PROJECT REPORT

OF
ANKITA ARORA
(Reg. No. 220954986/08/2010)
TOPIC: JOINT VENTURE AN!
TRATE"IC A##IANCE
TRAINING UNDER:
UMA POLYMERS LTD.
1ST
CORPORATE TOWER, PLOT NO 21 &.22
BEHIND BANK OF MAHARASHTRA,
SECOND PULIYA COMMERCIAL CENTRE,
CHOPASNI HOUSING BOARD, JODHPUR
PHONES: !2!"#$2$!, !21#$2$!
SIGNATURE OF TRAINEE SIGNATURE OF EMPLOYER
NAME: ANKITA ARORA NAME: CS IRA BA%I
DATE: &2.&".2&1$ DATE: 2&.&#.2&1$
PLACE: JODHPUR PLACE: JODHPUR
1
UNDERTAKING
I ANKITA ARORA D'O SHRI (IJAY ARORA
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(ENTURES AND STRATEGIC ALLIANCES 64+0 02
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+9:)4 089)458/, )97. @)/+1*51* 9+ 812 +9:)4 ;)4.+1,
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NAME: ANKITA ARORA
22
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COVERAGE
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22
Under Indian law, 3 legal forms exist for Non-Proft
organizations:
Trusts
Societies
Section 25 companies
Due to better laws, Section 25 companies have the most reliable strongest
organizational structure. Section 25 companies are those companies which are
formed for the sole purpose of promoting commerce, art, science, religion,
charity or any other useful object and have been granted a license by the
central government recognizing them as such. Thus, there are three criteria
for determining whether a particular company is section 25 company or not
!" #ts objects should be only to promote commerce, art, science, religion,
charity or any other useful object.
2" #t should intend to apply its pro$ts or other incomes only in promoting its
objects% and
&" 'entral government should have granted a license to such a company
recognizing them as such, these types of companies can be either public
company or private company having a limited liability.
The so(called non(pro$t organizations can alternatively be formed as a )ublic
Trust or a Society under the Societies *egistration +ct, !,-.. The /uestion
then arises why to form a company under the 'ompanies +ct,!05- and
simultaneously obtain license under Section 25 of the +ct, which involves
enormous paper wor1 and stricter provisions relating to maintenance of
accounts and audit2 The most obvious answer is provided by the advantages
of having an incorporated company, namely, independent corporate entity,
22
SECTION ! CO"P#NIES - INT$O%UCTION
limited liability, perpetual succession etc. Section 25 companies enjoy greater
privileges in the form of concessions allowed under the +ct to such companies.
DEFINITIONS
Section 25 'ompany is a voluntary association of person formed for
promotional activities. 3esides establishing a Trust and Society, the other
alternative to establish a 4on 5 )ro$t organization is Section 25 'ompany.
Section 25 'ompanies are formed as )ublic or )rivate 'ompany having a
limited liability under the 'ompanies +ct !05-. These companies can be
formed with or without share capital, in case they are formed without capital,
the necessary funds for carrying the business are brought in form of
donations , subscriptions from members and general public.
Section 25 'ompanies can be formed only after obtaining the necessary
licence from the 'entral 6overnment, which imposes certain terms and
conditions while granting the approval. #n case the company fails to comply
with the terms and condition at any point of time, the licence can be
cancelled.
Section 25 'ompanies are not re/uired to add the su78 9imited or )rivate
9imited at the end of their name.
Due to their nature of business, the 6overnment of #ndia has rela8ed the
application of various provisions of the 'ompanies +ct on such companies,
Se&tion-!-Com'an(
+ccording to section 25:!":a" and :b" of the #ndian 'ompanies +ct, !05-, a
section(25 company can be established ;for promoting commerce, art,
science, religion, charity or any other useful object<, provided the pro$ts, if
any, or other income is applied for promoting only the objects of the company
and no dividend is paid to its members.
22
)egislation : Section(25 companies are registered under section(25 of the
#ndian 'ompanies +ct. !05-.
"ain Instr*ment : =or a section(25 company, the main instrument is a
>emorandum and articles of association :no stamp paper re/uired"
Tr*stees : + section(25 'ompany needs a minimum of three trustees% there
is no upper limit to the number of trustees. The 3oard of >anagement is in
the form of a 3oard of directors or managing committee.
#''li&ation for $egistration :
!. +n application has to be made for availability of name to the registrar of
companies, which must be made in the prescribed form no. !+, together with
a fee of *s.!...?(. #t is advisable to suggest a choice of three other names by
which the company will be called, in case the $rst name which is proposed is
not found acceptable by the registrar.
2. @nce the availability of name is con$rmed, an application should be made
in writing to the registrar of companies:vide noti$cation dated !Ath >arch
2.!!". The application should be accompanied by the following documents
Three printed or typewritten copies of the memorandum and
articles of association of the proposed company, duly signed by all
the promoters with full name, address and occupation.
+ declaration by an advocate or a chartered accountant that the
memorandum and articles of association have been drawn up in
conformity with the provisions of the +ct and that all the
re/uirements of the +ct and the rules made thereunder have been
22
+O$"#TION P$OCE%U$ES
duly complied with, in respect of registration or matters incidental
or supplementary thereto.
Three copies of a list of the names, addresses and occupations of
the promoters :and where a $rm is a promoter, of each partner in
the $rm", as well as of the members of the proposed board of
directors, together with the names of companies, associations and
other institutions in which such promoters, partners and members
of the proposed board of directors are directors or hold responsible
positions, if any, with description of the positions so held.
+ statement showing in detail the assets :with the estimated values
thereof" and the liabilities of the association, as on the date of the
application or within seven days of that date.
+n estimate of the future annual income and e8penditure of the
proposed company, specifying the sources of the income and the
objects of the e8penditure.
+ statement giving a brief description of the wor1, if any, already
done by the association and of the wor1 proposed to be done by it
after registration, in pursuance of section(25.
+ statement specifying brieBy the grounds on which the application
is made.
+ declaration by each of the persons ma1ing the application that
he?she is of sound mind, not an undercharged insolvent, not
convicted by a court for any oCence and does not stand dis/uali$ed
under section 2.& of the 'ompanies +ct !05-, for appointment as a
director.
D. The applicants should also, within a wee1 from the date of ma1ing
the application to registrar of companies, publish a notice in the
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prescribed manner at least once in a newspaper in a principal
language of the district in which the registered o7ce of the proposed
company is to be situated or is situated and circulating in that district,
and at least once in an English newspaper circulating in that district.
5. The registrar of companies may, after considering the objections, if
any, received within &. days from the date of publication of the notice
in the newspapers, and after consulting any authority, department or
ministry, as he may, in his discretion, decide, determine whether the
licence should or should not be granted.
-. The registrar of companies may also direct the company to insert in
its memorandum, or in its articles, or in both, such conditions of the
licence as may be speci$ed by him in this behalf.
SECTION ! PO,E$ TO %ISPENSE ,IT-
.)I"ITE%. IN N#"E O+ C-#$IT#/)E O$
OT-E$ CO"P#N0.
:!" Fhere it is proved to the satisfaction of the *egistrar of companies that
an association
is about to be formed as a limited company for promoting commerce,
art, science, religion, charity or any other useful object, and
intends to apply its pro$ts, if any, or other income in promoting its
objects, and to prohibit the payment of any dividend to its members,
the *egistrar of companies may, by licence direct, that the association
may be registered as a company with limited liability, without the
22
addition to its name of the word G9imitedG or the words G)rivate
9imitedG.
:2" The association may thereupon be registered accordingly% and on
registration shall enjoy all the privileges, and :subject to the provisions of
this section" be subject to all the obligations, of limited companies.
:&" Fhere it is proved to the satisfaction of the *egistrar of companies ( :a"
that the objects of a company registered under this +ct as a limited company
are restricted to those speci$ed in clause :a" of sub(section :!", and :b" that
by its constitution the company is re/uired to apply its pro$ts, if any, or other
income in promoting its objects and is prohibited from paying any dividend to
its members, the *egistrar of companies may, by license, authorise the
company by a special resolution to change its name, including or consisting
of the omission of the word G9imitedG or the words G)rivate 9imitedG% and
section 2& shall apply to a change of name under this sub(section as it
applies to a change of name under section 2!.
:D" + $rm may be a member of any association or company licensed under
this section, but on the dissolution of the $rm, its membership of the
association or company shall cease.
:5" + license may be granted by the *egistrar of companies under this section
on such conditions and subject to such regulations as it thin1s $t, and those
conditions and regulations shall be binding on the body to which the license
is granted, and where the grant is under sub(section :!", shall, if the *egistrar
of companies so directs, be inserted in the memorandum, or in the articles, or
partly in the one and partly in the other.
:-" #t shall not be necessary for a body to which a license is so granted to use
the word G9imitedG or the words G)rivate 9imitedG as any part of its name and,
unless its articles otherwise provide,
such body shall, if the *egistrar of companies by general or special order so
directs and to the e8tent speci$ed in the directions, be e8empt from such of
the provisions of this +ct as may be speci$ed therein.
PRIVILEGES OF SECTION 25 COMPANIES
22
Section 25 companies can be either public company or private company
having a limited liability. The biggest advantage of securing a license from
*egistrar of companies under section 25 is that such company is allowed to
drop the word ;limited< or ;private limited< from their names. So these
companies can continue to enjoy their stature as a 9imited company without
disclosing to the public whether the liability of its members is limited by share
or guarantee. +s these companies do not have the object of creating pro$ts
from its business activities and instead are indulged in activities useful to
society the legislature intends to grant them some advantages and privileges
on them for ensuring that such companies carry on their activities without
undue hassles. +part from enjoying many privileges and advantages they do
have some obligations which they are re/uired to adhere to.
P$I1I)E2ES #N% #%1#NT#2ES

The section 25 company enjoys all advantages that any other limited
company registered under companies act enjoys. 3ut apart from these
advantages there are some speci$c privileges conferred upon them that
distinguish them from other companies. These privileges are in nature of
e8emptions from some provisions of the companies act or apply with some
modi$cations to section 25 company.

!" +ll companies having limited liability are re/uired to use the term ;limited< or
;private limited< as the case may be in their names as re/uired by section !&.
3ut section 25 companies are allowed to dispense with the use of term
;limited< or ;private limited< from their names Hsub-sec. (6)I. This helps the
company to enjoy limited liability without disclosing to the public the nature
of liability of its members.
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2" + partnership $rm is allowed to be a member of the section 25 company
Hsub-sec (4)I inspite of the fact that the law does not recognizes them as a
legal person. The only limitation in this regard is that on dissolution of such a
$rm its membership of the company ceases.
&" "inim*m S3are Ca'ital +s per the provision of section & of the companies
act a private company is re/uired to have a minimum share capital of rupees
one la1h and public company is re/uired to have minimum share capital of
$ve la1hs rupees. Jowever Section 25 'ompanies have been e8empted from
this re/uirement regarding minimum share capital by insertion of sub(section
:-" through +mendment +ct of 2.... +s such they can be registered even if
they have share capital les than the statutory minimum.
D" P*4li&ation of Name 3y provisions of section !DA of the companies act
every company registered under the act is re/uired to paint or a78 and to
1eep painted or a78ed its name and address of its registered o7ce on the
outside of every o7ce or place where its business is carried on in a
conspicuous position and in easily legible letters. #t is further re/uired to have
its name engraved in legible characters on its seal and is re/uired to its name
and address of its registered o7ce mentioned in all its business letters, bill
heads, letter papers, publications, bills, receipts, etc. Jowever a section 25
company has been e8empted from the provisions of this section and as such
is not re/uired to mention its name and address as re/uired in case of all
other companies.
5" #nn*al $et*rns of a Com'an( not 3a5ing S3are Ca'ital Every
company not having a share capital is re/uired by provisions of section !-.
to $le within -. days of every +nnual 6eneral >eeting a return with the
*egistrar containing following particulars i" address of its registered o7ce% ii"
names and address of its members with date on which they became
members and names of members who ceased to be so from last +6> with
date on which they left the company% and iii" particulars of persons who are
22
Directors, >anagers or Secretary of the company on the date of the return.
Section 25 'ompany without a share capital is also re/uired to $le returns
with the *egistrar as re/uired by section !-. but it has been e8empted from
mentioning the particulars of the members who are presently with the
company or have ceased to be members since holding of its last +6>.
-" Time and Pla&e of #2" Every company registered under the companies
+ct is re/uired by section !--:2" to hold its +nnual 6eneral >eeting during
business hours and on a day that is not a public holiday and has to be held at
its registered o7ce or at a place within the limits of city, town or village
where its registered o7ce is situated. Section 25 'ompany has been
e8empted from this provision provided the time place and date of the +6>
has been decided before hand by the 3oard of Directors having regard to the
direction given by the company in a 6eneral >eeting. +s such they are free to
determine the date, place and time of its +6> according to their convenience
and feasibility the only condition being that time, place and date of such
meeting should have been pre determined by the 3oard of Directors in
accordance with directions of the company if any.
A" Noti&e of #2" 3y virtue of section !A!:!" a company is re/uired to call
+6> by giving not less than 2! days notice in writing to its members. Date on
which meeting is to be held and date on which such a notice is served has to
be e8cluded in computing the period of 2! days for purpose of section !A!.
3ut Section 25 'ompany has been given some relief in this regard by allowing
them to hold an +6> after giving a notice of !D days length instead of 2!
days as re/uired by section !A!:!". Therefore they can call an +6> at a short
notice of !D days instead of 2! days.
," "aintaining of /oo6s of #&&o*nts Every company is re/uired by section
2.0:D(+" to maintain boo1s of accounts relating to a period of eight years
immediately preceding current year along with its vouchers. Jowever a
Section 25 'ompany is re/uired to maintain boo1s of account relating to a
22
period of only four years instead of eight years immediately preceding the
current year.
0" Ser5i&e of Co'ies of Certain %o&*ments + company is re/uired to send
a copy of every balance sheet :including pro$t and loss account" and other
documents re/uired by law to be laid before a company in the 6eneral
>eeting to its members, debenture holders and debenture trustees at least
2! days before the date on which such a meeting is to be held in accordance
with section 2!0:!". 3ut a Section 25 'ompany is allowed to send the
re/uired documents atleast fourteen days before the date of meeting instead
of 2! days Hvide Notifcation No. GSR 73 dated 30-12-1965I.
!." $ig3t of Persons ot3er t3at $etiring %ire&tor to stand for
%ire&tors3i' Section 25A deals with the procedure to be followed in case a
person who is not a retiring director intends to stand for directorship of the
company. #f the +rticles of the Section 25 'ompany provide for election of the
Directors by ballot system then the provisions of section 25A will not apply to
such a company and as a result a person who is not a retiring director and is
intending to stand for directorship will not have to follow the procedure laid
down by section 25A. 3ut if the +rticles of the company do not provide for
election of director by ballot then section 25A will have to be complied in
whole.
!!" In&rease in N*m4er of %ire&tors Knder section 250 a public company is
not allowed to increase the number of it directors beyond the permissible
limits under its articles without the approval of 'entral 6overnment provided
such increase results in total number of directors to go beyond twelve. 3ut
Section 25 'ompanies are e8empted from this section and are thus free to
increase the number of its directors without see1ing approval of central
governmentHvide Notifcation No. 2767 dated 5-!-1964I.
!2" +iling of Consent for %ire&tors3i' Every person who intends to stand for
directorship in accordance with section 25A is re/uired by section 2-D:!" to
22
$le with the company his consent to act as a director if he gets appointed as
such. This section is meant for the persons who are see1ing afresh
appointment and not for those who are see1ing reappointment as director. #t
ensures that a person does not refuse to act as director after his appointment
on ground that his consent was not ta1en by the company. 3ut sub(section :!"
has been made non(applicable to the Section 25 'ompany and as such a
person see1ing appointment as director for $rst time need not $le his consent
in advance with the company for wor1ing as a director if appointed.
!&" /oard "eetings Knder section 2,5 the meeting of 3oard of Directors
should be held at least once in every three months and four meetings should
be held in a year. Jowever section 25 companies are re/uired to hold
meetings of 3oard of Directors?E8ecutive 'ommittee?6overning 'ommittee
only once in every si8 monthsHvide Notifcation No. S" 157! dated 1-7-196!I.
The rest of the section 2,5 will apply to section 25 companies as it is,
therefore section 25 companies are allowed to hold 3oard meetings only once
in si8 months but should have held four meetings in a year.
!D" 7*or*m for "eetings The re/uired /uorum for a board meeting of any
company under section 2,A is one?third of its total strength which is arrived
at after deducting the number of interested directors from the total number
of directors on the 3oard or at least two whichever is higher. 3ut the section
25 company is e8empt from this section to the e8tent that the re/uired
/uorum for any board meeting is eight members or one?fourth of its total
strength whichever is less provided it should not be less than two members in
any case.
!5" Exer&ise of &ertain Powers Knder section 202 there are certain speci$ed
powers which a 3oard of Directors of the concerned company can e8ercise
only by passing of resolution at the meeting. The 3oard can e8ercise all other
powers by passing of resolutions by circulation instead of ta1ing them at
meetings by following the procedure speci$ed in section 2,0 of the +ct.
Jowever section 25 companies are allowed to decide following three matters
by passing a resolution by circulation instead of at meetings
22
the power to borrow moneys other than on debentures,
the power to invest funds of the company, and
the power to ma1e loans.
The remaining powers speci$ed in section 202 viz., power to ma1e calls on
shareholders in respect of money unpaid on their shares% power to authorize
by bac1 of shares in accordance with section AA+% and power to issue
debentures, can be e8ercised only by passing of resolutions at duly
conducted meeting of 3oard of Directors of section 25 company Hvide
Notifcation No. 2767 dated 5-!-1964I.
!-" %is&los*re of Interest Knder section 20A a company is not allowed to
enter into contract for :i" purchase, sale or supply of any goods, material or
services% or :ii" for underwriting subscription of any shares in or debentures of
company, with a director of the company% or his relative% or a $rm in which
such a director or relative is a partner% or a partner in such a $rm% or a private
company in which such director is member or director unless consent of the
3oard of Directors has been obtained before entering into such contractHsub-
sec. (1)I. #f any of the persons or entity mentioned above regularly trades or
does business in the subject matter of contract and such contract is made for
cash at prevailing mar1et prices then consent of 3oard is re/uired only in
those cases where cost of such contract e8ceeds $ve thousand rupees
aggregate in a particular yearHsub section (2)I. 'onsent of 3oard can be
obtained within three months from date on which such contract is entered
into if there arises some urgent necessity even if cost or value of such
contract e8ceeds rupees $ve thousand in a year.Hsub-sec. (3)I. Section 200
lays down the circumstances when disclosure of interests by Directors of the
company is mandatory and procedure in regard to such disclosure. #t directs a
director to disclose his interest :direct or indirect" or concern in any contract
or arrangement made or proposed by the company at the $rst meeting of
3oard when such contract is being considered or at $rst meeting held after he
became interested in a contract already entered into by the company. 3ut in
case of section 25 companies section 200 applies only to the matters covered
22
by sub(section :!" and :&" of section 20A. #t follows that section 25 companies
are allowed to enter into contracts or arrangements with all of the persons or
entity mentioned earlier if such person or entity regularly does trade or
business in the subject matter of such contract or arrangement and cost of
such contract is made at prevailing mar1et prices without see1ing the
consent of the 3oard of Directors even if the cost of such contract e8ceeds
$ve thousand rupees aggregate in a year. Jence section 25 companies are
allowed to conduct trade or business with private companies, $rms or
persons where some director may be having an interest provided such
private company, $rm or person regularly does trade or business in such a
contract without see1ing approval of 3oard again and again where the cost of
such contracts e8ceeds $ve thousand rupees in a particular year in which
such a contract is entered or see1ing approval of central government where
share capital of the company e8ceeds one crore rupees.
!A" "aintenan&e of $egisters of Contra&ts Knder section &.! a company is
re/uired to maintain register of all the contracts to which section 20A or 200
applies. 3ut a section 25 company is e8empt to the e8tent that it allowed to
maintain register of only those contracts to which sub(sections :!" and :&" of
section 20A apply. Thus they are e8empted from maintaining registers of
those contracts which are made in pursuance of sub(section :2" of section
20A or are covered by section 200.
!," "aintenan&e of $egister of %ire&tors Knder section &.& of the
companies act every company is re/uired to maintain a register containing
particulars of its Directors, >anaging Directors, >anagers and Secretary in
manner prescribed in sub(section :!". These companies are further re/uired
to send to the *egistrar of 'ompany a duplicate in prescribed form containing
all particulars of such register and a noti$cation in duplicate informing the
*egistrar of nay changes among its Directors, >anaging Directors, >anagers
or Secretary within &. days of such changes or appointment of =irst Directors
of the company Hsub-sec. (2)I. Section 25 company has been e8empted from
operation of sub(section :2" of section &.& and as such they are not re/uired
22
to notify changes among its directors, etc to the *egistrar. They are only
re/uired to maintain *egisters of their Directors, >anaging Directors,
>anagers and Secretary in prescribed format containing speci$ed particulars
and updating the register by ma1ing changes in it as when there is some
change among the Directors, >anaging Directors, >anagers and Secretary of
the company.
!0" 7*alif&ation for Se&retar( s3i' Every company registered under the
companies act is re/uired to have a Secretary as de$ned under section 2:D5"
and having prescribed /uali$cations as laid down in the companies act itself
and in 'ompanies :+ppointment and Luali$cations of Secretary" *ules, !0,,
and is re/uired to be appointed in accordance with 'hapter #M :sections &,&(
+" of the companies act. Jowever a Section 25 'ompany is e8empt from the
provision of section to the e8tent that the rules regarding the /uali$cation of
a Secretary do not apply to them Hvide Notifcation N". #.2$3$76-%&' dated
09-01-1976I. +s section 2:D5" do not apply to them they are free to appoint
any person as its Secretary whom it feels $t and proper for the same.
2." #''li&a4ilit( of C#$O Section 25 'ompanies are e8empted from
applicability of 'ompanies +uditor<s *eport @rder 2..&:'+*@". '+*@ has
been made applicable to all companies from !
st
Nanuary 2..D. 3ut '+*@
e8pressly e8empts section 25 companies from its applicability vide 'lause
2:iii" of )ara # of the @rder.
2!" Pa(ment of $egistration +ees The fees payable by a Section 25
'ompany at the time of registration and further increase of its share capital
has been 1ept very low in comparison to other companies and is at present
$8ed at mere *s. 5.?( irrespective of the authorized amount of share capital
:%i(cu)a( No. 6 dated 24-06-1996 and Notifcation No. S" 3!79 dated 22-12-
1962"
22
22" Stam'ing of "emorand*m and #rti&les The +rticles and >emorandum
of a Section 25 'ompany are not re/uired to be stamped in accordance with
the #ndian Stamp +ct, !,00.

O$#I"ATION
Though a Section 25 'ompany has many advantages and enjoys many
privileges yet there are some statutory obligations which are re/uired to be
complied with and ta1en care of by such companies.
!" + Section 25 'ompany has to ensure that its pro$ts and all other incomes
are utilised only for the purpose of promoting its objects and not for any other
purpose.
22
2" #t should also ensure that its pro$ts are not distributed as dividend among its
members.
&" Section 25 'ompany cannot alter its objects clause in its >emorandum
without see1ing the written approval of central government Hsub section :,"I.
D" #f the 'entral 6overnment has imposed some conditions and regulations
upon the company for granting a license under section 25 then such a
company is bind by such conditions and has to ensure ade/uate compliance
with them. Fhere such conditions and regulations have been imposed then
such conditions and regulations are re/uired to be included in the +rticles
or?and memorandum of the company as may be directed by the government.
5" Section 25 'ompany is regarded as a ;company< within the meaning of the
#ncome Ta8 +ct, !0-! and as such its income is ta8able according to the
applicable rates similar to those applying to other companies.
-" #f an e8isting company obtains a license under section 25 it has to ensure
that its objects are con$ned to those mentioned in section 25 itself and if not
ma1e proper alteration to its memorandum and articles.

+part from above mentioned privileges a Section 25 'ompany enjoys all
other advantages that a company registered under the companies act has
after incorporation. Similarly it is re/uired to comply with all other provisions
of the +ct just li1e any other normal company from which it has not been
e8pressly e8empted. +s such it will be subject to penalties if there is a default
in compliance with any of the provision of the 'ompanies +ct. Such a default
can also result in revocation of the license granted by the *egistrar of
companies under section 25.
$e%e&'() o& e*('o% 25 Co+,-%.
22
$e&ognition: Section 25 'ompanies are recognized under various
scheme carried on by the 'entral and State 6overnment for charitable
and religious purposes and are given special treatment under the said
scheme
+oreign +*nds: Section 25 'ompanies are recognized under =oreign
'ontribution *egulation +ct for receiving foreign contribution and funds
for carrying on charitable and religious activities. Since these
companies are subject to regulatory control, therefore they are
preferred in comparison to other form of organizations.
)ia4ilit(: + 'ompany e8ists as a separate legal entity from your
personal life. 3oth company and person who own it are separate
entities and both functions separately. 9iability for repayment of debts
and lawsuits incurred by the 'ompany, lies on it and not the owner.
+ny business with potential for lawsuits should consider incorporation.
#ncorporating will oCer an added layer of protection
Per'et*al S*&&ession: +n incorporated company has perpetual
succession. 4otwithstanding any changes in the members of the
'ompany, the 'ompany will be a same entity with the same privileges,
immunities, estates and possessions. The 'ompany shall continue ton
e8ist till its wound up in accordance with the provisions of the relevant
law
Eas( Transfera4le Owners3i': The shares and other interest of any
member in the 'ompany shall be a movable property and can be
transferable in the manner provided by the +rticles, which is otherwise
not easily possible in other business forms. Therefore , it is easier to
become or leave the membership of the 'ompany or otherwise it is
easier to transfer the ownership
Se'arate Pro'ert(: + 'ompany as legal entity is capable of owning
its funds and other properties. The 'ompany is the real person in which
all the property is vested and by which it is controlled, managed and
22
disposed oC. The property of 'ompany is not the property of its
shareholders
$aising "one(: + 'ompany can sell shares of the 'ompany to the
public or can accept deposits from public and can therefore raise
money easier than other business structure types. The modes of
$nancing business carried on by company are numerous
$e&ognized Under Tax )aws: Section 25 'ompanies are recognized
under #ncome Ta8 9aws for e8emption from payment of ta8 on income
generated from rendering services for charitable and religious
purposes. Knder the #ncome Ta8 +ct !0-! :# T +ct", charitable
organizations :whether trust, society and section 25 of the company" in
#ndia are not liable to any income ta8, provided certain conditions
re/uired under law are ful$lled. +s per the section !!:!" :a" to :c" as
well as !.:2&'" of # T +ct the term 4)@ includes religious organizations
such as temples, churches, mos/ues etc and charitable organizations
such as educational institutes, hospitals, 46@s etc. @rganization may
/ualify for ta8 5 e8empt status. + donor :whether an individual,
association, company, etc" is entitled to a deduction :in computing his
total income" if he ma1es a donation to a charitable organization
enjoying e8emption u?s ,.6 of the #ncome Ta8 +ct
Ca'a&it( to s*e: +s a juristic legal person, a 'ompany can sue in its
name and be sued by others. The managing director and other
directors are not liable to be sued for dues against the 'ompany
/etter 2o5erned: 'ompanies are governed by 'ompanies +ct, !05-
and have to follow various regulatory procedures during the course of
its governance, moreover they have to comply with stringent
disclosure norms which let to better governed organizations and
creation of value for owners.
22
%raw4a&6 of Se&tion ! Com'an(
Costl( to +orm and $*n: #n comparison to other business forms, it is
costly to incorporate and run a 'ompany. 9ot of compliances is
re/uired to be carried every year and therefore the cost of running is
also high in comparison to other forms. >oreover heavy $nes and
penalties has been prescribed for the non compliance.
$eg*lated form of /*siness 'ompany is highly regulated form of
business , as lot of compliances li1e maintenance of various registers ,
holding of meetings are re/uired to done each year and for
underta1ing various activities or decision , it is necessary to obtain the
permission of speci$ed number of shareholders and in some , of
regulatory authorities also. The 'ompanies +ct !05- also prescribes
various provisions how the company will be managed and run.
#*dit and +inan&ial %is&los*re #t is necessary for all the companies
to get its accounts audited annually and to prepare its balance sheet
and pro$t and loss account in accordance with the prescribed
guidelines. 9ot of information as to the $nancial condition of the
22
business is re/uired to be disclosed and moreover, all such documents
are available for public inspection, therefore it is not possible to
maintain $nancial secrecy of the business.
)a&6 of Control #n case of companies, the ownership and
management is divorced, in order words, it is not necessary the people
owning the company are also managing it. The 'ompany is managed
by Directors, which are appointed by the shareholders. The Directors
are responsible for running and managing the company and ta1ing 1ey
business decisions and shareholders don<t have any direct control over
the company and therefore they are not much aware of whats
happening in the company.
)ong Closing Pro&eedings #t is generally not easy to close the
company as compared to other forms of business, the procedure to
close is long and involves compliance of various formalities, at times it
ta1es !(2 years to completely wind(up the company. >oreover in
certain cases, it is necessary to ta1e the permission of the Jigh 'ourt
to close the 'ompany.
+O$EI2N CONT$I/UTION $E2U)#TION
#CT
Knder Section - of ='*+, it is clearly provided that any organisation having a
de$nite cultural? social? educational? religious? economic object shall only
accept foreign contribution after satisfying two conditions
:i" #t must registers itself with the 'entral 6overnment.
:ii" #t must agrees to receive foreign contribution only through one speci$c
ban1 account.
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=or grant of registration, the association should
:i" be registered under the Societies *egistration +ct, !,-. or the #ndian
Trusts +ct, !,,2 or section 25 of the 'ompanies +ct, !05-%
:ii" normally be in e8istence for at least three years and has underta1en
reasonable activity in its chosen $eld for the bene$t of the society for
which the foreign contribution is proposed to be utilised. =or this purpose, the
association should have spent at least *s. -,..,... over last three years on
its activities, e8cluding administrative e8penditure. Statement of #ncome O
E8penditure duly audited by 'hartered +ccountant for last three years may
be enclosed to substantiate that it meets the $nancial parameter.
:iii" meet the following conditions(
:!" The person ma1ing an application for registration or grant of prior
permission is not $ctitious or benami%
:2" has not been prosecuted or convicted for indulging in activities aimed at
conversion through inducement or force, either directly or indirectly, from one
religious faith to another%
:&" has not been prosecuted or convicted for creating communal tension or
disharmony in any speci$ed district or any other part of the country%
:D" has not been found guilty of diversion or mis(utilisation of its funds%
:5" is not engaged or li1ely to engage in propagation of sedition or advocate
violent methods to achieve its ends%
:-" is not li1ely to use the foreign contribution for personal gains or divert it
for undesirable purposes%
:A" has not contravened any of the provisions of this +ct%
:," has not been prohibited from accepting foreign contribution%
:0" the person and?or any of its directors or o7ce bearers has neither been
convicted under any law for the time being in force nor any prosecution for
any oCence is pending against him.
:iv" the acceptance of foreign contribution by the association? person is not
li1ely to aCect prejudicially 5
22
:!" the sovereignty and integrity of #ndia% or
:2" the security, strategic, scienti$c or economic interest of the State% or
:&" the public interest% or
:D" freedom or fairness of election to any 9egislature% or
:5" friendly relation with any foreign State% or
:-" harmony between religious, racial, social, linguistic, regional groups,
castes or communities.
:v" the acceptance of foreign contribution(
:!" shall not lead to incitement of an oCence%
:2" shall not endanger the life or physical safety of any person.
#*dit 4( C3artered #&&o*ntant
Every organisation which receives foreign contributions is re/uired to furnish
a certi$cate from a chartered accountant. +long with this certi$cate, audited
balance sheet and the statement of receipt and payment account should also
be submitted
Every organisation which receives foreign contributions shall $le an annual
return in =orm ='(& under rule ,:2" within !2. days of the closure of the year.
22
SOCIET0 $E2IST$#TION #CT -
INT$O%UCTION
P*r'ose of t3e #&t is to 'ro5ide for registration of
literar(, s&ientif& and &3arita4le so&ieties.
Societies *egistration +ct is a 'entral +ct. Jowever, ;unincorporated literary,
scienti$c, religious and other societies and associations< is a State Subject
:Entry &2 of 9ist ## of Seventh Schedule to 'onstitution, i.e. State 9ist". Thus,
normally, there should have been only State 9aws on this subject. Jowever,
Societies *egistration +ct was passed in !,-., i.e. much before bifurcation of
power between State and 'entre was speci$ed. Though the +ct is still in
force, it has been speci$cally repealed in many States and those States have
their own +cts. Thus, practically, the 'entral +ct is mainly of academic
interest.
Societies to which the Act applies 5 =ollowing societies can be registered
under the +ct ( P 'haritable societies P >ilitary orphan funds or societies P
Societies established for promotion of science, literature, or for $ne arts P
Societies established for instruction and diCusion of useful 1nowledge,
diCusion of political education P Societies established for maintenance of
libraries or reading rooms for general public P Societies established for )ublic
museums and galleries for paintings or other wor1s of art, collections of
natural history, mechanical and philosophical inventions, instruments or
designs Hsection 2.I
22
%E+INITION
+ society may be de$ned as a company or an association of persons united
together by mutual consent to deliberate, determine and act jointly for same
common purpose. >inimum seven persons, eligible to enter into a contract,
can form society. Fhen an 46@ is constituted as a society, it is re/uired to be
registered under the Societies *egistration +ct, !,-., which is a federal act.
#n certain states, which have a charity commissioner, the society must not
only be registered under the Societies *egistration +ct, but also, additionally,
under the 3ombay )ublic Trusts(+ct.
The chief advantage of forming a society are that it gives a corporate
appearance to the organization, and provides greater Be8ibility as it is easier
to amend the memorandum and bye laws of the society than in case of trust,
terms of which are strictly manifested in the trust deed. Jowever, formation
of a society re/uires more procedural formalities than in case of a trust.
=or the purpose of registration, following documents are re/uired to be $led
with the registrar of Societies
a" 'overing letter re/uesting for registration stating in the body of the letter
various documents anne8ed to it. The letter is to be signed by all the
subscribers to the memorandum or by a person duly authorized by all of
them to sign on their behalf.
22
b" >emorandum of +ssociation, in duplicate neatly typed and pages serially
numbered :no stamp paper re/uired", wherein the aims and objects and
mode of management :of the society" should be(enshrined.
c" *ules and *egulations?3ye(9aws, in duplicate, certi$ed by at least three
members of the governing body.
d" +n a7davit of the president?Secretary of the society, on a non(judicial
stamp paper of prescribed value, stating the relationship between the
subscribers, duly attested by an oath commissioner, notary public or !st class
magistrate.
e" Documentary proof such as house ta8 receipt, rent receipt in respect of
premises shown as registered o7ce of the society or no objection certi$cate
from the landlord of the premises.
f" +n authority duly signed by all members of the managing committee.
g" + declaration by the members of the managing committee that the funds
of the society shall be used only for the purpose of furthering the aims and
objects of the society.
22
)*#M#9E6ES @= =@*>#46 '@>)+4Q K4DE*
S@'#ETQ *E6#ST*+T#@4 +'T
Trustees( + Society needs a minimum of seven managing committee
members% there is no upper limit to the number managing committee
members. The 3oard of >anagement is in the form of a governing body or
council or a managing or e8ecutive committee.
+nnual list of managing body to be $led 5 +nnual list of managing body
should be $led within !D days after +6>. HsectionDI. #f there is no
provision of +6>, then list should be $led in Nanuary every year. Hsection
DI. ( ( The governing body may be termed as governors, council, directors,
committee, trustees or other body to whom by rules and regulations of
society, the management of the aCairs of society is entrusted. Hsection
!-I.
Society is not a body corporate 5 Society is not a body corporate. This is
evident from following 5 :a" Entry &2 in 9ist ## of Schedule to 'onstitution
22
itself uses the words ;unincorporated< :b" +s per section D, property of
society vests in governing body, if not vested in trustees. Thus, property
does not vest in society as such. :c" Section - states that suit by or
against society can be only in name of )resident, 'hairman, )rincipal
Secretary or Trustees, as determined by rules of society. Thus, suit cannot
be in name of society as such.
@7ce bearers not personally liable 5 Section , ma1es it clear that though
suit against society is instituted in name of some person, he is not
personally liable, but property of society will be liable.
>embers of society 5 + member is a person who is admitted according to
rules and regulations of society and who pays subscription, or signed the
roll or list of members, and who has not resigned from membership.
Hsection !5I. + member can be sued as stranger for arrear in subscription
or if he injures or destroys property of society. Hsection !.I. >ember guilty
of oCence of stealing, embezzlement or wilful destruction of society
property can be punished as stranger, i.e. not a member. Hsection !!I.
+lteration, e8tension of purposes, amlagamation or dissolution 5 Society
can alter, e8tend or abridge is purposes, or amalgamate with other society
after approval of general meeting of members. Hsection !2I. Society can
be dissolved if three($fths of members determine to do so. Hsection !&I.
Kpon dissolution, balance amount should be given to other society and
not to any member. Hsection !DI.
E++ECT O+ $E2IST$#TION 8 NON-
$E2IST$#TION O+ # SOCIET0
The Societies *egistration +ct, !,-. lays down procedure for registration of
societies for various bona$de purposes.
The registration gives the society a legal status and is essential
22
!. for opening ban1 accounts,
2. obtaining registration and approvals under #ncome Ta8 +ct,
&. lawful vesting properties of societies, and
D. gives recognition to the society at all forums and before all authorities.
Fhen the society is registered, it and its members become bound to the
same e8tent, as if each member had signed the memorandum.
+ society, registered under this +ct, must con$ne its activities to the sphere
embraced by its objects.
+ ta8 imposed on a society is one imposed on the society and not on its
members.
+ society registered under the +ct enjoys the status of a legal entity apart
from the members constituting it. + society so registered is a legal person
just as an individual but with no physical e8istence. +s such it can ac/uire
and hold property and can sue and be sued.
The society should be registered under the +ct to ac/uire the status of
juridical person.
#n the absence of registration, all the trustees in charge of the fund have
alone a legal status and the society has no legal status, and, therefore, it
cannot sue and be sued. + non(registered society may e8ist in fact but not in
law. #t is immaterial under the +ct whether the society is registered but where
the bene$t is claimed, the registration of society under the +ct us re/uired.
+n unregistered society cannot claim bene$ts under the #ncome(ta8 act.
#CCOUNTS #N% #U%ITS
22
The societies are in possession of funds and properties provided to them by
the members or by other persons :by way of donation etc.". The funds and
properties are interested for the attainment of objects for which the society
has been formed. The members of the governing body are the trustees who
apply the funds. #t becomes necessary, that the societies maintain regular
account boo1s and get them audited and present them to the members at
the general meeting and $le them with the *egistrar for scrutiny. Every
society should get its accounts audited once a year by duly /uali$ed auditor
and have balance sheet prepared by him. The auditor should submit the
report showing the e8act date of $nancial aCairs of the society.
)ITI2#TION
+s every society is a legal entity separate from its members it is capable of
$ling suits against any person or any member. Similarly, the suits can also be
brought against the society.
The registered society can $le a suit anywhere in #ndia and in any state
although it is not registered in that particular state.
22
EN+O$CE"ENT O+ 9U%2E"ENT #2#INST
SOCIET0
The judgment of decree passed against any person or o7cer of the society,
who represents the society in the legal proceeding, cannot be enforced
against the personal property of such person. The property of the society
shall only be liable to pay for the decree passed against a society. This
protection has been given to the o7ce bearers of the society under the
principal +ct
+ society is well 1nown as an association of persons united together by
mutual consent to deliberate, determine and act jointly for the same common
purpose. >inimum seven persons, eligible to enter into a contract, can form
society. Fhen an 46@ is constituted as a society, it is necessary to be
registered under the Societies *egistration +ct, !,-..
The primary bene$ts of forming a society are that it gives a corporate
appearance to the organization, and provides greater Be8ibility as it is easier
to amend the memorandum and bye laws of the society than in the case of
trust, terms of which are strictly manifested in the trust deed. Jowever,
formation of a society needs more procedural formalities than in the case of a
trust.
22
CO"P#$ISON /ET,EEN # SOCIET0 #N% # SECTION
! CO"P#N0
So&iet(
Se&tion !
Com'an(
Stat*te8)egislation
Societies *egistration +ct
of !,-.
'ompanies +ct of !05-
9*risdi&tion of t3e #&t 'oncerned state where
registered
'oncerned state where
registered
#*t3orit(
*egistrar of Societies
*egistrar of 'ompanies
$egistration
+s Society :and by
default also as Trust in
>aharashtra and
6ujarat"
+s Section 25 'ompany
"ain %o&*ment
>emorandum of
+ssociation and *ules O
*egulations
>emorandum and +rticles
of +ssociation.
Stam' %*t(
4o stamp paper re/uired
for >emorandum of
+ssociation and *ules O
*egulations
4o stamp paper re/uired
for >emorandum and
+rticles of +ssociation
N*m4er of 'ersons
needed to register
>inimum seven, no
upper limit
>inimum three, no upper
limit
/oard of "anagement
6overning body or
council?managing or
e8ecutive committee
3oard of
Directors?>anaging
'ommittee
22
"ode of s*&&ession
on 4oard of
management
Ksually election by
members of the general
body
Ksually election by
members of the general
body
SECTION ! CO"P#N0 1IS-:-1IS CO"P#NIES #CT,
;<3
)rovisions of the 'ompanies +ct, 2.!& relating to ;Section 25 'ompany< are
provided under Section , of the 4ew +ct. The provision is not yet eCective. #t
is e8pected to become applicable very soon.
//EN! OF REPORT//
I"NATURE OF TRAINEE I"NATURE OF E0P#O1ER
22