Section-25 Company is a Non – Profit organization, registered under the Companies Act 1956. It can be formed as a Public or Private Company having a limited liability, with or without share capital. It needs a minimum of three trustees; there is no upper limit to the number of members. The Board of directors is considered as the Board of Management.
An association already registered as a company, may also apply for a license u/s 25.
In order to become as Section 25 company, the below criteria is essential:
A license from the Central Government is required to carry on activities as a Section-25 Company. In order to obtain the license from the Central Government, the following conditions are to be fulfilled:
- Company is formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object;
- Company intends to apply its profits, if any, or other income in promoting its objects;
- Company prohibits the payment of any dividend to its members.
Privileges enjoyed by a Section 25 company:
- It need not add the suffix Limited or Private Limited at the end of its name.
- It can be registered even if the share capital is less than the statutory minimum (i.e. even if it is less than 1 lakh rupees and 5 lakh rupees in case of Private limited Companies and Public limited Companies respectively).
- It need not get its Memorandum and Articles stamped in accordance with the Indian Stamp Act, 1899.
- It can hold meeting of the directors once in every six months instead of once in three months.
- It can increase the number of directors beyond the permissible limits without obtaining permission from the central government.
- It is required to maintain books of accounts only of the past four years instead of eight years.
- It can sell its shares to the public or can accept deposits from public, in order to raise money.
Obligations of a Section 25 company:
- It has to ensure that its profits and all other incomes are utilized only for the purpose of promoting its objects.
- It has to ensure that its profits are not distributed as dividend among its members.
- It can hold meeting of directors once in six months, but four meetings has to be held in a calendar year.
- It should maintain the minutes of every proceedings of every meeting of Board of Directors and Shareholders.
- It should maintain necessary accounting records at his registered office in respect of :
– All the sums of money received and expended by the company.
– Assets and Liabilities of the company.
- It should ensure Annual Fillings of returns are done each calendar year with the Registrar of Companies.
Revocation of License:
The Central Government may at any time revoke the license as it thinks fit, after giving reasonable opportunity of being heard.
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