Non Profit Organizations

A company registered with the following features:

  • Promotion of commerce, art, science, religion, charity
  • Prohibits distribution of profit / income among members
  • Registered with limited liability without addition of Limited / Private Limited to its name.

        Non profit Organizations are generally known as Sec.25 Companies . Registration of such companies require prior permission from the Central Government and the words 'Private Limited' or 'Limited' can be dispensed from the name.

Section-25 Company


        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.j

Main Instrument

For a section-25 company, the main instrument is a Memorandum and articles of association (no stamp paper required)

Trustees

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.

Special Licensing

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 30days seek registration under the Companies Act, 1956. Alongside of these permissions, the office must acquire tax registrations.