Our panel of accountants with their sound professional information help organizations to meet the requisite criteria to register themselves as licensed charitable or non-profit institutions.
Formation and Registration of a Non -Profit organisations in India
3) Section-25 Company
A Trust is a closer system of a registered body that has limited membership. It can be either a family trust or a public trust. For a Trust, election of office-bearers is not compulsory.
Formation of the NGO as Trust
A Group of Individuals can deliver goods to society by forming public charitable trusts. The concept of trust generally involves endowment of some property for public utility under certain norms. At present the practice of establishing family or public charitable Trusts by sparing certain cash amount for charitable, welfare or religious purposes is prevalent. There are some differences between registered societies and a trust. The set up of the trust is not open having a tendency to keep its membership limited and form byelaws suiting to the needs of the trustees(not necessarily on democratic lines). Also there is very less interference of the authorities in its functioning.
Indian Trust Act, 1882 governs private or family trusts although various states have also enacted their own trust acts, for example The Maharashtra Trust Act; Bombay Public Trust Act, 1950 Punjab Trust Act; Bombay Public Trust Act, 1950; Madhya Pradesh Public Trust Act, 1951; Rajasthan Public Trust Act, 1959; etc. So, before registration of an NGO as trust, the provisions of applicable Trust Act should be studied by the promoters to suit their needs.
The Trust Deed is very important. The Trust Deed is made on non-judicial stamp papers, prescribed fee and signed by the trustee or trustees for submission to the Registrar concerned. In case of trust the registrar or sub-registrar having authority to register properties has the authority to register the Trust Deed. Hence, Trust Deed of the proposed Trust can be registered with Tehsildar or registrar properties and endowment at the district collectorate. In metropolitan cities separate offices of registrar of properties and endowments do function.
The Trust Deed should contain name(s) of the author(s), settler(s) of the trust; the name(s) of the trustee(s); the name(s) if any, of the beneficiary/ies or whether it shall be public at large; name of the trust; address of the trust; objects of the trust; procedure of appointment, removal or replacement of a trustee, their rights, duties and powers, etc; the mode and method of determination of the trust etc.
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.
MEMBERS : 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.
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-25Company
According to section 25(1)(a) and (b) of the Indian Companies Act, 1956, a section-25 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-25 companies are registered under section-25 of the Indian Companies Act. 1956.
Main Instrument : For a section-25 company, the main instrument is a Memorandum and articles of association (no stamp paper required)
A section-25 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee.
Application for Registration :
1.An application has to be made for availability of name to the registrar of companies, which must be made in the prescribed form no. 1A, together with a fee of Rs.500/-. It is advisable to suggest a choice of three other names by which the company will be called, in case the first name which is proposed is not found acceptable by the registrar.
2.Once the availability of name is confirmed, an application should be made in writing to the regional director of the company law board. The application should be accompanied by the following documents: Three printed or typewritten copies of the memorandum and articles of association of the proposed company, duly signed by all the promoters with full name, address and occupation.
A declaration by an advocate or a chartered accountant that the memorandum and articles of association have been drawn up in conformity with the provisions of the Act and that all the requirements of the Act and the rules made thereunder have been duly complied with, in respect of registration or matters incidental or supplementary thereto.
Three copies of a list of the names, addresses and occupations of the promoters (and where a firm is a promoter, of each partner in the firm), as well as of the members of the proposed board of directors, together with the names of companies, associations and other institutions in which such promoters, partners and members of the proposed board of directors are directors or hold responsible positions, if any, with description of the positions so held.
A statement showing in detail the assets (with the estimated values thereof) and the liabilities of the association, as on the date of the application or within seven days of that date. An estimate of the future annual income and expenditure of the proposed company, specifying the sources of the income and the objects of the expenditure.
A statement giving a brief description of the work, if any, already done by the association and of the work proposed to be done by it after registration, in pursuance of section-25.
A statement specifying briefly the grounds on which the application is made.
A declaration by each of the persons making the application that he/she is of sound mind, not an undischarged insolvent, not convicted by a court for any offence and does not stand disqualified under section 203 of the Companies Act 1956, for appointment as a director.
3.The applicants must also furnish to the registrar of companies (of the state in which the registered office of the proposed company is to be, or is situate) a copy of the application and each of the other documents that had been filed before the regional director of the company law board.
4.The applicants should also, within a week from the date of making the application to the regional director of the company law board, publish a notice in the prescribed manner at least once in a newspaper in a principal language of the district in which the registered office of the proposed company is to be situated or is situated and circulating in that district, and at least once in an English newspaper circulating in that district.
5.The regional director may, after considering the objections, if any, received within 30 days from the date of publication of the notice in the newspapers, and after consulting any authority, department or ministry, as he may, in his discretion, decide, determine whether the licence should or should not be granted.
6.The regional director may also direct the company to insert in its memorandum, or in its articles, or in both, such conditions of the licence as may be specified by him in this behalf.
IV. Special Licensing
In addition to registration, a non-profit engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):
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).
To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.
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.
A foreign non-profit setting up an office in India and wanting staff from abroad needs to be registered as a trust/society/company, needs permission from the Reserve Bank of India and also a No Objection Certificate from the Ministry of External Affairs.
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