Section 25 companies

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  • © Altacit Global 2009 Email: info@altacit.com
  • Section 25 companies

    1. 1. SECTION 25 COMPANIES By Shelley Anandhavalli. E Advocate Altacit Global Email: [email_address] Website: www.altacit.com
    2. 2. INTRODUCTION <ul><li>Section 25(1)(a) and (b) of the Indian Companies Act, 1956 are </li></ul><ul><ul><li>formed for the sole purpose of promoting commerce, art, science, religion, charity </li></ul></ul><ul><ul><li>any other useful object </li></ul></ul><ul><ul><li>that have been granted a license by the central government recognizing them as such. </li></ul></ul>
    3. 3. CRITERIA <ul><li>Its objects should be only to promote commerce, art, science, religion, charity or any other useful object. </li></ul><ul><li>It should intend to apply its profits or other incomes only in promoting its objects. </li></ul><ul><li>Central government should have granted a license to such a company recognizing them as such, </li></ul>
    4. 4. REQUISITES <ul><li>Section 25 Companies should apply its profits, if any, or other income </li></ul><ul><ul><li>only in promoting its objects </li></ul></ul><ul><ul><li>must also prohibit payment of dividend to its members. </li></ul></ul>
    5. 5. SECTION 25 COMPANIES <ul><li>can be either public company or private company having a limited liability. </li></ul><ul><li>a license from Central Govt. under section 25 enables them to drop the word ‘limited’ or ‘private limited’ from their names. </li></ul>
    6. 6. WHY SEC 25 COMPANY? <ul><li>Section 25 companies have the most reliable, strongest organisational structure: </li></ul><ul><ul><li>Indian Trusts have no central law. </li></ul></ul><ul><ul><li>Indian Societies have different legal and institutional frameworks from state to state. </li></ul></ul><ul><ul><li>Indian Companies (incl. Sec 25 companies), have one uniform law across the country - Companies Act 1956. </li></ul></ul>
    7. 7.   SECTION 25 COMPANY SOCIETY TRUST Objects Non-profit activities Charitable, Literary, Scientific, etc Charitable, Socially beneficial Statute/Law Indian Companies Act 1956 Societies Registration Act 1860 Indian Trust Act, 1882 Alternation of objects Complex legal procedure Simple procedure Normally only Settlor can modify Management Formalities of Company law have to be observed. Few restrictions imposed under the Act Very few restrictions imposed under the Act Meetings To be held as per provisions of law which are quite extensive. Annual meeting as per law and Rules of the society No provisions laid down Penalties Various offences and lapses attract severe penalties. Few offences and penalties have been prescribed Very negligible Legal Status Full legal status Legal status with certain limitations Legal status with limitations Statutory Regulation Exhaustive but mature Very limited Nominal Removal of members Not possible without consent Possible without consent Not applicable Dissolution or takeover by state Very difficult Possible Possible
    8. 8. PRIVILEGES AND ADVANTAGES <ul><li>Enjoy Limited company stature without disclosing to the public whether the liability of its members is limited by share or guarantee. </li></ul><ul><li>A partnership firm is allowed to be a member [inspite of the fact that the law does not recognises them as a legal person] </li></ul><ul><li>Minimum Share Capital (can be registered even if they have share capital lesS than the statutory minimum </li></ul>
    9. 9. CNTD.. <ul><li>Publication of Name not necessary </li></ul><ul><li>Annual Returns of a Company not having Share Capital [exempted from mentioning the particulars of the members who are presently with the company or have ceased to be members since holding of its last AGM.] </li></ul><ul><li>Time and Place of Annual General Meeting </li></ul><ul><ul><li>free to determine the date, place and time of its AGM, </li></ul></ul><ul><ul><ul><li>Condition should have been pre determined by the Board of Directors in accordance with directions of the company if any. </li></ul></ul></ul>
    10. 10. CNTD.. <ul><li>Notice of AGM </li></ul><ul><ul><ul><ul><li>AGM at a short notice of 14 days instead of 21 days </li></ul></ul></ul></ul><ul><li>Maintaining of Books of Accounts </li></ul><ul><ul><li>maintain books of account relating to a period of only four years instead of eight years immediately preceding the current year </li></ul></ul><ul><li>Service of Copies of Certain Documents </li></ul><ul><ul><ul><ul><li>atleast fourteen days before the date of meeting instead of 21 days </li></ul></ul></ul></ul>
    11. 11. CNTD.. <ul><li>Right of Persons other that Retiring Director to stand for Directorship </li></ul><ul><ul><ul><ul><li>If the Articles of the Section 25 Company provide for election of the Directors by ballot system then the provisions of section 257 will not apply to such a company. </li></ul></ul></ul></ul><ul><li>Increase in Number of Directors </li></ul><ul><ul><li>Can increase the number of its directors without seeking approval of central government </li></ul></ul>
    12. 12. CNTD.. <ul><li>Filing of Consent for Directorship </li></ul><ul><li>Number of Board meetings </li></ul><ul><li>Quorum for Meetings </li></ul><ul><li>Disclosure of Interest </li></ul><ul><li>Maintenance of Registers of Contracts </li></ul><ul><li>Maintenance of Register of Directors </li></ul><ul><li>Qualification for Secretaryship </li></ul><ul><li>Applicability of Companies Auditor’s Report Order </li></ul><ul><li>Payment of Registration Fees- at present fixed at mere Rs. 50/- irrespective of the authorized amount of share capital </li></ul>
    13. 13. EXERCISE OF CERTAIN POWERS <ul><li>section 25 companies are allowed to decide following three matters by passing a resolution by circulation instead of at meetings: </li></ul><ul><ul><li>the power to borrow moneys other than on debentures </li></ul></ul><ul><ul><li>the power to invest funds of the company </li></ul></ul><ul><ul><li>the power to make loans. </li></ul></ul>
    14. 14. OBLIGATIONS <ul><li>ensure that its profits and all other incomes are utilised only for the purpose of promoting its objects and not for any other purpose. </li></ul><ul><li>ensure that its profits are not distributed as dividend among its members. </li></ul><ul><li>cannot alter its objects clause in its Memorandum without seeking the written approval of central government </li></ul>
    15. 15. CNTD.. <ul><li>ensure adequate compliance with the Central Government’s imposed conditions and regulations upon the company for granting a license under section 25. </li></ul><ul><li>such conditions and regulations are required to be included in the Articles or/and memorandum of the company as may be directed by the government. </li></ul>
    16. 16. CNTD.. <ul><li>Section 25 Company is regarded as a ‘company’ within the meaning of the Income Tax Act, 1961 </li></ul><ul><ul><li>its income is taxable according to the applicable rates similar to those applying to other companies. </li></ul></ul><ul><li>If an existing company obtains a license under section 25 </li></ul><ul><ul><li>ensure that its objects are confined to those mentioned in section 25 itself and if not make proper alteration to its memorandum and articles. </li></ul></ul><ul><li>required to comply with all other provisions of the Act </li></ul><ul><ul><li>just like any other normal company from which it has not been expressly exempted. </li></ul></ul>
    17. 17. <ul><li>THANK YOU </li></ul>

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