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seven key points of a section 25 company


Posted By admin on December 25, 2013 No Comments



Section-25 companies are registered under section-25 of the Indian Companies Act. 1956. It is being formed for promotion of commerce, art, science, religion, charity or any other useful object.

2.Main instrument

The main instrument of any section 25 company is the memorandum and articles of association, wherein the aims and objects and mode of management of the company are mentioned. The objects of such company include promotion of Commerce, Art, Religion, and Charity etc.

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A section-25 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee.

4.Application of profit

The important condition in case of company registered u/s 25 is that the income and property of the company is to be wholly applied for the promotion of the object as provided in its Memorandum of Association and no profit can be paid directly or indirectly, by way of divided or bonus to the members of the company.

5.Management of the Company

Minimum seven individuals are required to register a company under section 25 of the Act. Founder members of the company can be Directors of the company. 1/3rd of the Directors liable to retire have to retire by rotation every year. Remuneration is payable to the Directors as per schedule 13 of the Companies Act. But no prior permission of Central Govt. is required unless it crosses a certain limit.

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6.Maintainance of accounts

The provisions of the Companies Act, 1956 regarding maintenance of accounts apply to the company registered under section 25 of the Act. Hence the annual accounts need to be audited and the Profit and Loss account should be prepared in the format prescribed under Schedule VI of the Act. Companies (Auditor’s Report) order, 2003; by is clause 1(2)(iii) exempts a company licensed to operate under section 25 of the Companies Act.

7.Firm can be a member

A unique feature of Section 25 companies is that even a `firm’ can also be a member of such a company in its own name.

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