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CS Executive · Company Law and Practice · Legal Status and Types of Registered Companies

A section 8 company, Harit Bharat, is wound up. After all debts and liabilities are settled, surplus assets remain. Which course is permitted by section 8?

Surplus assets may go to another section 8 company with similar objects, on Tribunal conditions, or be sold with proceeds credited to the Insolvency and Bankruptcy Fund. Section 8(9) does not allow distribution to members or promoters, consistent with the prohibition on dividends.

  1. ADistribute the surplus among members in proportion to their holdings
  2. BTransfer it to the promoters who contributed the initial capital
  3. CSell the assets and credit the proceeds to the Insolvency and Bankruptcy Fund, or transfer them to another section 8 company with similar objects on conditions the Tribunal imposesCorrect
  4. DVest the surplus in the Registrar for later distribution to directors

Explanation

Section 8(9) provides that remaining assets may be transferred to another section 8 company with similar objects, subject to Tribunal conditions, or sold with the proceeds credited to the Insolvency and Bankruptcy Fund. Distribution to members would defeat the no-dividend prohibition.

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