section 25 presentation by mitesh agrawal
DESCRIPTION
TRANSCRIPT
Mitesh AgrawalChief Literacy OfficerSarva Sakshar Foundation, Punewww.sakshar.inEmail: [email protected]
Sarva Sakshar Foundation
Eradicating illiteracy through innovative solutions
– A Section 25 Company
- 2 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
What is Section 25? – just another section in Companies Act, 1956 [Act No. 1 OF 1956]
- 3 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
What is What? And Who is Who?
Item Meaning
The Companies Act
Governs the constitution/ formation of a company
Company A legal entity, can be prosecuted under the law of the land
Section 25License to dispense with word ‘Limited’ as a recognition/ acknowledgment of not-for-profit
status
Shares/ Equity Share in the ownership of the company
Stake Represents % ownership; calculated by dividing your # of shares by total # of shares
Memorandum of Association
Details the objective and means of conducting the business, i.e. primary and
secondary activities
Articles of Association
Details how the business to be run, Power of Board, General Meeting etc.
Title Meaning
Shareholder/ member Who owns a share in the company
Founder Who has founded/ established the company. Mostly own shares too
Promoter Who promotes a company, can change
Director Agent of shareholders
Board of Directors (BOD)
Committee of Directors Supervising the Management
Management/ Employees
Running the Day-to-Day operations of the company
Shareholders BOD Management Employees
Company
- 4 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
Why section 25? - benefits
With higher compliance (i.e. cost of doing business) as compared to other structures, section 25 offers
you:
More transparency with higher compliance, annual filling of information which is publically avaialble
Easier to induct (and remove) influential personalities as board members without loosing control
Control is based on equity percentage unike trustee have equal powers
Concentrated control or shared control
Raise funds from Banks
Social fund – investments
Relaxed norms compared to a for-profit comany
15% of your income is exempt from income tax
Donors get 50% or 100% exemption from tax
If you are making impact 365 days a year, then section 25 registration is for you
Exemptions over a normal For-Profit
Lower registration fees and exemption from stamp duty
Maintain book of accounts only for 4 years Vs 8 years
Company secretary's qualifications are not mandatory
No need to extensively publish name and reg. address
Flexibility with respect to date, time and venue of an AGM
No need to notify change in directors
No prior permission required to increase number of
directors
Only 2 mandatory board meetings Vs 4 meetings
Exempt from CARO 2003
- 5 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
What it takes away from you?
I, the Regional Director at Bombay/Calcutta/Kanpur/Madras, hereby grant this license, directing that the said association be registered as a company with limited liability without the addition of the word "Limited" or the words "Private
Limited" to its name, subject to the following conditions, namely :-
Prohibit the payment of any dividend to its members
No remuneration shall be given by the company to persons who at any time are or have been members
No alteration shall be made to the MoA or to the AoA without prior written approval
Other insertions in MoA and AoA as the ROC/ RD deem fit
With foreign nationals as shareholders, additional considerations like FIPB/ FDI/ FEMA compliance will be required
What’s allowed
Remuneration only after previous approval of Central Government – granted only in exceptional cases
Payment of out-of pocket expenses
Reasonable and proper interest on money lent
Reasonable and proper rent on premises let to the company
Income tax act requirements
− Market salary for a defined set of relatives of members
− Other market value based payments for all the buy-sell-lease transactions with members and relatives
Note: Central Government in this context means the Registrar of Companies (ROC) or Regional Director (RD) who has jurisdiction over your company
- 6 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
Time –line, documents and steps required to form a new company u/s 25
MoA and AoA
A declaration by a practicing Company Secretary
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
A statement giving a brief description of the work proposed to be done
A statement specifying briefly the grounds on which the application is made
A declaration by each person making the application in the form
1 Month 1 Month 1.5 Months
Identify right experts and advisors
Research and understand the laws
Digital Signature Certificate (DSC)
Director Identification Number (DIN)
Submit the documents to get the section 25 license
With-in a week, publish advertisement − 2 news papers – one English and one regional − Wait for any objections for next 30 days
No objection, then Apply for Corporate Identity Number (CIN) Takes another 5 days
Plan a suitable structure Apply for Name approval
− Takes 3-5 days− Valid only for 60 days
Finalise shareholding Preparing legal documents
required for registration
Application for license
- 7 -Copyright © 2012 Sarva Sakshar Foundation
www.nipune.org
Section 25 Vs Trust Vs Society
Section 25 Company (Pvt Ltd) Public Trust Society
Statute/Legislation Companies Act of 1956 Public Trust Act like Bombay Public Trust Act, 1950 Societies Registration Act of 1860
Ease of Formation Relatively complicated, 2-3 months Very simple, 2-3 weeks Relatively simple, 1-2 weeks
Cost of registration Rs. 35,000 Rs. 10,000 Rs. 5,000
Name Approval Separate application, strict guidelines for names approval Not required No separate application
Jurisdiction of the Act Concerned state where registered Concerned state where registered Concerned state where registered
Authority Registrar of Companies Charity Commissioner/Deputy Registrar Registrar of Societies
Registration As Section 25 Company As Trust As Society (and by default also as Trust in Maharashtra and Gujarat)
Main Document Memorandum and Articles of Association. Trust deed/ Indenture Memorandum of Association and Rules &
Regulations (Bye laws)
Number of persons needed to register
Minimum two members and two directors; less than 50 members Minimum two trustees; no upper limit Minimum seven, no upper limit
Governing structure2 tier:-General Body-Board of Directors
One tier-Trustees
2 tier:-General Body-Executive committee
Voting Rights Based on shareholding All trustees have equal rights All members have equal rights
Annual filing Annual return and audited accounts No filing List of managing body, varies by state
General & board meeting One and two every year No provision, as per deed/ indenture As per bye laws
Transfer of membership Yes No No
Recurring expenditure Some Nil Minimal
Area of operation Throughout India Throughout India Throughout India
Sarva Sakshar Foundation (SSF) is a not-for-profit organisation established by IIT Alumni
Contact details: [email protected]
www.sakshar.in
Thank You