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Non profit / section company

A non-profit or section 25 company is one of the popular forms of Non-Profit Organisation in India. Under the Companies Act, 1956, a non-profit or section 25 company is a company that

has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object

intends to apply its profits, if any, or other income in promoting its objects; and

Intends to prohibit the payment of any dividend to its members.

Thus, a section 25 company is a voluntary association of persons formed for promotional activities. Besides establishing a Trust or a Society, the other alternative to establish a Non-Profit Organisation is to form a Section 25 Company.

Key Benefits:

  • Many privileges and exemptions under Company Law.
  • No requirement of Minimum Paid-up Capital.
  • No stamp duty on registration
  • Registered Partnership Firms can be a member in its own capacity.
  • Tax deductions to the donors of the Company under section 80G of the Income Tax Act.

Key Conditions:

  • No member shall be appointed as remunerated officer.
  • No remuneration or benefit shall be paid to a member being a servant or officer of the Company other than reimbursement of out of pocket expenses, interest on money lent or rent of premises.
  • Any subsequent alteration of Memorandum or Articles requires prior approval of Regional Director (ie Central Government).

Minimum Requirements:

  • Minimum 2 shareholders for Private Limited Company and 7 shareholders for a Public Limited Company.
  • Minimum 2 directors for Private Limited Company and 3 directors for a Public Limited Company.
  • The directors and shareholders can be the same persons.
  • DIN (Director Identification Number) for all the directors
  • DSC (Digital Signature Certificate) for two of the director.