NGO Registration Methods – 1

1. Trust 2. Society and 3. Non Profit Company (NPO)

In India non-profit / public charitable organisations can be registered as trusts, societies, or a Private Limited Non Profit Company, under section-8 companies is the same as the popular Section 25 company under the old Companies Act, 1956. Non-Profit Organisations in India

• Exist independently of the state
• Are self-governed by a board of trustees or ‘managing committee’/ governing council, comprising individuals who generally serve in a fiduciary capacity
• Produce benefits for others, generally outside the membership of the organisation
• Are "non-profit-making", in as much as they are prohibited from distributing a monetary residual to their own members.

Section 2(15) of the Income Tax Act – which is applicable uniformly throughout the Republic of India – defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable. Thus, in ascertaining whether a purpose is public or private, one has to see if the class to be benefited, or from which the beneficiaries are to be selected, constitute a substantial body of the public. A public charitable purpose has to benefit a sufficiently large section of the public as distinguished from specified individuals. Organisations which lack the public element – such as trusts for the benefit of workmen or employees of a company, however numerous – have not been held to be charitable. As long as the beneficiaries of the organisation comprise an uncertain and fluctuating body of the public answering a particular description, the fact that the beneficiaries may belong to a certain religious faith, or a sect of persons of a certain religious persuasion, would not affect the organisation’s ‘public’ character.

Whether a trust, society or section-8 company (Previous Section 25), the Income Tax Act gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry.

CAF would like to clarify that this material provides only broad guidelines and it is recommended that legal and or financial experts be consulted before taking any important legal or financial decision or arriving at any conclusion.

Formation and Registration of a Non -Profit organisations in India

• Trust
• Society
• Section-8 Company (Previous Section 25)
• Additional Licensing/ Registration

I. Trusts

A public charitable trust is usually floated when there is property involved, especially in terms of land and building.

Legislation : Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.

Main Instrument : The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. In every trust deed, the minimum and maximum number of trustees has to be specified. The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.

Trustees : A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees.

Application for Registration :

The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered

After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee to the form and pay a registration fee which may range differently, depending on the location and value of the trust office and trust property.

The application form should be signed by the applicant before the registrar, sub-registrar, deputy registrar, regional officer or superintendent of the regional office of the charity commissioner or authorised registrar. The application form should be submitted, together with a copy of the trust deed.

Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.

II. Society

According to section 20 of the Societies Registration Act, 1860, the following societies can be registered under the Act: '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.'

Legislation : Societies are registered under the Societies Registration Act, 1860, which is a federal act. In certain states, which have a charity commissioner, the society must not only be registered under the Societies Registration Act, but also, additionally, under the Bombay Public Trusts Act. Main Instrument : The main instrument of any society is the memorandum of association and rules and regulations (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined.

Trustees : A Society needs a minimum of seven managing committee members; there is no upper limit to the number managing committee members. The Board of Management is in the form of a governing body or council or a managing or executive committee

Application for Registration :

Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).(2)

The procedure varies from state to state. However generally the application should be submitted together with: (a) memorandum of association and rules and regulations; (b) consent letters of all the members of the managing committee; (c) authority letter duly signed by all the members of the managing committee; (d) an affidavit sworn by the president or secretary of the society on non-judicial stamp paper, together with a court fee stamp; and (e) a declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.

All the aforesaid documents which are required for the application for registration should be submitted in duplicate, together with the required registration fee. Unlike the trust deed, the memorandum of association and rules and regulations need not be executed on stamp paper.

III. Section-8 Company - (Old Section-25)

According to Section-8 of Indian Companies Act, 1956 (Old section 25(1)(a) and (b) of the Indian Companies Act, 1956, a section-25) a section 8 company can be established ‘for promoting commerce, art, science, religion, charity or any other useful object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members

Legislation : Section-8 companies are registered under section 8 of Indian Companies Act 2013 (old section-25 of the Indian Companies Act, 1956).

Main Instrument : For a section-8 company, the main instrument is a Memorandum and articles of association (no stamp paper required)

Board Members : A section-8 Company needs a minimum of three members; there is no upper limit to the number of members. The Board of Management is in the form of a Board of directors or managing committee.

Procedure for incorporation of a company under Section 8

Name Approval

Name approval has to be obtained from the Registrar of Companies ["RoC"] by submitting an application in e-Form INC 1.

For this you need to decide various items, which are mentioned in Form INC 1. The name once approved by the authority is valid for 60 days. The Subscriber to the Memorandum and Articles of Association shall be the applicant for the availability of name application.

2. Memorandum And Articles Of Association

After obtaining name approval, the draft Constitutional Documents of proposed Company i.e. Memorandum of Association (MOA) and Articles of Association (AOA) is to be drafted and then filed with the RoC along with the forms / documents stated in clause 3 below.

Subscription Pages of MOA & AOA – The last page of the MOA and AOA must contain details of the subscribers to the Memorandum and Articles and the number of shares to be subscribed by each. This last page is required to be executed by subscribers.

In the case of foreign subscriber the above documents need to be consularised before the Indian Embassy in the respective Country. In case of wholly owned subsidiary, a copy of the Board resolution of Holding Company approving the investment in the proposed Indian Company and authorizing a person to sign the incorporation papers on behalf of the company, duly attested by the officer of the Indian Embassy in the foreign country where the registered office is situate is also required to be attached with the papers.

3. Filing Of Forms

The following forms are required to be filed with the RoC:

• e-Form INC 12 (for issuance of license under section 8 of the Companies Act, 2013). This application shall be accompanied by:
• Memorandum & Articles of Association of the proposed company.
• A declaration confirming the application by a Company Secretary in Practice on the Non – Judicial stamp paper of prescribed value.
• List of names, descriptions, addresses & occupation of the promoters as well as Board Members of the proposed company.
• A statement showing details of assets and liabilities of the company as on date with the application.
• An estimate of future annual income and expenditure of the proposed company, specifying the source of income and object of expenditure.
• A statement giving brief description of work, if any, already done by the association.
• A statement specifying briefly the grounds on which the application is made.
• A declaration in prescribed form on non – judicial stamp paper by each person making an application.
• A letter of authority
• Payment of prescribed fee

Presently Form No INC 12 is filed as an attachment to Form No – RD 1 alongwith the other documents.

After all the papers for obtaining license are filed and reviewed by the RoC, the RoC may require certain clarifications before issuance of license under Section 8 of the Companies Act, 2013. These clarifications or enquiry need to be satisfied by the person who has been authorised to do so by the Power of Attorney filed with the RoC or by the applicant. Once all clarifications are provided, the License under Section 8 is issued by the RoC and then applicant can file incorporation documents in below mentioned e-Forms:

• e-Form INC 7 (declaration of compliance with the requirements of the Act on application for registration of a company);
• e-Form INC 22 (notice of situation of registered office);
• e-Form DIR 12 (appointment of directors of the company)
• a Power of Attorney to be executed by subscribers and proposed directors (authorisation by the promoters of the company to a person/s to carry out appropriate changes as suggested by the RoC in any of the incorporation papers that have been filed).

4. Clarifications/Additional Information Required By Roc

After all the incorporation papers are filed and reviewed by the RoC, the RoC may require certain clarifications. These clarifications or enquiry need to be satisfied by the person who has been authorised to do so by the Power of Attorney filed with the RoC

5. Certificate Of Incorporation

Once all clarifications are provided, the Certificate of Incorporation is issued by the RoC and the company is deemed to be incorporated from the date of the Certificate of Incorporation.

6. Indicative Time Frame

The entire procedure can be completed on a fast track basis within 25 working days.

Information Required:

DIN, Digital signature certificate, name, address, father's name, nationality, occupation, phone number and email of the applicant;

Class and category of the proposed company, whether public company or private company and company limited by shares or limited by guarantee or unlimited company;

Name of the State/Union territory in which the proposed company is to be registered;

Details of promoters; a) Number of promoters; b) Category of promoter viz Individual, Body Corporate, Company etc.; c) DIN or Income Tax PAN or passport number of Corporate Identification Number (CIN) or foreign company registration number (FCRN) or any other registration number.

Main objects of the proposed company to be set out clearly in the name application as the RoC does not allow addition of new clause at the time of incorporation

Particulars of proposed Directors with their DIN. All the Directors must have DIN

Proposed name of the Company and in case the proposed name is not available, alternative names in order of preference;

Whether the promoters are carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied for (If yes, NOC from all owners/partners of such entity for use of such name must be provided, and in case the business of such entity shall be taken over by the proposed company after incorporation, if yes, NOC from owner/partners for taking over the business of the entity already in existence);

Whether the proposed name(s) contain(s) name of any person other than promoter(s) or their close blood relatives;

Whether the proposed name is indicative of the object of the proposed company, if yes, whether the proposed name is in consonance with the object of the proposed company;

Justification for the name chosen for the proposed company and significance of key or coined word in the proposed name;

In case of wholly owned subsidiary, as the proposed Indian company would be using the name of the Holding Company, then a NOC from the Holding Company for using its name shall also be given along with the application for availability of name. This would also facilitate expediting the name availability application;

If the promoter has any trademarks registered in India, a copy of such registration certificate as an additional justification for the name of the proposed company;

In case promoters do not have DIN and Digital Signature Certificate, the following documents/information shall be required for obtaining DIN & Digital Signature Certificate:

• Self attested copy of Identity Proofs (Passport/PAN/Election ID Card/Aadhar Card etc). Copy of passport is mandatory in case of a foreign national. For Indian Nationals PAN is mandatory. PAN is not mandatory for foreign national.
• Self attested copy of Address Proof (Family Register/Bank Statement/Utility Bills etc) of all proposed Directors and Promoters, who do not have DIN; if the above said documents are not in English or Hindi then the certified translation copy is required.
• Passport size photo of all promoters and proposed Directors;
• Occupation, Educational Qualifications, Phone Numbers, Mobile Numbers and Email;
• Duly filled and signed application form for obtaining Digital Signature Certificate;
• In case the proposed director is residing outside India, then the attached supporting documents like passport, etc should be attested by the following:
• Consulate of the Indian Embassy,
• Foreign public notary or
• Company secretary in full time employment /CEO/Managing director of the Indian company in which he/she proposed to be a director.

Comparision among Trust, Society and Non Profit Company

	Trust	Society	Section-8 Company
Statute/Legislation	Relevant State Trust Act or Bombay Public Trusts Act, 1950	Societies Registration Act, 1860	Indian Companies Act, 2013
Jurisdiction	Deputy Registrar/Charity commissioner	Registrar of societies (charity commissioner in Maharashtra).	Registrar of companies
Registration	As trust	As Society In Maharashtra, both as a society and as a trust	As a company u/s 8 of the Indian Companies Act.
Registration Document	Trust deed	Memorandum of association and rules and regulations	Memorandum and articles of association. and regulations
Stamp Duty	Trust deed to be executed on non-judicial stamp paper, vary from state to state	No stamp paper required for memorandum of association and rules and regulations.	No stamp paper required for memorandum and articles of association.
Members Required	Minimum – two trustees. No upper limit.	Minimum – seven managing committee members. No upper limit.	Minimum three Members. No upper limit.
Board of Management	Trustees / Board of Trustees	Governing body or council/managing or executive committee	Board of directors/ Managing committee
Mode of Succession on Board of Management	Appointment or Election	Appointment or Election by members of the general body	Election by members of the general body