A non-governmental organization (NGO) usually termed as non-profit Organisation usually deliver resources or serve some social or political purpose. NGOs or Non-profit Organisation are primarily concerned with promoting a cause and engaged in a wide range of activities.
Non-profit organisations can be registered in India as a:
> Society, under the Registrar of Societies or
> Trust, by making a Trust deed or
> Section 8 Company, under the Companies Act, 2013.
Foreign contributions to non-profits are governed by FCRA regulations under umbrella of Ministry of Home affairs. Income Tax Act, 1961, gives equal treatment to all categories of NGO in terms of exempting their income and granting 80G be it Trust, society or Section 8 company.
Objects of Section 8 Company:
a) Objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
b) Apply its profits, if any, or other income in promoting its objects; and
c) Prohibit the payment of any dividend to its members.
Procedure For Incorporation Of Section 8 Company – A Practical Approach
In terms of section 8 of the Companies Act, 2013, if proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under section 8 of the this Act as a limited company and has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
The Central Government may grant license on such conditions as it deems fit and allow that person or association of persons to be registered as a limited company without the addition to its name of the word Limited, or as the case may be, the words Private Limited.
Apply for Name approval through WWW.MCA.GOV.IN.
For Companies under section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, and the like etc.
Make Application For Issue of License In E-Form Inc-12:
The application for issue of License shall be made to Central government, power now delegated to Registrar of companies of relevant jurisdiction and shall be accompanied by the following documents, namely:
a) Draft MOA in Form INC-13 Pursuant to rule 19(2) the Companies (Incorporation) Rules and Copy of AOA.
b) Declaration in Form No.INC.14 Company Secretary in practice, by an Advocate, a Chartered Accountant, Cost Accountant.
c) An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure.
d) Declaration by each of the persons making the application in Form No. INC.15.
e) 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.
f) A statement specifying briefly the grounds on which the application is made.
g) 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.
h) 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 8
i) Identity Proof and Residential proof of the Shareholder and proposed Director.
j) Copy of PAN card of the Shareholder, other than ID proof.
Make Application For Issue of Certificate of Incorporation (COI) / CIN in SPICe (INC-32) form:
The application for issue of COI / CIN shall be accompanied by the following documents, namely:
a) Copy of License issued under section 8 by Central government.
b) Copy of MOA in form INC-13 Pursuant to rule 19(2) the Companies (Incorporation) Rules and Copy of AOA.
c) Pan is mandatory for shareholder and Director.
d) Apart from pan card another ID and address proof of both Shareholder and Director.
e) Affidavit from the subscriber to memorandum and first Director in Form No. INC-9.
f) Consent of Directors in DIR-2.
g) Proof of Registered Office address (Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts).
h) Copies of the utility bills of Registered Office address (not older than two months).
i) List of all the companies (specifying their CIN) having the same registered office address, if any.
Note: (a) At least one of the directors shall be resident in India, i.e, who has stayed in India for a total period of not less than 182 days in the previous financial year
(b) Directors and shareholders can be same person
Issue of Certificate of Incorporation And CIN:
After the documents are filed with Registrar of companies, the document gets scrutinized by the registrar, and on satisfaction Certificate of Incorporation along with PAN and TAN number of company is issued.
After COI is issued with PAN number your legal entity is formed. You have to approach any Bank and open current account in the name of the company. Print Letter head of the company and Apply for 80G and 12AA registration (Not mandatory) with Income tax department.
In addition to registration, a Section 8 company (NGO) engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):
1. To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.
2. To receive donations from a foreign individual or a foreign body corporate, an Indian non-profit organisation shall obtain FCRA registration.
3. Income of an organization is exempted if Section 8 company(NGO) has 12AA registration.
4. If an organization has obtained certification under section 80-G of Income Tax Act then donors of that Section 8 company(NGO) can claim exemption from Income Tax.
Section 8 Company FAQ
1. Can a single Individual form a Section 8 company?
No, at least two Members/Promoters are required to incorporate a Section 8 company.
2. How many Directors are required to incorporate a Section 8 company?
Minimum two Directors are required to incorporate a Section 8 company as “Private Limited” and minimum three directors if incorporated as “Public limited.”
3. Can body corporate or company become Director in a Section 8 company?
No, only Individual person can become a Director in a Section 8 company.
4. What is the meaning of Resident in India?
Resident in India means any person who has stayed in India for a total period of not less than 182 days in the previous financial year.
5. What words shall be the part of a Section 8 company name?
The name of section 8 company shall include the words Federation, Chambers, foundation, Forum, Association, Confederation, council, and the like etc.
6. Can I use “Private Limited” or “Limited” at the end of the Section 8 Company name?
No, words like “Private limited” or “Limited” should not be there in the company name, if it is a Section 8 Company.
7. Can I pay Dividend or other benefits in money to any of the members of Section 8 Company?
No, Dividend or other benefits shall not be given by the Section 8 Company to any of its members.
Disclaimer: Statements and opinions expressed in articles are those of the author’s personal views. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur.
Author Kundan Kumar Mishra is an Associate Member of the Institute of Company Secretaries of India and can be reached at Email : [email protected]