Remuneration of directors and employees in section 25 company
Priyanka
(Querist) 15 October 2014
This query is : Resolved
Dear Experts,
I have been working in the field of HR and training for the last 8 years in various MNCs across the globe. I was a business partner till last month with a 'profit making' pvt ltd company focusing on employability skills.
I am planning to start on my own in the field of skill development. Since my focus will be on 12th drop outs who usually are below poverty line or just about there, i am unable to come up with a profit making business model as it will be unaffordable for most of the prospective students.
Because my major objective is to make a difference in the society by enabling the youth with required technical and soft skills and giving them a recruitment platform for job opportunities, someone very senior suggested me to form a section 25 company. I have researched on the Web as much as i could, but still have certain queries.
I don't want to seek advice of a CA or lawyer yet since I am at a very preliminary stage right now and honestly i already have too many expenses lined up for the company's various affiliations.
Hence, this forum seemed to be an option to me to start with.
I will be very grateful if I could get answers from any of the expert panelists.
Below are the queries -
1. I understand I will need 2 to 7 Directors on board. How much would be their remuneration ideally? Or how is it calculated?
2. Just to confirm - will all the employees starting from MD to Ops manager or Admin person be paid their salaries as per regular industry standards? The net profit (calculated after deducting employee salaries, director salaries and all other expenses) will be put back into the company?
3. How do I raise the start up capital for the company? Can I approach corporates for CSR funds? If I have a robust business plan, will they be ready to invest? If they do, will they be coming on board?
Awaiting your response.
Thanks in advance!
Regards,
Priyanka
Devajyoti Barman
(Expert) 15 October 2014
1. Director's salary is to be fixed internally.
2.Yes
3. Do not bank upon CSR funds to start a new company. You have to raise your capital internally. later on you can receive CSR fund as grant.
Priyanka
(Querist) 15 October 2014
Thanks Mr. Barman.
Yes, I have plans of investing myself and raising funds internally through BoD. Once we start working, within 8 -10 months of operations, we should have enough proof of our competency and vision which should be able to convince the corporates to invest their CSR funds with us.
Rajendra K Goyal
(Expert) 16 October 2014
1. Directors salary can be fixed at agreed level.
2. Yes is the reply.
3. You have to arrange the funds, outsider may not contribute even till 1-2 balance sheets.
malipeddi jaggarao
(Expert) 16 October 2014
You were a business partner in a similar company. You should have equipped with sufficient knowledge about the queries you posted.
Priyanka
(Querist) 16 October 2014
Thanks Mr. Goyal and Mr. Barman. Appreciate your selfless knowledge sharing.
Mr. Jaggarao,
I was just a profit sharing business partner. Not on board. Plus as I have mentioned, it was a profit making organisation and I am venturing into a not to profit one. Hence needed the clarifications.
Hope this satisfies your doubt about the authenticity of my queries.
Regards,
Priyanka
malipeddi jaggarao
(Expert) 16 October 2014
You need not stick to forming a Company for this purpose. There are other ways of registering charitable institutions (no profit social work).
Registering a Non Profit association in India can be done in
a total of four ways:
• Trust ( both Central and State Acts like the Bombay Public
Trusts Act, 1950 )
• Society ( both Central and State Acts )
• Company under Section-8 of the Companies Act, 2013 ( old
section-25 of the Companies Act, 1956 )
• Special Licensing Society: Charitable societies, military orphan
funds or societies established at the several presidencies of India,
societies established for the promotion of science, literature, or
the fine arts, for instruction, the diffusion of useful knowledge, the
diffusion of political education, the foundation or maintenance of
libraries or reading rooms for general use among the members or
open to the public, or public museums and galleries of paintings
and other works of art, collection of natural history, mechanical
and philosophical inventions, instruments or designs
In addition to registration, a non-profit engaged in certain
activities might also require special license/permission.
Some of them are :
1. A place of work in a restricted area (like a tribal area or a
border area requires a special permit – the Inner Line
Permit – usually issues either by the Ministry of Home Affairs or
by the relevant local authority (i.e., district magistrate).
2. To open an office and employ people, the NGO should be
registered under the Shop and Establishment Act.
3. To employ foreign staff, an Indian non-profit needs to be
registered as a trust/society/company, have FCRA registration and
also obtain a No Objection Certificate. The intended employee also
needs a work visa.
4. A foreign not-for-profit may be registered as a branch, liaison
or project office [and not necessarily as an Indian entity] after the
requisite permission has been granted by the RBI. Upon receipt of
approval from the RBI, the foreign office must within 30 days seek
registration under the Companies Act, 1956. Alongside of these
permissions, the office must acquire tax registrations.
Hope you got an idea. Choose the method.
Priyanka
(Querist) 16 October 2014
Thanks a lot Mr. Jaggarao. The options help. I will go with option of company under section 25, now section 8.
I have been told it is very clear in terms if dealings and can be run very professionally just like a corporate organisation.
Dr J C Vashista
(Expert) 17 October 2014
Very well advised by expets, I agree and nothing more to add.
T. Kalaiselvan, Advocate
(Expert) 19 October 2014
