Section 25 companies

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Allen (Querist)
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13 September 2013 Q1.How are directors appointed in a section 25 company
1) If they have share capital
2) if they don't have share capital

Q2. Can third parties appoint directors in a section 25 company?

Ajay Mishra

Ajay Mishra (Expert)
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13 September 2013 There are following exemption to Section 25 Company regarding Directors:

 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.

Allen

Allen (Querist)
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13 September 2013 So basically appointment for directors is done at the annual general meeting?

Allen

Allen (Querist)
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13 September 2013 If there is no share capital then do members vote at the AGM?

Thank you for your reply

Ajay Mishra

Ajay Mishra (Expert)
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13 September 2013 No, board will appoint a person under section 260 as additional director.

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