How to form Section 25 company

7/28/2019 How to form Section 25 company

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Formation of Non Profit/Section 25 companySection 25 Company or a Non-Profit organization (NPO) is a Company established for promoting

commerce, art, science, religion, charity or any other useful object, provided the profits, if any, or

other income is applied for promoting only the objects of the company and no dividend is paid to its

members.

An NPO/NGO can be formed for promotion of any useful object like sports, education, research

activities etc. The term No Profit does not mean that the Company cannot generate profit or income,

but it essentially means applying the income for further promotion of the object and not for

distributing it to the promoters. It means that the Company can earn profits but the promoters

cannot be benefited out of those profits.

Key Benefits:

Many privileges and exemptions under Company Law.

Exemption from requirement of Minimum Paid-up capital.

Exemption of Stamp duty for registration.

Non-application of Companies Auditors Report Order (CARO) 2003.

Registered partnership firm can be a member in its own capacity.

Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.

Key Conditions:

Profit or Income of the Company shall be applied for the promotion of the mainobject

Declaration of dividend or distribution of profit to the promoters is not allowed

No member shall be appointed as a remunerated officer

No remuneration / benefit shall be paid to a member being a servant / officer of the Company

(except reimbursement of out of pocket expenses, reasonable interest on money lent or

reasonable rent on the premises)

Subsequent alteration of MoA & AoA requires prior approval of Central Govt. (i.e. Regional

Director)

Key Requirements:


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Minimum 2 Shareholders (for Private Limited Co.) and 7 Shareholders (for Public Limited Co.)

Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)

The directors and shareholders can be same person

DIN (Director Identification Number) for all the Directors

DSC (Digital Signature Certificate) for two of the Directors

Steps involved in formation of Section 25 Company/ Non-Profit organization

Step

No.

StepsTimeframe(Working

days)Processing

1 DSC 2 Documents required:

Self attested

Address proof

Identity proof

2 DIN

Approved DIN is a pre-requisite

for incorporation process

5 Apply for DIN and get a provisional

DIN

Certification/Attestation of

Directors personal details

Sending the same to the DIN Cell

and getting it approved

3 Pre- Name Application Search --

The Promoters have to provide

atleast 6 (Six) names in the

orderof priority.

To make an online search of

availability of names as

desiredby the Promoters


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4 Application for Name

Availability

6 names for the

proposed Company

Main Object Clause

6 To draft the Main Object Clause to

be pursued by the Company after

incorporation.

5 Representations before RoC on

behalf of Promoters

1 Changes to be made in the Name

application, if any, suggested by the

RoC

6 Application to Regional

director (RD) for issue of

License

35 Filing of Form 24A Attachments:

3 Printed Copies of MOA & AOA

List of Directors

Declaration from a practicing

Company Secretary

Declaration from Promoters

Consent to act as Directors of the

Company

Statement of assets and

Liabilities

Statement of proposed work

Statement of estimated Income &

Expenditure

Statement of grounds

Copy of advertisement/PublicNotice

Power of attorney

Photocopy of name approval

letter

7 Representations before RD in

case of any objections

5 Changes to be made in the relevant

documents, as suggested by the RD

8 Public Notice/Advertisement 3

With in 7 days of applicationto

the RD

Shall be published in one

newspaper in principallanguage of the district

(district of Registered office of

the proposed Company) and in

one English newspaper


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9 Documents required (after

issue of license by RD)

Printing of Altered Memorandum

and Articles of Association (MOA

/ AOA)

Other Forms like:

Form 32

Form 18

Form1

Letter of Authority/PoA

2 Stamping of documents namely:

Letter ofAuthority/Power of

Attorney

Form1

Processing of eForms

10 Final Process:

Filing all the above

documents with the ROC

Follow up with the ROC

office

10 Online uploading of e-Forms

Payment of Registration fees

Collecting the Certificate of

Incorporation

In case of NPO being a Public Limited Company

11 Application for Certificate of

Commencent of Business

A Public Limited Company,

in addition to Certificate ofIncorporation, must obtain a

Certificate of

Commencement of Business

before its operation

10 Documentation

Preparation of Statement in lieu of

Prospectus (SLP)(If the Companyis not issuing the Prospectus to

raise funds from general public)

CA certification of SLP

Preparation of Form 20

Consent letter of the Auditor

Preparation of Statement of

Preliminary Expenses

Online filing of eForm 20


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Steps for Registration of a Section 25 Company

Step-1

Apply in Form No. 1A to concerned ROC, for availability of name in order of preference (without

addition to its name of the word "Limited" or the words "Private Limited").

Step-2

Prepare Memorandum & Articles of Association.

Step-3

Make an application in E form 24A online to the Concerned Regional Director for issue of license

under Section 25 of the Companies Act, 1956. The application should be accompanied by: -

Three Copies of MoA & AoA of the proposed Company.

A declaration confirming the application by CA / CS / Advocate on prescribed Stamp Paper.

Three copies of list of names, descriptions, addresses & occupation of the promoters as well as the

members of Board of Directors of the proposed Company.

A statement showing details of assets & liabilities of the Association as on date with the

application.

An estimate of future annual income & expenditure of the proposed company, specifying the source

of income & object of expenditure.

A statement giving brief description of work, if any, already done by the association.

A statement specifying briefly the grounds on which the application is made.

A declaration in prescribed form on non-judicial stamp paper by each person making an application.

A letter of authority.

Payment of prescribed fees.

Step-4

Notice pursuant to regulation 11 of the Companies Regulation, 1956 shall be published within one

week before or after the admission of the application in one or more newspapers (one in English and

other in vernacular local newspaper).

Step-5

Simultaneously furnish the copy of application with all its enclosure and accompanying papers to

the concerned Registrar of Companies.

Step-6


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The Concerned RoC do the scrutiny of the information of Directors and Promotors of the Proposed

company and sent a Scrutiny report to the concerned RD within 15 days of the receipt of such

application. The concerned ROC also gets the draft MOA & AOA vetted and then list outs the

modifications considered necessary and forwards the same to RD within fifteen days of receipt of the

copy. He may normally advise RD to grant license to the proposed company or not.

Step-7

The concerned ROC may consult for the views of District Magistrate of the state within whose

jurisdiction the registered office of the proposed company is to be located. Copy sent to RD and

reply is generally directly received by ROC from DM.

Step-8

In case, the considerations for issue of license are more important, the RD may consult the StateGovernment too. The RD may also consult the ministries concern and determine, if any, objections

received.

Step-9

On receipt of the above papers, the RD gets the MOA & AOA and other papers generally

scrutinized.

Step-10

Having received all the necessary views from the ROC, DM, State Government, the RD will take the

decision for grant of license to the application or not. (Generally the license is granted within 30

days from the date of filing of application with the RD).

Step-11

Departmental instruction shall be strictly followed. The license may be revoked, with Company's

right to be heard.

Step-12After obtaining the license the MOA & AOA be printed as approved.

Step-13

File the necessary papers with ROC for registration along with filing fees (maximum filing fees

payable is Rs.5000/-) and also produce the license granted by the RD. The Stamp duty is also

chargeable in some states these days.


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Step-14

The ROC on making necessary scrutiny and correction will issue the certificate of incorporation.

Check List for registering a company under Section 25

StepNo.

Particulars of Action/ Documents Required ProcessingPeriod

1 Apply in Form No. 1A to concerned ROC, for availability of

name in order of preference. Info required: -

Full name & residential address of each of promoters.

ames of the proposed Company in order of their preference

(without addition to its name of the word "Limited" or the

words "Private Limited").

Proposed main object of the proposed Company (shall be

one as depicted u/s 25 of the Companies Act, 1956).Mention that the proposed Company is to be formed underprovisions of Sec. 25 of the Companies Act, 1956

3 - 4workingdays

2 After the name is approved, prepare Memorandum &

Articles of Association; preferably get it vetted by ROC /

RD. Keep in mind that the MOA & AOA are drawn in

consonance with provisions of the Sec. 25 & other

applicable provisions of the Companies Act, 1956.

3 - 4workingdays

3 Make an application with to the Concerned RegionalDirector for issue of license under Section 25 of the

Companies Act, 1956 with all the requisite enclosure as

given under:-

Three Copies of MOA & AOA of the proposed Company

A declaration confirming the application by CA / CS /

Advocate on prescribed Stamp Paper.

Three copies of list of names, descriptions, addresses &

occupation of the promoters as well as the members of

Board of Directors of the proposed Company.

A statement showing details of assets & liabilities of the

Association as on date with the application.

An estimate of future annual income & expenditure of the

proposed company, specifying the source of income &

object of expenditure.

8 - 10workingdays(dependingupon thepreparationofdocuments,availabilityof each ofthepromoters

andpublicationof notice innewspaper)


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A statement giving brief description of work, if any, already

done by the association.

A statement specifying briefly the grounds on which the

application is made.

A declaration in prescribed form on non-judicial stamp

paper by each person making an application.

A letter of authority.Copy of notice pursuant to regulation 11 of the CompaniesRegulation, 1956.

4 Simultaneously furnish the copy of application with all its

enclosure and accompanying papers to the concerned

Registrar of Companies.

5

On receipt of the above papers, the RD gets the MOA &AOA and other papers generally scrutinized, the RD will

take the decision for grant of license to the application or

not.

30 - 45working

days

6 On receipt of the license from RD, file the necessary papers

with ROC for registration along with filing fees & forms.

The ROC on making necessary scrutiny and correction will

issue the certificate of incorporation.

8 - 10

working

days

How to form Section 25 company

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Transcript of How to form Section 25 company