
Let’s make your business 100% compliant and ready for success
