SNM Ltd. was registered in 2021 with a share capital of 50 Lakh divided into 5 lakhs equity share of 10 each under Section 8 of the Companies Act,…

Formation of companies with charitable objects etc. (Section 8 company): Section 8 of the Companies Act,2013 deals with the formation of companies which are formed to promote the charitable objects of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment etc.Such company intends to apply its profit in promoting its objects andprohibiting the payment of any dividend to its members. In the instant case, SNM Ltd. cannot declare dividend @10% to equity shareholders for the year ending 31 st March, 2025 as it is a Section 8 company which are specifically prohibited from paying dividend. The profits of a section 8 company must be applied towards promoting its objects. Therefore, the special resolution passed in the EGM to declare a dividend is invalid.