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Can LLPs or other companies be members of a Section 8 company?

1. Companies and LLPs as Members – Permitted by Law

  • Yes, Limited Liability Partnerships (LLPs) and other incorporated companies can be members of a Section 8 company.
  • The Companies Act, 2013, allows both individuals and legal entities to subscribe to the Memorandum of Association.
  • This includes private limited companies, public limited companies, LLPs, and registered societies or trusts.
  • Such entities can contribute to governance and funding, provided they support the company’s non-profit objectives.
  • Legal persons must be represented by authorized signatories.

2. Conditions for Membership

  • The entity must agree to the objects of the Section 8 company and fulfill the eligibility criteria.
  • An authorized resolution must be passed by the company or LLP approving the membership.
  • The nominated representative of the entity acts as its authorized signatory or director, if applicable.
  • Entities must not seek financial gain or profit distribution from their membership.
  • Their role must align with the charitable purpose and ethical standards.

3. Rights and Responsibilities of Entity Members

  • Entity members may participate in general meetings, governance decisions, and offer advisory support.
  • They may nominate directors or contribute funds, subject to the company’s Articles of Association.
  • All members, whether individuals or entities, are subject to non-profit compliance norms.
  • Entities must comply with reporting obligations related to donations or grants provided.
  • Misuse of membership for business or political gains is prohibited.

4. Documentation and Approval Requirements

  • The entity must submit a Board Resolution or Partners’ Consent approving membership in the Section 8 company.
  • The authorized representative’s identity and signature proof must be provided during incorporation.
  • The incorporation forms must reflect the legal name and designation of the subscribing entity.
  • All representations must comply with ROC and MCA documentation standards.
  • Any change in representation must be formally communicated and documented.

5. Regulatory and Governance Considerations

  • While legal entities can be members, they must not dominate or seek indirect financial benefit.
  • The composition of the board must remain aligned with the non-profit nature of the company.
  • The Registrar of Companies (ROC) may scrutinize membership structures to ensure compliance.
  • Membership must be clearly stated in the Memorandum and Articles of Association.
  • The participation of companies and LLPs must always support the social mission of the Section 8 company.

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