Section 25 companies

1. SECTION 25 COMPANIES
By
Shelley Anandhavalli. E
Advocate
Altacit Global
Email: [email protected] Website: www.altacit.com

2. INTRODUCTION
•Section 25(1)(a) and (b) of the Indian Companies
Act, 1956 are
–formed for the sole purpose of promoting
commerce, art, science, religion, charity

–any other useful object
–that have been granted a license by the central
government recognizing them as such.

3. CRITERIA
•Its objects should be only to promote
commerce, art, science, religion, charity or
any other useful object.
•It should intend to apply its profits or other
incomes only in promoting its objects.
•Central government should have granted a
license to such a company recognizing
them as such,

4. REQUISITES
•Section 25 Companies should apply its
profits, if any, or other income
–only in promoting its objects
–must also prohibit payment of dividend to
its members.

5. SECTION 25 COMPANIES
•can be either public company or private
company having a limited liability.
•a license from Central Govt. under section
25 enables them to drop the word ‘limited’
or ‘private limited’ from their names.

6. WHY SEC 25 COMPANY?
•Section 25 companies have the most reliable,
strongest organisational structure:
–Indian Trusts have no central law.
–Indian Societies have different legal and
institutional frameworks from state to state.
–Indian Companies (incl. Sec 25 companies),
have one uniform law across the country -
Companies Act 1956.

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. PRIVILEGES AND ADVANTAGES
•Enjoy Limited company stature without disclosing
to the public whether the liability of its members is
limited by share or guarantee.
•A partnership firm is allowed to be a member
[inspite of the fact that the law does not
recognises them as a legal person]
•Minimum Share Capital (can be registered even if
they have share capital lesS than the statutory
minimum

9. CNTD..
•Publication of Name not necessary
•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.]
•Time and Place of Annual General Meeting
–free to determine the date, place and time of its AGM,
•Condition should have been pre determined by the
Board of Directors in accordance with directions of
the company if any.

10. CNTD..
•Notice of AGM
AGM at a short notice of 14 days instead of 21 days
•Maintaining of Books of Accounts
–maintain books of account relating to a period of only
four years instead of eight years immediately
preceding the current year
•Service of Copies of Certain Documents
–atleast fourteen days before the date of meeting
instead of 21 days

11. CNTD..
•Right of Persons other that Retiring Director to stand for
Directorship
–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.
•Increase in Number of Directors
–Can increase the number of its directors without seeking
approval of central government

12. CNTD..
•Filing of Consent for Directorship
•Number of Board meetings
•Quorum for Meetings
•Disclosure of Interest
•Maintenance of Registers of Contracts
•Maintenance of Register of Directors
•Qualification for Secretaryship
•Applicability of Companies Auditor’s Report Order
•Payment of Registration Fees- at present fixed at mere
Rs. 50/- irrespective of the authorized amount of share
capital

13. EXERCISE OF CERTAIN POWERS
•section 25 companies are allowed to decide
following three matters by passing a resolution by
circulation instead of at meetings:
–the power to borrow moneys other than on
debentures
–the power to invest funds of the company
–the power to make loans.

14. OBLIGATIONS
•ensure that its profits and all other incomes are
utilised only for the purpose of promoting its
objects and not for any other purpose.
•ensure that its profits are not distributed as
dividend among its members.
•cannot alter its objects clause in its
Memorandum without seeking the written
approval of central government

15. CNTD..
•ensure adequate compliance with the Central
Government’s imposed conditions and
regulations upon the company for granting a
license under section 25.
•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.

16. CNTD..
•Section 25 Company is regarded as a ‘company’ within
the meaning of the Income Tax Act, 1961
–its income is taxable according to the applicable rates similar to those
applying to other companies.
•If an existing company obtains a license under section 25
–ensure that its objects are confined to those mentioned in section 25
itself and if not make proper alteration to its memorandum and
articles.
•required to comply with all other provisions of the Act
– just like any other normal company from which it has not been
expressly exempted.

17. •THANK YOU