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Introduction:

Section 25 companies are those companies which are formed not for making profit but their main intention is to promote commerce, art, science, religion, charity or any other useful object related to the society. There is a long formality to be completed for registering a Company under section 25 of the Act. Such companies are not restricted to use “LTD” Or “PVT.LTD” after their name. Such companies should intend to apply its profits, if any or other income only in promoting its objects and restricting the use of profit for payment of dividend to its members.

 

Three criteria are required to be fulfilled in determining whether a particular company is section 25 company or not:

 

1) Its objects should be only to promote commerce, art, science, religion, charity or any other useful object.

 

2) It should intend to apply its profits or other incomes only in promoting its objects; and

 

3) Central government should have granted a license to such a company under section 25.

 

Process of Registering a Company Under section 25 is similar to register other Company but there are some more formalities to fulfilled, these are…

 

1.On receipt of the name availability from the ROC, get the Memorandum and Article of Association suitably drafted. It is advisable to get vetted the MOA and AOA by the Regional Director, Department of Company Affairs.

2. Make an Application to the Regional Director for the Grant of License under section 25of the company’s act 1956 in E-form 24A. Along with the application the following document are required to be attached:

a) Memorandum of Association

 

b) Article of Association

 

c) Declaration as per Annexure V of Companies Regulation 1956

 

d) Declaration by advocate of SC or HC regarding conformity of provisions of the Act.

 

e) Details of Promoter or proposed Director of the Company

 

f) Statement of the ground on which application is made

 

g)  All the document mention in the above must be in English or a translated copy in English is to be given.

 

3. Regional Director after considering the objection if any received and after considering the views from ROC issued License to the Company after order to insert such clause in MOA as it thinks proper.

 

4. The Company File the order with the ROC and obtain the Certificate of Registration.

 

But now a days there are number of Section 25 Companies which are not working or not involve in any activity and The Ministry has been receiving representation from various stakeholders to develop a procedure under Companies Act, 1956 for  conversion of section 25 company (non-profit company) to an ordinary company   because there are a number of section 25 companies which have not done any activity after obtaining license under section 25 or  have stopped such activities, and now want to convert themselves as an ordinary company.. In this regard the Ministry Of Corporate Affairs decided to take step to convert the section 25 companies. As per F.No.17/178/2011-CL-V.

 

According to F.No.17/178/2011-CL-V A section 25 Company may apply to Registrar of Company in e-form 61 for its revocation of license under section 25 (7) of the Act. Such section 25 Company should satisfy following conditions…..

a) The company should have passed a resolution in general meeting to convert itself into a non section 25 Companies which should have been approved by all members/shareholders of the company by adopting revised Memorandum and Articles of Association.

 

b) The company has not commenced any activity or operation since its incorporation.

c) The company has not received any donation, grants or contribution etc., other than from its members. 

d) Where the company has obtained any special status from any authority such as Income Tax, Commissioner of Charity or any organization or Department of Central Government, State Government, Municipal Body or any recognized authority then a “No Objection Certificate” has to be obtained from the concerned authority.

e) The existing assets, if any has to be transferred to a similar object company before converting it into a non-section 25 company.

f) The company should have filed its all upto date Balance Sheets and Annual Returns. 

 

g) The Directors have to file an affidavit confirming above compliances/ status.

h) A certificate from practicing Chartered Accountants/ Company Secretary/ Cost Accountant certifying the above status / compliances by the company.

 

On receipt of the above document and after being satisfied the ROC can consider to revoke license in exercise his power…...

 

Please check the following link for more details:

/news/proposed-guidelines-for-conversion-of-section-25-company-non-profit-company-to-an-ordinary-company-under-companies-act-1956-by-15th-july-2011-9650.asp


Published by

CS Bijoy
(Expert)
Category Corporate Law   Report

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