The Companies Act, 2013 has made significant changes in the
definition and regulatory framework of Section-25 Companies as is given in the
Companies Act, 1956. These are yet to be made effective. Section 8 of the Companies Act, 2013 will
replace Section 25 of Companies Act, 1956.
The Act specifies and increases the gamut of activities for
which the Company for non-profit objectives can be formed. Sub-section (1) of Section 8 says:
“Where it is proved to
the satisfaction of the Central Government that a person or an association of
persons proposed to be registered under this Act as a limited company—
(a) 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;
(b) intends to apply its
profits, if any, or other income in promoting its objects; and
(c) intends to prohibit
the payment of any dividend to its members,
the Central Government may, by licence issued
in such manner as may be prescribed, and on such conditions as it deems fit,
allow that person or association of persons to be registered as a limited
company under this section without the addition to its name of the word
“Limited”, or as the case may be, the words “Private Limited”, and thereupon
the Registrar shall, on application, in the prescribed form, register such
person or association of persons as a company under this section.”
Thus now the new Act specifies more objects like sports,
education, research, social welfare and protection of environment for which the
Companies can be formed under this section.
Further the Section says the Company will be registered as a ‘Limited’
Company whereas Section 25 says an ‘association’ to be registered as a Company.
Sub-section (10) of
Section 8 says:
“A company registered
under this section shall amalgamate only with another company registered under
this section and having similar objects.”
No such condition is specified in the Companies Act, 1956.
Sub-section (11) of
Section 8 imposes heavy penalties on non-compliance with any of the
requirements laid down in the section. The Company may be fined with an amount
which shall not be less than ten lakh rupees
but which may extend to one crore rupees and the directors and
every officer of the company who is in default shall be punishable with
imprisonment for a term which may extend to three years or with fine
which shall not be less than twenty-five
thousand rupees but which may extend to
twenty-five lakh rupees, or with both. Thus once section 8 gets notified, the
Companies incorporated for the philanthropic objects have to adhere to the
terms and conditions laid down while grant of licence and the requirements laid
in the governing act.
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