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Formation of a Non Profit Company under Section 25







Section 25(1) (a) and (b) of the Indian Companies Act, 1956, provides for the for the formation of a company under this section for the promotion of commerce, art, science, religion, charity or any other useful object’, [provided the profits, if any, or other income is applied for promoting only the objects of the company] and no dividend is paid to its members.

Thus section 25 companies are non profit companies incorporated and governed by the Companies Act, 1956. For a section-25 company Its Memorandum and articles of association are the main and guiding instruments. No stamping of memorandum or articles required for a section 25 companies. There should be a minimum of three trustees in a section-25 Company. There is no upper limit to the number of trustees. The following steps can be followed:


Step – 1

Form 1A: Name approval: An application in E-Form 1A has to be made for availability of name to the registrar of companies, with a fee of Rs.500/-. It can be filed electronically. Six name in preferential order need to be proposed




Application to Regional Director: After the availability of name is confirmed, an application should be made in writing to the regional director of the company law board for granting license under this section. The application should be accompanied by the following documents:

1.       Three printed or typewritten copies of the memorandum and articles of association of the proposed company, duly signed by all the promoters with full name, address and occupation.

2.       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.

3.       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.

4.       A declaration by an advocate or a chartered accountant/ company secretary that the memorandum and articles of association have been drawn up in conformity with the provisions of the Act and that all the requirements of the Act and the rules made thereunder have been duly complied with, in respect of registration or matters incidental or supplementary thereto.

5.       Three copies of a list of the names, addresses and occupations of the promoters (and where a firm is a promoter, of each partner in the firm).

6.       Three copies of a list of the members of the proposed board of directors, together with the names of companies, associations and other institutions in which such promoters, partners and members of the proposed board of directors are directors or hold responsible positions, if any, with description of the positions so held.

7.       A statement showing in detail the assets (with the estimated values thereof) and the liabilities of the association, as on the date of the application or within seven days of that date.

8.       An estimate of the future annual income and expenditure of the proposed company, specifying the sources of the income and the objects of the expenditure.

9.       A statement specifying briefly the grounds on which the application is made.

10.   A declaration by each of the persons making the application that he/she is of sound mind, not an undischarged insolvent, not convicted by a court for any offence and does not stand disqualified under section 203 of the Companies Act 1956, for appointment as a director.


Step – 3

Filing of Application copy to the RoC: The applicants must also furnish to the registrar of companies (of the state in which the registered office of the proposed company is to be, or is situate) a copy of the application and each of the other documents that had been filed before the regional director of the company law board.


Step - 4

Publication of Notice: Within a week from the date of making the application to the regional director of the company law board, the applicants are required to publish a notice in the prescribed manner at least once in at least two news papers. One notice should be in an English newspaper circulating in that district and in a  language of the district in which the registered office of the proposed company is to be situated or is situated and circulating in that district.


Step – 5

Grant of Approval: The regional director, after considering the application, documents and objections, if any, received within 30 days from the date of publication of the notice in the newspapers, and after consulting any authority, department or ministry, as he may, in his discretion, decide, determine whether the licence should be granted or not. And if the registrar satisfies that the application is complete in all respects and in the best interest of the country, he can grant the licence under this section with or without conditions and may also direct the company to insert in its memorandum, or in its articles, or in both, such conditions of the licence as may be specified by him in this behalf



Step – 6

Other Incorporation formalities: After obtaining licence under section 25 the company shall be formed as a normal company and the other formalities of incorporation shall be complied with.


Step - 7

Registration under Section 80G: If a section 25 company gets itself registered under section 80G then the person or the organization making a donation to the NGO will get a deduction of 50% from his/its taxable income. The company has to apply in Form No. 10G to the Commissioner of Income Tax for such registration. Normally this approval is granted for 2-3 years but can be granted earlier depending upon the situations. The application form should be sent in triplicate to the Commissioner of Income Tax along with the following documents:

  1. Copy of income tax registration certificate.
  2. Detail of activities since its inception or last three years whichever is less

3.       Copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.

Published by

CA Dhiraj Ramchandani
(CA, M. com)
Category Corporate Law   Report

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