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All About Section 25 Companies
All About Section 25 Companies
All About Section 25 Companies
1.MEANING
Companies which are formed for the following purpose are known as Section 25 Companies or Association not for Profit
For the purposes of promoting commerce, art, science, religion, charity to any other useful object With intention to apply its profits or other income for promoting its objects, and Which prohibits payment of any dividend to its members,
Section 25 Company is a voluntary association of person formed for promotional activities. Besides establishing a Trust and Society, the other alternative to establish a Non Profit organization is Section 25 Company. Section 25 Companies are formed as Public or Private Company having a limited liability under the Companies Act 1956. These companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations , subscriptions from members and general public. Section 25 Companies can be formed only after obtaining the necessary licence from the Central Government, which imposes certain terms and conditions while granting the approval. In case the company fails to comply with the terms and condition at any point of time, the licence can be cancelled. Section 25 Companies are not required to add the suffix Limited or Private Limited at the end of their name. Due to their nature of business, the Government of India has relaxed the application of various provisions of the Companies Act on such companies.
members is required to form it. However, if the non-profit from is for a public purpose, then a minimum of seven are needed. 1. Application for a name applying for availability of name to the Registrar of Companies is the first step towards registration of the non-profit company. Four names are to be suggested to the Registrar in prescribed Form. 2. Memorandum and Articles Memorandum and Articles of the non-profit company are required to be approved by the Regional Director and the ROC. The documents required for submission of application are: i) Three printed copies of the memorandum and articles of association of the applicant company, signed by all the promoters with full name, address and occupation (No stamp duty is payable on the Memorandum and Articles of Association) A declaration by an advocate or a chartered memorandum and articles of association have conformity with the provisions of the Act and that of the Act and the rules made there under have with, in respect of registration; accountant that the been drawn up in all the requirements been duly complied
ii)
iii)
List of the names, addresses and occupation of the promoters, members of board of directors, name of companies, associations and other institutions in which promoters of the applicant company are directors or hold positions, description of the positions held by them (three copies) Statement of assets and liabilities (only existing company) Source of income of the Applicant Company and estimate of annual expenditure; A statement giving a brief description of the work, if any, already done by the association and of the work proposed to be done by it after registration in pursuance of section 25;
iv) v)
vi)
vii)
A statement on grounds on which the application is made under section 25 of the Companies Act, 1956; A declaration by each of the persons making the application that he/she is of sound mind, not an undischarged solvent, not convicted by a court for any offence and does not stand disqualified under section 203 of the Companies Act, 1956 for appointment as director. 3. License under section 25 An application for the license under 25 for the company is to be submitted to the Regional Director (Department of Company Affairs). The license essentially permits the word 'Limited' or 'Private Limited' to be deleted from name of the company. It could take upto 12 weeks after application to receive the license under section 25 of the Companies Act 1956. Pursuant to application to the Regional Director (within seven days thereafter), the applicant company has to publish a notice in a newspaper where the registered office is situate and certified copy of the notice to filed with the Regional director. 4. Registration with ROC Registration certificate is normally granted within one month after filing section 25 licenses; Converting existing company to section 25 companies The Companies Act, 1956 also facilitates the conversion of an existing company to a non-profit company. Foreign Director There is no bar under Indian law for a foreigner to be a Director in a section 25 company, (relevant permissions prescribed under the Foreign Exchange Management Act.).
viii)
Section 25 Companies have been exempted from this requirement regarding minimum share capital by insertion of sub-section (6) through Amendment Act of 2000. As such they can be registered even if they have share capital less than the statutory minimum.
4. Publication of Name
A section 25 company has been exempted from the provisions of section 147 and as such is not required to mention its name and address as required in case of all other companies.
6. Notice of AGM
Section 25 Company can hold an AGM after giving a notice of 14 days length instead of 21 days as required by section 171(1). Therefore they can call an AGM at a short notice of 14 days instead of 21 days.
the procedure laid down by section 257. But if the Articles of the company do not provide for election of director by ballot then section 257 will have to be complied in whole.
section 25 company is exempt from this section to the extent that the required quorum for any board meeting is eight members or one/fourth of its total strength whichever is less provided it should not be less than two members in any case.
and a notification in duplicate informing the Registrar of nay changes within 30 days of such changes. Section 25 company are not required to notify changes among its directors, etc to the Registrar. They are only required to maintain Registers of their Directors, Managing Directors, Managers and Secretary in prescribed format containing specified particulars and updating the register by making changes in it as when there is some change among the Directors, Managing Directors, Managers and Secretary of the company.
3.Compulsory compliances
If the Central Government has imposed some conditions and regulations upon the company for granting a license under section 25 then such a company is bind by such conditions and has to ensure adequate compliance with them.
4,Taxation
Section 25 Company is regarded as a company within the meaning of the Income Tax Act, 1961 and as such its income is taxable according to the applicable rates similar to those applying to other companies.
5.DIFFERENCE AMONG TRUST,SECTION 25 COMPANIES AND SOCIETY BASIS OF DIFFERENCE BASIC DOCUMENT SECTION 25 COMPANY SOCIETY TRUST Trust Deed which contains objects of the trust (bye-law)
Memorandum of Memorandum of Association Association Articles of Articles of Association Association with rules & regulations. Little Hard Simple Registrar of Comapnies Registrar of Societies
Easy
MODIFICATION OF OBJECTS
Deputy Registrar / Charity Commisioner Indian Societies Relavent state Companies Act Registration Act Trust Act 1956 1860 Nonprofit Literary, Social benefits & Activities Charitable, Charitable Scientific and resource oriented Complicated Easy Alteration can be Legal Legal Procedures undertaken only by Procedures the Founder. If the founder is deceased alteration of objects is impossible Minimum = 7 Minimum = 7 Minimum = 2 Maximum = No Maximum = No Maximum = No limit limit limit As per As Society with As Trust with the Companies Act Society Registrar Registrar. under Section 25 No Stamp paper No stamp paper 4% of Trust required for required for property Value will Memorandum of Memorandum of be executed in non association and association, and judicial stamp articles of rules and paper with the
NAME
association. Prior approval required from Registrar of Companies. Board of Directors & Management committee By Appointment Quite Extensive as per the provision of Company Law
By Election
By Election No provisions
LEGAL STATUS STATUTORY REGULATIONS MEMBERSHIP TRANSFER MEMBER ADMISSION DISSOLUTION OR TAKE OVER BY STATE PAYMENT TO MEMBERS
Annual Meeting As per Law. Governing Body meeting as per the rules of Society. Full Legal Status Limited Legal Status Exhaustive Limited Free or Control as per desire. Impossible
General Body or Governing Body Not applicable Board Control Control through issue of Capital. Very risky and Possible Possible difficult As approved by Not restricted Company & State. As notified in Trust deed