Process to shut down a Section-8 Company

A section 8 companies is established in order to encourage and nourish the act of arts, commerce science, sports, education, research, social welfare, religion, charity, protection of environment or any such other objective. The Section 8 companies fall under the Companies Act 2013 which would be registered as an Non Governmental Organisation. A company registered as Section 8 company cannot share profit made as a result of the charitable activities between its partners. The profit made during the functional part must be invested back into the company to promote trust and non profitable activities to give back.

There can be several reasons for closing a non profit organisation it may range from not reaching the resources for accomplishing the goal, Members are not interested in the root cause with which the company was established to merger with another NGO. The above are only certain cases for closing a Section 8 Company.

The primary Catch is that closing a section 8 company is not that easy as the licensing is represented in terms of Non profit Licensing system, hence there is procedure involved in surrounding the license. First the company needs to be converted into any of the closable company licensing format and then the closure can be done.

Things to consider while closing a Section 8 company

The current base of people who are benefiting from the NGO must be informed, so that they can move on to other NGO.

Keep the donors upto date with how the funds are managed as such.

The Debts has to be addressed and then in case of not sortable situation then they can file for bankruptcy but it all depends on the board decision.

The employees as a part of the initiative must be informed and severance pay must be made.

The board meeting Decision is one of the important thing to consider in terms of making a call on how the remaining funds are handled.

Advantage of Closing a Section 8 Company

In case of the goal being obsolete, the members of the board can concentrate on new goals.

Sometimes a Section 8 Company closes as it might get acquired by other NGO or greater cause Companies.

The remaining assets in the name of the company can be used to pay of any debts remaining during the closure of the NGO company.

Why Close a Section 8 Company?

The existing company can merge with another NGO with same goal sets.

The Company failed to get resources to give back to the community.

The company has debts and it has outstanding left so in order to settle all those the company can be dissolved.

Even the mission has been accomplished successfully that would lead the company to come to a situation where the goal has been satisfied hence it would be dissolved.

In certain cases the mission can become obsolete and hence the company may be not getting the traction they want.