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Section 25 Presentation by Mitesh Agrawal

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Section 25 Presentation by Mitesh Agrawal

  1. 1. Sarva Sakshar Foundation – A Section 25 Company Eradicating illiteracy through innovative solutionsMitesh AgrawalChief Literacy OfficerSarva Sakshar Foundation, Punewww.sakshar.inEmail: contact@sakshar.in
  2. 2. www.nipune.orgWhat is Section 25? – just another section in Companies Act, 1956 [Act No. 1 OF 1956]Copyright © 2012 Sarva Sakshar Foundation -2-
  3. 3. www.nipune.orgWhat is What? And Who is Who? Item Meaning Title Meaning The Companies Governs the constitution/ formation of a Shareholder/ member Who owns a share in the company Act company Who has founded/ established the Founder company. Mostly own shares too A legal entity, can be prosecuted under the Company law of the land Promoter Who promotes a company, can change License to dispense with word ‘Limited’ as a Director Agent of shareholders Section 25 recognition/ acknowledgment of not-for-profit status Board of Directors Committee of Directors Supervising the (BOD) Management Shares/ Equity Share in the ownership of the company Management/ Running the Day-to-Day operations of the Employees company Represents % ownership; calculated by Stake dividing your # of shares by total # of shares Company Details the objective and means of Memorandum of conducting the business, i.e. primary and Association secondary activities Articles of Details how the business to be run, Power of Association Board, General Meeting etc. Shareholders BOD Management EmployeesCopyright © 2012 Sarva Sakshar Foundation -3-
  4. 4. www.nipune.orgWhy section 25? - benefits If you are making impact 365 days a year, then section 25 registration is for you 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 Exemptions over a normal For-Profit  Lower registration fees and exemption from stamp duty  Raise funds from Banks  Maintain book of accounts only for 4 years Vs 8 years  Social fund – investments  Company secretarys qualifications are not mandatory  Relaxed norms compared to a for-profit comany  No need to extensively publish name and reg. address  15% of your income is exempt from income tax  Flexibility with respect to date, time and venue of an AGM  Donors get 50% or 100% exemption from tax  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 2003Copyright © 2012 Sarva Sakshar Foundation -4-
  5. 5. www.nipune.orgWhat 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 relativesNote: Central Government in this context means the Registrar of Companies (ROC) or Regional Director (RD) who has jurisdiction over your companyCopyright © 2012 Sarva Sakshar Foundation -5-
  6. 6. www.nipune.orgTime –line, documents and steps required to form a new company u/s 25 Application for license 1 Month 1 Month 1.5 Months  Identify right experts and  Plan a suitable structure  Submit the documents to get the section 25 advisors  Apply for Name approval license  Research and understand the − Takes 3-5 days  With-in a week, publish advertisement laws − Valid only for 60 days − 2 news papers – one English and one regional  Digital Signature Certificate  Finalise shareholding − Wait for any objections for next 30 days (DSC)  Preparing legal documents  No objection, then  Director Identification Number required for registration  Apply for Corporate Identity Number (CIN) (DIN)  Takes another 5 days  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 formCopyright © 2012 Sarva Sakshar Foundation -6-
  7. 7. www.nipune.orgSection 25 Vs Trust Vs Society Section 25 Company (Pvt Ltd) Public Trust Society Public Trust Act like Bombay Public TrustStatute/Legislation Companies Act of 1956 Societies Registration Act of 1860 Act, 1950Ease of Formation Relatively complicated, 2-3 months Very simple, 2-3 weeks Relatively simple, 1-2 weeksCost of registration Rs. 35,000 Rs. 10,000 Rs. 5,000 Separate application, strictName Approval Not required No separate application guidelines for names approvalJurisdiction of the Act Concerned state where registered Concerned state where registered Concerned state where registeredAuthority Registrar of Companies Charity Commissioner/Deputy Registrar Registrar of Societies As Society (and by default also as TrustRegistration As Section 25 Company As Trust in Maharashtra and Gujarat) Memorandum and Articles of Memorandum of Association and Rules &Main Document Trust deed/ Indenture Association. Regulations (Bye laws)Number of persons Minimum two members and two Minimum two trustees; no upper limit Minimum seven, no upper limitneeded to register directors; less than 50 members 2 tier: 2 tier: One tierGoverning structure -General Body -General Body -Trustees -Board of Directors -Executive committeeVoting Rights Based on shareholding All trustees have equal rights All members have equal rightsAnnual filing Annual return and audited accounts No filing List of managing body, varies by stateGeneral & board One and two every year No provision, as per deed/ indenture As per bye lawsmeetingTransfer of membership Yes No NoRecurring expenditure Some Nil MinimalArea of operation Throughout India Throughout India Throughout IndiaCopyright © 2012 Sarva Sakshar Foundation -7-
  8. 8. Contact details: contact@sakshar.in Thank YouSarva Sakshar Foundation (SSF) is a not-for-profit organisation established by IIT Alumni www.sakshar.in