Section 25 of the Companies Act

Section 25 of the Companies Act

Context :

The Enforcement Directorate on Wednesday, summoned Sonia Gandhi and Rahul Gandhi to probe the affairs related to the National Herald newspaper — owned by AJL.

Details:

It has been alleged that the Gandhis acquired properties owned by the National Herald by buying the newspaper’s publishers, AJL, through an organisation -Young India — a Section 25 company — in which they have 86% stake.

The Congress has said that since Young India has been created under a special provision of the Companies Act — Section 25 — it has to be a not-for-profit company and no dividend can be given to its shareholders or directors.

Section 25 of the Company Act 1956:

• A Section 25 company is similar to what is defined under Section 8 under Companies Act, 2013
• It is a not-for-profit charitable company formed with the sole object of “promoting commerce, art, science, religion, charity, or any other useful object, and 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”.
• It could be a public or a private company, a Section 25 company is prohibited from payment of any dividend to its members and the profits/other income if any are used in promoting its objects.
• Section 8 of the Companies Act, 2013 includes other objects such as sports, education, research, social welfare and protection of environment among others.