If a Section 8 Company fails to comply with the legal provisions, then the central government may revoke the license issued under this act.
In case of revocation, the company may get wound up. Or it may be simply asked to change it’s name by adding either “Private or Public Limited” in the end of it’s name. And the assets remaining after clearing debts and liabilities of such a Company shall be transferred to some other Section 8 Company having similar objects.
If the operations of the Company are found to be conducted fraudulently or in violation with the objects of the Company or are unfavorable to public interest. then also, the license can be revoked.
If a company defaults in complying with the provisions of the Act, it shall, without prejudice to any other action under the provisions of this section, be punishable with a fine which shall not be less than Rs.10 lakh and may extend to Rs.1 crore. The Directors and all other officers of the company, found in default, shall be punishable with imprisonment for a term which may extend to 3-years, or with fine not be less than Rs.25, 000 which may extend to Rs.25 lakh, or both. Provided that it is proved that the operations were conducted fraudulently. Then every officer in default shall be liable for action.
Any such order shall not be passed unless the company has been given a reasonable opportunity of being heard.