Dhruvika a social worker, to promote tribal art and culture in Southern Rajasthan planned to incorporate a company, the purpose of which was not…

CA Intermediate · Corporate and Other Laws · PYQS · May 2026
Dhruvika a social worker, to promote tribal art and culture in Southern Rajasthan planned to incorporate a company, the purpose of which was not only promote the tribal art but also to generate income for the tribal people. The people residing in the area are well versed in making the bamboo items, terracotta, leather goods, handmade jewellery, and textiles (hand-printed, tie and dye) but due to poor marketing, their products could not reach the buyers. The tribal products are in great demand among the people. Dhruvika thought of providing the marketing platform to such local producers (artisans) by selling the products through the e-commerce platforms. She discussed her plan with some of the prominent artisans of the tribal area and invited them to be the members of the proposed company and she had planned to distribute the net profits equally among the members as a goodwill gesture. (i) Referring to the provisions of the Companies Act, 2013 discuss whether Dhruvika can be granted a licence to incorporate a company under Section 8 of the Companies Act, 2013. (3 Marks) (ii) In case the artisans are unwilling to be members, can Dhruvika incorporate an One Person Company (OPC) under Section 8 of the Companies Act, 2013? (2 Marks)

Suggested Answer and Working Notes:

(a) (i) According to sub-section (1) of Section 8 of the Companies Act, 2013, where it is proved to the satisfaction of the Central Government (the power has been delegated to ROC in this behalf) that a person or an association of persons proposed to be registered under the Companies Act, 2013, as a limited company: (a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object; (b) intends to apply its profits, if any, or other income in promoting its objects; and (c) intends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and in such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word "Limited", or as the case may be, the words "Private Limited", and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section. In the given case, Dhruvika proposed to incorporate a company with the artisans as its members. However, she intended to distribute the net profits equally among the members, which shows a clear intention of distribution of dividend to the members. Since section 8 (1) of the Companies Act, 2013 specifically prohibits payment of any dividend to its members and requires the profits to be applied solely towards promotion of its objects, the licence for incorporation of the company under Section 8 cannot be granted. (ii) According to Rule 3 (5) of the Companies (Incorporation) Rules, 2014, One Person Company cannot be incorporated or converted into a company under section 8 of the Act. Thus, even if the artisans are unwilling to be members, Dhruvika cannot incorporate an One Person Company under section 8 of the Companies Act, 2013.

Topics: Incorporation of Company and Matters Incidental Thereto

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