NGOs work on the non-profit motto, and their activities and endeavors are covered by the donations and reliefs given by various sources including from foreign sources. However, foreign funding can’t be accepted and utilized if the mandate of the Foreign Contribution & Regulation Act, 2010 is not followed.
On these lines, the present article is written throwing light on the procedure and the compliances required to secure Foreign Funding by the NGOs.
The present subject matter holds vital importance as the NGOs with the passage of time are keen on exploring the opportunities of foreign funding.
Foreign funding for NGOs
Non Govt Organisations work on no profit and no gain motto, and the administrative expenses of such organisations are mainly covered by donations. Such donations have multiple sources, and are not restricted to a particular geographical area. Since the world has come closer than ever, especially after the pandemic, access to foreign funding for NGOS have now become slightly easier. however, no foreign funding can be accepted/ utilized if the same is not in consonance with the Foreign Contribution (Regulation) Act, 2010 (for brevity: – “FCRA”).
In light of the aforesaid compliance requirement, this article is being written stipulating the procedural requirements to procure and utilize foreign funding in accordance with law.
2-way approach
The law qua foreign funding is enshrined under the FCRA and its allied Rules and Regulations. The FCRA mandates that individuals, Hindu Undivided Families, associations, and the companies registered under section 25 of the Companies Act, 1956 (now section 8 of the Companies Act, 2013) shall not accept foreign funding unless the person/ association has obtained either of the following: –
(i) Certification of Registration under the FCRA; or
(ii) Prior Permission from the concerned authority, i.e., Ministry of home a
It is not out of place to mention that the definition of “Foreign Funding” is quite extensive as the same includes Indian and Foreign Currency, and every article given by a foreign source including a gift which is not less than of Rs 25,000/-.
Certificate of Registration
It’s a mandatory requirement for the NGOs, seeking foreign funding, to secure Certificate of Registration under the FCRA. However, those NGOs which are not eligible for the registration can utilize the Foreign Funding by way of Prior Permission mechanism which is duly explained in the following part of this piece of writing. A Certificate of Registration is valid only for five years and can be renewed in the future.
How to get Registered under the FCRA?
An applicant must have spent at-least Rs 15,00,000/- (Rupees Fifteen Lakh Only) on its core activities during the preceding 3 years from the date of the application. It means that an applicant not only is required to spend Rs 15,00,000/- or more on its core activities, but also be in existence of not less than 3 years in order to get registered. It is interesting to note that the expenditure of Rs 15,00,000/- shall not include administrative expenses incurred by an applicant.
In order to seek registration, an applicant is required to submit Form 3A along with the necessary documents. The form is quite self-explanatory as the same is bereft of any technical requirements.
The details of the registration, purpose and the aim of the organisation, chief functionaries of the organization, a separate bank Account to receive such donations are required to be furnished. Furthermore, an Applicant is required to provide a report of the activities performed in the past years 3 along with the Audited Statements of accounts of the past 3 years. Needless to say, that an applicant is also required to disclose the details if it has ever obtained prior Permission for Foreign Funding in the past. It is to be kept in mind that the application must be submitted along with the statutory fee of Rs 10,000/-.
Documents required
1. Certificate of Registration; and
2. Memorandum of Association (better to provide AOA too);
3. Report of the activities of past 3 years; and
4. Audited Statement of last 3 years; and
5. Prior Permission if any
6. Affidavits by the Chief Functionaries of an Applicant, inter alia, affirming all the information provided are true and correct to the best of their knowledge. It is to be kept in mind that the said Affidavits are required to be attested by a Notary Public or Class 1 Magistrate.
Prior Approval Mechanism
Those NGOs who, haven’t spent Rs 15,00,000/- for their core activities or are less than 3 years old can procure and utilize foreign funding if they have secured Prior Permission from the concerned authority. The Prior Permission is limited for a particular funding, and the same doesn’t cover other/ future funding. in other words, the NGOs who don’t meet the threshold of the registration are required to secure Prior Permission for each and every Foreign Funding.
How to secure Prior Permission?
The process to obtain Prior Permission is quite similar to the registration process. To obtain Prior Permission from the Ministry of Home Affairs, an applicant is required to fill and submit a Form 3B along with the following documents. The concerned NGO must provide the details of its registration, purpose and the aim of the organisation, a separate bank Account to receive such donations. It is submitted that an applicant is required to explain a plan of utilizing the proposed foreign funding, and how the said funding will assist an applicant in achieving its goal. Furthermore, it is always good to furnish a brief of the activities that an Applicant has performed in the past years along with the details of the transactions showing expenditure, and funding/ donations procured in the past years. Lastly, the application must be submitted along with a statutory fee of Rs 5,000/-.
Documents required
1. Certificate of Registration; and
2. Memorandum of Association (better to provide AOA too);
3. Confirmation from the donor and agreement; and
4. Report qua the said Funding;
5. Affidavits by the Chief Functionaries of an Applicant, inter alia, affirming all the information provided are true and correct to the best of their knowledge. It is to be kept in mind that the said Affidavits are required to be attested by a Notary Public or Class 1 Magistrate.
Though, the aforesaid paragraphs explain the whole process and the compliances that are required to be met while seeking registration or Prior Permission. however, the said information is not exhaustive and the concerned Authority may ask for further information from an Applicant, if required. Lastly, after seeking registration or Prior Permission, as the case maybe, an applicant is required to show the details of the same in its annual returns.
The process qua seeking registration or Prior permission is not too technical. But there are few practical nuances in filing and submitting the aforesaid forms and documents which make it difficult for the organisations to comply with the aforesaid requirements. Hence, it’s advisable to secure the professional assistance of a lawyer or a CA/CS.
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Author : Advocate Lalit Ajmani is the Founding and Managing Partner of ‘Ajmani & Law Partners’. Mr. Ajmani handles a diverse spectrum of cases pertaining to civil, commercial, defamation, matrimonial, etc. Furthermore, he is often asked for corporate advisory and drafting assignments. Author can be contacted lalit@ajmaniandlawpartners.com | +91- 9654431469.
Author Bio
Mr. Ajmani’s article is highly informative, that too put in very simple and clear style.