Payment of remuneration by section 25 company

This query is : Resolved 

08 June 2012

Hi, Frnds. I need advice on the following

Can a Section 25 Company pay remuneration to the relative of its Member (to spouse of the member of company) for the service actually rendered to the company ??

Ajay Mishra (Expert)
08 June 2012


The section 25 company enjoys all advantages that any other limited company registered under the act enjoys. But apart from these advantages there are some specific privileges conferred upon them that distinguish them from other company. These privileges are in nature of exemptions from some provisions of the Companies Act or apply with some modifications to section 25 company.
 Minimum Share Capital: Section 25 companies have been exempted from this requirement regarding minimum share capital by insertion of sub-section (6). As such they can be registered even they have share capital less than the statutory minimum. {section 3(6)}
 Publication of Name: A section 25 company has been exempted from the provisions of section 147 and as such is not required to mention its name and address as required in case of all other companies. (Section 147)
 Annual Return: Section 25 company without a share capital is required to file returns with ROC as required by section 160 but it is 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 Annual General Meeting. {Section 160 (1)(aa)}
 Time and Place of AGM: Every company is required to hold its AGM during business hours and on a day not a public holiday and has to be held at its registered office or at a place within the limits of city, town or village where its registered office is situated. Section 25 company has been exempted from this provision. As such they are free to determine the date, place and time of its AGM according to their convenience and feasibility, the only condition being that time, place and date of such meeting should have been pre determined by the Board of Directors. (Section 166(2)).
 Notice of AGM: Section 25 company has been given some relief in this regard by allowing them to hold an AGM after giving a notice of 14 days length instead of 21 days as required by section 171(1). Therefore they can call an AGM at a short notice of 14 days instead of 21 days. (Section 171(1)).
 Minutes of Meeting: In section 25 company minutes may be recorded within 30 days of the conclusion of every meeting in case of companies where the Articles of Associations provides for confirmation of minutes by circulation. (Section 193)
 Maintaining Books of Accounts: Every company is required by section 209(4-A) to maintain books of accounts relating to a period of 8 years. However a section 25 company is required to maintain books of account relating to a period of only 4 years instead of 8 years immediately preceding current year. {Section 209(4A)}
 Service of Copies of Certain Documents: A section 25 company is allowed to send the required documents at least 14 days before the date of meeting instead of 21 days. (Section 219)
 Appointment of Directors by Rotation and Filing of Vacancy: The provisions of section 255 and 256 relate to retirement of director by annual rotation and filing of vacancies. Section 25 can be exempt from the application of these provisions. There can be no objection to the nomination and election by a member company, which has not paid the subscription for the relevant year. (Department’s Circular No.23(29) dated 07-05-1964)
 Right of Persons other than Retiring Director to stand for Directorship: If the Articles of 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 and as a result a person who is not a retiring director and is intending to stand for directorship will not have to follow the procedure laid down by section 257. (Section 257)
 Increase in Number of directors: Section 25 companies are exempted from section 259 and are thus free to increase the number of its directors without seeking approval of Central Government. (Vide Notification No. 2767, dated 05-08-1964) (Section 259)
 Consent to Act as a Director: A person seeking appointment as a director for the first time need not file his consent in advance with the company for working as director if appointed in section 25 company.
 Number of Board Meeting: Under section 285, the meeting of Board of Directors should be held at least once in every three months and four meeting should be held in a year. But section 25 companies are allowed to hold Board Meeting only once in six month but should have held minimum four meeting in a year. (Section 285)
 Quorum for Meeting: Under section 25 company quorum for the Board Meeting shall be either 8 members or ¼ of its total strength whichever is less, in any case should not be less than two members. (Section 287)
 Resolution by circulation: Section 25 companies are allowed to pass a resolution by circulation instead of at a Board Meeting under clause (c ), (d) and (e) of section 292(1).
 Disclosure of Interest: Disclosure of interest by director of section 25 companies are required to be given only to cases covered under section 297(1) of the Companies Act. (Section 299)
 Maintenance of Register: In section 25 company, maintenance of register of contracts will apply to contracts, which are subject to disclosure under section 299.
 Filing of Form-32 : Provisions of section 303(2) will not apply to section 25 company, regarding filing of return in Form-32 for change in directors, managing director manager or secretary within 30 days of such change to ROC.


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