As Rahul Gandhi appears before the Enforcement Directorate (ED) for the fourth day of questioning on Monday in connection with a money-laundering case related to the National Herald-Associated Journals Ltd deal, the Congress has said lakhs of party workers across the country will hold peaceful protests against the government’s “vendetta politics”.

While the probe has led to an intense war of words between the BJP and the Congress, let’s understand how the issue unfolded.

The Background

In 2013, BJP MP Subramanian Swamy complained about alleged cheating and misappropriation of funds on part of Sonia Gandhi and Rahul Gandhi in acquiring the National Herald newspaper. He alleged that the Gandhis acquired properties owned by the National Herald by buying its erstwhile publishers, AJL, through an organisation called Young India — a Section 25 company — in which they have 86 per cent stake. Sonia and Rahul had been granted bail in the case by the trial court in December 2015.

The Congress, meanwhile, said AJL became an indebted company and it converted its debt into equity by assigning its debt to a new company— Young India — and became debt-free.

The Grand Old Party also clarified 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.

What is a Section 25 company?

The Companies Act, 1956, defines a Section 25 company as 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”.

This is similar to Section 8 of the Companies Act, 2013, which includes other objects such as sports, education, research, social welfare and protection of environment among others.

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.

Some more examples of Section 25 or Section 8 companies?

Azim Premji Foundation, Coca Cola India Foundation, and Amazon Academic Foundation are some prominent names.

How is it different from a trust? And why is this section used?

According to experts, most foreign donors prefer contributing to a company compared to a trust given the transparency and provision of more disclosures.

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