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NOT-FOR-PROFIT COMPANY

UPSC CURRENT AFFAIRS | SECTION 25 COMPANY: A NOT-FOR-PROFIT COMPANY WITH DEFINED OBJECTIVES | 06TH JUNE | INDIAN EXPRESS

/ June, 2022, UPSC Daily Current Affairs

SYLLABUS SECTION: GS II (Governance)

WHY IN THE NEWS?

Recently ED has summoned Sonia Gandhi and Rahul Gandhi following a trial court order of a NOT-FOR-PROFIT COMPANY.

That they’ll allow the Income Tax Department to probe the affairs of the National Herald newspaper.

THE ISSUE:

  • In 2012, Subramanian Swamy filed a complaint before a trial court that Gandhis acquired properties.
  • They were owned by the National Herald by buying the newspaper’s erstwhile publishers.
  • The ALJ, through an organization called Young India — a Section 25 company — in which they have an 86% stake.
  • He alleged that YIL had ‘taken over the assets of the National Herald in a ‘malicious’ way of a NOT-FOR-PROFIT COMPANY.

SECTION 25 COMPANY

  • As per the Companies Act, 1956, a Section 25 company.
  • Similar to what is define under Section 8 under the Companies Act, 2013) is a not-for-profit charitable company.
  • This form with the sole object of promoting commerce, art, science, religion, charity, or any other useful object.
  • The company intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members.
  • Section 25 company is prohibitt from payment of any dividend to its members.
  • Section 25 states that by its constitution the company is required/ intends to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members.
Examples of Section 25 or Section 8 companies
  • These are Reliance Foundation, Reliance Research Institute, Azim Premji Foundation, Coca Cola India Foundation, and Amazon Academic Foundation.
  • Most people looking to form a charitable entity go for forming a company under Section 25, now Section 8, rather than a Trust structure.
  • Section 8 of the Companies Act, 2013 includes other objects such as sports, education, research, social welfare, and protection of the environment among others.
  • Foreign donors like to contribute to a company rather than Trust because they are more transparent and provide more disclosures.

Source: Indian Express