formation of NGo
R T Pandey
(Querist) 04 July 2010
This query is : Resolved
How an NGo O can be formed
A V Vishal
(Expert) 04 July 2010
A. Types of Organizations:
1. Trusts
The public charitable trust is a possible form of not-for-profit entity in India. Typically, public charitable trusts can be established for a number of purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Indian public trusts are generally irrevocable. No national law governs public charitable trusts in India, although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts.
2. Societies
Societies are membership organizations that may be registered for charitable purposes. Societies are usually managed by a governing council or a managing committee. Societies are governed by the Societies Registration Act 1860, which has been adapted by various states. Unlike trusts, societies may be dissolved.
3. Sec. 25 Companies
A section 25 company is a company with limited liability that may be formed for "promoting commerce, art, science, religion, charity or any other useful object," provided that no profits, if any, or other income derived through promoting the company's objects may be distributed in any form to its members.
B. Tax Laws
India ’s tax laws affecting NGOs are similar to the tax laws of other Commonwealth nations. These laws may have some impact on U.S. grant makers, and thus are summarized here.
India provides for exemption from corporate income taxes of the income of certain NGOs carrying out specific types of activities, with unrelated business income being subject to tax under certain circumstances.
India also subjects certain sales of goods and services to VAT, with a fairly broad range of exempt activities. The rates range from 4 percent to 12 percent, with most goods and services taxed at 8 percent.
The income tax law and the corporate tax law provide tax benefits for donors, and these may be relevant to an American corporation doing business in India in deciding whether to engage in direct corporate grantmaking in India. The existence of a double taxation treaty between India and the United States may also affect gift planning decisions of U.S. corporate grantmakers doing business in India.
Finally, not-for-profit organizations involved in relief work and in the distribution of relief supplies to the needy are 100% exempt from Indian customs duty on the import of items such as food, medicine, clothing and blankets. Other exemptions may also be available.
II. Applicable Laws
Constitution of India Articles 19(1)(c) and 30;
Income Tax Act, 1961;
Public Trusts Acts of various states;
Societies Registration Act, 1860;
Indian Companies Act, 1956, section 25;
Foreign Contribution (Regulation) Act, 1976;
If you decide on the kind of organization you would like to start, more detailed procedure on formation of such organization can be discussed.
Raj Kumar Makkad
(Expert) 04 July 2010
Nothing to add in the expert opinion of Vishal.
R T Pandey
(Querist) 05 July 2010
kindly give detailed procedure for Sec 25 companies formation
A V Vishal
(Expert) 05 July 2010
Detailed Procedure is enclosed herewith, however I should forewarn beforehand that the entire process will take atleat 6 months to complete.
Procedure for Registration of Sec 25 Company
Step-1
Apply in Form No. 1A to concerned ROC, for availability of name in order of preference (without addition to its name of the word "Limited" or the words "Private Limited").
Step-2
Prepare Memorandum & Articles of Association.
Step-3
Make an application to the Concerned Regional Director for issue of license under Section 25 of the Companies Act, 1956. The application should be accompanied by: -
· Three Copies of MoA & AoA of the proposed Company.
· A declaration confirming the application by CA / CS / Advocate on prescribed Stamp Paper.
· Three copies of list of names, descriptions, addresses & occupation of the promoters as well as the members of Board of Directors of the proposed Company.
· A statement showing details of assets & liabilities of the Association as on date with the application.
· An estimate of future annual income & expenditure of the proposed company, specifying the source of income & 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 fees.
Step-4
Notice pursuant to regulation 11 of the Companies Regulation, 1956 shall be published within one week before or after the admission of the application in one or more newspapers (one in English and other in vernacular local newspaper).
Step-5
Simultaneously furnish the copy of application with all its enclosure and accompanying papers to the concerned Registrar of Companies.
Step-6
On receipt of the copy the concerned ROC gets the draft MOA & AOA vetted and then list outs the modifications considered necessary and forwards the same to RD within fifteen days of receipt of the copy. He may normally advise RD to grant license to the proposed company or not.
Step-7
The concerned ROC may consult for the views of District Magistrate of the state within whose jurisdiction the registered office of the proposed company is to be located. Copy sent to RD and reply is generally directly received by ROC from DM.
Step-8
In case, the considerations for issue of license are more important, the RD may consult the State Government too. The RD may also consult the ministries concern and determine, if any, objections received.
Step-9
On receipt of the above papers, the RD gets the MOA & AOA and other papers generally scrutinized.
Step-10
Having received all the necessary views from the ROC, DM, State Government, the RD will take the decision for grant of license to the application or not. (Generally the license is granted within 30 days from the date of filing of application with the RD).
Step-11
Departmental instruction shall be strictly followed. The license may be revoked, with Company's right to be heard.
Step-12
After obtaining the license the MOA & AOA be printed as approved.
Step-13
File the necessary papers with ROC for registration along with filing fees (maximum filing fees payable is Rs.5000/-) and also produce the license granted by the RD.
Step-14
The ROC on making necessary scrutiny and correction will issue the certificate of incorporation.
Check List for registering a company under Section 25
Step No.
Particulars of Action/ Documents Required
Processing Period
1
Apply in Form No. 1A to concerned ROC, for availability of name in order of preference. Info required: -
§ Full name & residential address of each of promoters.
§ Four names of the proposed Company in order of their preference (without addition to its name of the word "Limited" or the words "Private Limited").
§ Proposed main object of the proposed Company (shall be one as depicted u/s 25 of the Companies Act, 1956).
Mention that the proposed Company is to be formed under provisions of Sec. 25 of the Companies Act, 1956
3 - 4 working days
2
After the name is approved, prepare Memorandum & Articles of Association; preferably get it vetted by ROC / RD. Keep in mind that the MOA & AOA are drawn in consonance with provisions of the Sec. 25 & other applicable provisions of the Companies Act, 1956.
3 - 4 working days
3
Make an application with to the Concerned Regional Director for issue of license under Section 25 of the Companies Act, 1956 with all the requisite enclosure as given under:-
§ Three Copies of MOA & AOA of the proposed Company
§ A declaration confirming the application by CA / CS / Advocate on prescribed Stamp Paper.
§ Three copies of list of names, descriptions, addresses & occupation of the promoters as well as the members of Board of Directors of the proposed Company.
§ A statement showing details of assets & liabilities of the Association as on date with the application.
§ An estimate of future annual income & expenditure of the proposed company, specifying the source of income & 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.
§ Copy of notice pursuant to regulation 11 of the Companies Regulation, 1956.
8 - 10 working days (depending upon the preparation of documents, availability of each of the promoters and publication of notice in newspaper)
4
Simultaneously furnish the copy of application with all its enclosure and accompanying papers to the concerned Registrar of Companies.
5
On receipt of the above papers, the RD gets the MOA & AOA and other papers generally scrutinized, the RD will take the decision for grant of license to the application or not.
30 - 45 working days
6
On receipt of the license from RD, file the necessary papers with ROC for registration along with filing fees & forms. The ROC on making necessary scrutiny and correction will issue the certificate of incorporation.
8 - 10 working days
