Section 25 Companies Act 2013: A Practical Guide for Charitable and Non-Profit Organisations

Not every company is formed to make profits.
Some are created to educate. Some to heal. Others to support causes that don’t show returns on a balance sheet.

That’s exactly where Section 25 of the Companies Act, 2013 steps in.

This provision exists to legally recognise companies that are set up for charitable, social, educational, religious, or non-profit objectives. It gives such organisations a corporate structure, but without forcing them to look or behave like profit-driven businesses.

And yes, it comes with benefits. But also responsibility.

What Is a Section 25 Company, Really?

A Section 25 company is a non-profit company registered under the Companies Act, not a trust and not a society.

The intention matters here.

If your objective is:

• charity

• education

• social welfare

• environmental protection

• promotion of art, culture, or science

and profits are reinvested, not distributed — Section 25 is meant for you.

The law makes one thing very clear.
You are allowed to earn income.
You are not allowed to distribute profits.

The Biggest Advantage: No “Limited” in the Name

This is what most people notice first.

Section 25 companies are allowed to remove the word “Limited” or “Private Limited” from their name.

Why does that matter?

Because it instantly tells donors, institutions, and authorities that:

• this is not a commercial entity

• profits are not the motive

• funds are meant for public benefit

That one small naming privilege builds trust faster than most brochures ever will.

Transparency Is Not Optional

With benefits come checks.

Section 25 companies are required to furnish information and statistics whenever asked by regulatory authorities. This includes:

• financial statements

• activity reports

• operational data

• details of how funds are being used

The idea is simple.
If you claim to work for public good, you must be ready to show proof.

This requirement exists to stop misuse of charitable status and protect genuine donors.

Fundraising Documents Can Become a Legal Trap

Here’s something many non-profits overlook.

If a Section 25 company issues any document that offers securities or financial instruments to the public, that document is treated as a deemed prospectus.

What does that mean in real life?

It means:

• full disclosure rules apply

• liabilities under prospectus law apply

• misleading statements can attract penalties

Even brochures, circulars, or online documents can trigger this if they involve public offers.

Intent doesn’t matter as much as content.

Even an “Offer Document” Can Create Liability

The law goes one step further.

Any document by which an offer is made to the public — even if it’s not formally called a prospectus — can still attract legal consequences.

So if you’re:

• raising funds from the public

• issuing bonds for a social project

• inviting contributions through structured offers

you need to be extremely careful with wording, disclosures, and compliance.

Good intentions don’t override bad documentation.

Who Can Register Under Section 25?

This section applies to:

• charitable organisations

• NGOs

• educational institutions

• social welfare entities

• non-profit companies with public benefit objectives

As long as profits are used only for the stated objectives, Section 25 applies.

But compliance is ongoing, not one-time.

Why Section 25 Matters So Much

It matters because it:

• gives legal credibility to non-profits

• builds donor confidence

• prevents misuse of charitable structures

• creates accountability without killing flexibility

Most serious donors today check legal structure before funding. Section 25 gives reassurance.

Practical Compliance (What Actually Works)

Forget complicated checklists. Focus on basics:

• keep clean financial records

• document every fundraising activity

• treat public offers seriously

• submit required data on time

• conduct internal reviews periodically

Digital records help. So does professional advice.

Compliance isn’t about fear. It’s about sustainability.

Real-World Examples

A charity issues bonds to fund a rural health project.
The fundraising document must meet prospectus standards.

An NGO collects donations for education programs.
Records and statistics must be available for inspection.

A social company invites public participation online.
The content must be legally compliant, even if no shares are involved.

Small mistakes here become big problems later.

Best Practices That Save You Trouble

• Never treat fundraising documents casually

• Review public communications legally

• Maintain donor and fund registers

• Conduct board-level oversight

• Educate staff about compliance

Transparency is not paperwork. It’s protection.

Final Thoughts

Section 25 of the Companies Act, 2013 exists to support organisations that work beyond profit. It gives structure, credibility, and recognition — but only to those who operate transparently.

If your organisation wants to make a real impact and raise funds responsibly, Section 25 is powerful. But only when used correctly.

For help with Section 25 company registration, compliance, fundraising documentation, or regulatory filings, Callmyca.com can guide you end-to-end — so you focus on the mission, not the paperwork.