Association not for profit: An “Association not for profit” means a association which is formed not for earning profit but for commerce, art, science, charily, religion or other useful social purpose. These associations may or may not be registered as a company under the companies Act. When such type of the association are registered as a company as a company with limited liability, they must be granted a license by the Central Government.
As per section 13, the name of a limited company must end wit the word ‘Limited’ in case of a public Company and with the words ‘Private Limited’ in case of private company. Section 25 of the companies Act, 1956 however allows the registration under a licence granted by the Central Government, of an association not for profit with limited or the words Private Limited to its name.
Condition for the grant of licence: When the following two conditions are satisfied than only the Central Government will grant the licence to an association, conditions are as follows:-
- 1. Intends to apply or use its profits of other income in promoting its objects and to prohibits the payment of any dividend to its members and
- 2. Is important to form a limited company for promoting commerce, science, religion charity or for other useful object.
As per section 25(1) when the two conditions are fulfilled, the Central Government may by licence direct that the association may be registered as a company with limited liability, without the addition to its name of the word “Limited” or the words “Private Limited”. On getting itself registered it enjoys all the privileges and is subject to all types of obligation of limited companies.
The Central Government will grant licence on such conditions and subject to such regulations as it thinks fit. The association will be bound to follow the conditions and regulation on which the licence is granted. The Central Government has the power to revoke the licence at any time after giving an opportunity to the company for being heard.
Procedure for registration of a Company under section 25:
- As per section 25 the first step is that the promoter must apply to the Central Government for a licence.
- The second step for the registration of a company is that the promoters must fulfill all the conditions subject to which the licence is to be issued.
- Thereafter he should apply to the registrar of companies for the incorporation of a company in same way as the other companies are registered i.e. filling the documents like MOA, AOA, list of first director, declaration in prescribed form.