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DISADVANTAGES OF A SECTION 25 COMPANY

Posted By admin on December 25, 2013 No Comments

1.Restriction on profits earned

A Section 25 Company has to ensure that its profits and all other incomes are utilized only for the purpose of promoting its objects and not for any other purpose. It should also ensure that its profits are not distributed as dividend among its members.

2.Restriction on alteration of memorandum

Section 25 Company cannot alter its objects clause in its Memorandum without seeking the written approval of central government. If an existing company obtains a license under section 25 it has to ensure that its objects are confined to those mentioned in section 25 itself and if not make proper alteration to its memorandum and articles.

3.Compulsory compliances

If the Central Government has imposed some conditions and regulations upon the company for granting a license under section 25 then such a company is bind by such conditions and has to ensure adequate compliance with them.

4,Taxation

Section 25 Company is regarded as a ‘company’ within the meaning of the Income Tax Act, 1961 and as such its income is taxable according to the applicable rates similar to those applying to other companies.

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