All You Need to Know About Starting a Company
An NGO or non-governmental organisation is a not-for-profit entity who workstowards the welfare of the poorer sections of society or towards a particular cause. Their focus areas are environmental, human or animal rights, improving health and welfare of children, development work or raising awareness about a particular cause or activity.
As these are not-for-profit, these organisations cannot pay their profits as dividends to members. Any profit earned should be reinvested toward the cause. NGOs raise their funds from donorswho may or may not receive tax relaxation on their donations. In India, an NGO can be set up as a trust, section-8 company or a society.
NGO Registration Methods
There are three methods for NGO Registration in India:-
One way to register NGO is by registering it as a trust.This kind of method is used by NGOs who work towards eradicating poverty, giving education and providing medical relief. It should be clearly noted that trusts are irrevocable. It means that they cannot be terminated without the permission of the beneficiary. Trusts are not governed by any national laws but by state laws. States like Maharashtra and Gujarat have Public Trust Acts to look into the matters of NGOs.
Societies can be defined as member-based organizations for charitable purposes. A governing body or a managing committee will run the society.All societies are governed under the preview of Indian law. In India, societies come under the Societies Registration Act, 1860.
SECTION 8 COMPANIES
A Section 8 Company has limited liability and cannot make any profits. These are usually formed to promote science, art, commerce, charity and religion etc.Section 8 Companies have more legal standing and better credibility among government bodies than Societies and Trusts.
NGO Registration Process Under Trust, Society and Company Act
TRUST REGISTRATION PROCESS
A trust can be registered by any person who is competent to contract or has power and property that is transferable.The process of registering a trust is quiteeasy and simple.
Before registering, you have to collect the following information:
- Name for the trust
- Registered Address
- Objects of the trust (charitable or Religious)
- One settler of the trust
- Two trustees of the trust
- Property of the trust-movable or immovable property (To save on stamp duty, an initial amount is given to be the initial property).
The procedure to follow to register a trust:
1. Put together a trust deed
The Trust Deed must have the following details:-
- It should be on stamp paper of requisite value.
- One passport size photograph and a copy of identity proof of the settler.
- One passport size photograph and a copy of identity proof of the two trustees.
- One passport size photograph and a copy of identity proof of two witnesses.
- The Trust Deed should be signed on all pages by the Settler.
2. Register the trust deed
According to the Indian Trust Act of 1882,the Trust Deed must be registered with the local registrar of a state. You need to submit the copies of the Deed duly signed by the settler on all the pages. When you are going to register the deed, the witnesses and the settler must be present at the Registrar office along with their identity proof in the original. If the officer approves all the documents after verifying,the registered Trust Deed will be provided to you. Once you get a registered Trust Deed, you have to operate your trust in accordance with the Trust Act.
SOCIETIES REGISTRATION PROCESS
The registration of a society is two steps process. The steps are as follows:
1. Memorandum of Association
The MoAconsists of various clauses like the name of the society, the address of the registered office, an object for the formation of society and details of the general body.
2. Rules and Regulations
The rules and regulations for society registration must talk about the following:
- How is membership and subscription to be obtained to the society?
- What rules and regulations govern the society and its members?
- How are meetings to be organized (their frequency, calling for the meeting and so on)?
- How will the committee or governing body be formed?
- When will auditors be appointed?
- How will legal matters be settled?
- What can be the reasons for dissolution?
After formulating the rules and regulations, these need to be signed and certified by three office bearers of the society (usually the Chairman, President and Vice-president or secretary and the president, as applicable). After completing both these documents, these need to be signed by each of the founding members with their official stamp and address.A notary public or chartered accountant will be required as witnesses.
SECTION 8 COMPANY REGISTRATION PROCESS
It is very easy process to register a Section 8 Company.The steps in registering a section 8 company are as follows:
- The first step is to fill up the Section 8 Form. You need to provide correct details.
- Get the DIN and the DCS signature of the directors of the Section 8 Company. After that you will be able to apply for the name approval of the company.
- You need to fill the Form No.INC 1 and submit it to the CRA or MCA to apply for the name approval.Maximum of 6 names can be given by the applicants. After approval, the name of the Section 8 Company will be valid for 60 days.
- You are required to file the MOA and AOA with the registrar after getting your name approved. The subscription pages of both must be signed by each subscriber with their name, address, description and occupation in the presence of a witness who should attest the signature by signing and adding his name, address, description and occupation.
- You are required to apply for your Certificate of Incorporation and then apply for a company Tan and Pan card. It will be completed in atmost10-12 days.
- Your Section 8 Company will be successfully registered after getting the COI, PAN and TAN cards.
What are the differences between Trust, Society and Section-8 Company Management?
- Trusts are managed by the trustees; the societies are managed by a committee or the managing council whereas a Section-8 company is managed by a board of directors.
- A trust must have at least two trustees,a society must have seven (for a state-level society) and eight (for a national level society) committee members whereas a section-8 company must have 2 members for a private limited company and 7 members for a public limited company.
- A trust is governed by the Registrar of Trusts. So, it only needs to be registered with it. A society is governed by the Registrar of Societies. Section 8 companies are governed by the Registrar of Companies as well as the commissioner of the relevant state so it is required to be subjected to an audit every year.
- Trusts, societies and section-8 companies take longer time to be set up than private limited companies. Because the governing bodies must be convinced that the entity has an honest interest in the cause. It takes up to 20 days to register a trust,45 days to register a society and75 days to register a Section-8 company.
Documents Required for NGO Registration
The documents required to be submitted to the Registrar are as follows:
- A letter requesting registration, signed by founding members. This letter will state the purpose of formation of the society and a request which will indicate that the society is registered under the Act. The signature of all members is compulsory.
- A certified copy of the MoA, signed by the founding members, with a duplicate.
- A certified copy of the rules and regulations, signed by the founding members, along with a duplicate copy.
- A table with the names and address and occupation of all members of the society with their signatures.
- Minutes of the meeting (general body meeting conducted to set the rules and regulations).
- Declaration by the president of the society.
- A sworn affidavit from the President or Secretary, declaring the relationship between the subscribers.
- Address proof of registered office and no-objection certificate from the landlord.
NGO Registration Form and Purpose
To register a Non-Government Organization or an NGO,you are required to fill out the following forms:
FORM INC 1
This form is required for registering the name of the NGO.
FORM INC 12
The form is required to apply for a license to run the NGO. You are required to submit the MOA and the AOA of your NGO along with this form.
FORM INC 7
This form is required to apply for the incorporation of the NGO. Along with this form, you are required to submit the following documents:
- Memorandum and articles of the company duly signed by all the subscribers.
- An affidavit from each of the subscribers and first directors in Form INC 9 that they are not guilty of any offence.
- Declaration in Form INC 8 that all the requirements of the Companies Act have been complied with.
- Address of correspondence till the registered office is fixed.
- Address and Identity proofs of all the subscribers to MOA and first directors of the company.
FORM INC 22
You can either fill this form along with the INC 7 or submit it within 30 days aftersubmission of the form INC 7. It requires the details of the registered address of the NGO.
FORM DIR 12
You are required to fill the DIR 12 form to appoint directors for your NGO and submit it to the registrar. It must be submitted within 30 days from the date of the appointment of the directors.