Guide to NGO Registration in India

The Non-Governmental Organisation (NGO) is an organization that works for a non-profit or charitable purpose. The Ministry of Corporate Affairs (‘MCA’) is responsible for regulating Guide to NGO Registration in India, companies under the Companies Act, 2013 (‘Act’), whereas the State Government is responsible for regulating trusts or societies.

In comparison with trust and society, NGO company incorporation has greater benefits. The Government Department, donors, and other stakeholders give this type of company more credibility. This article provides instructions on how to become an NGO under the Companies Act, 2013 as a NGO Company.

An NGO’s legal responsibilities in India

India has a number of laws that NGOs can use to register: 

  • Indian Trusts Act of 1882
  • Society under Societies Registration Act, 1860
  • The Companies Act, 2013 defines a company as a NGO company

An NGO’s purposes for incorporation under Section 8 of the Corporations Act

NGO companies are formed primarily to promote non-profit objectives, such as:

  • In commerce
  •  In art 
  • Research 
  • The sport 
  • An education
  • Thesis
  • Welfare services 
  • Religious beliefs 
  • Charities 
  • Environment protection
  • Objects related to the above

In cases where the Central Government is satisfied that a person or association of persons is planning to establish the above objectives under a limited company, it may grant a license to register as a NGO company under the Companies Act, 2013 (‘Act’). 

NGO companies, whether they are profitable or not, apply their earnings towards promoting their objectives and do not distribute their profits to shareholders.

Getting your company registered under NGO has a lot of benefits

NGO of the Companies Act, 2013 provides many advantages of NGO registration, which are as follows:

No minimum capital requirement:NGO companies do not require a minimum capital requirement for incorporation, and they can alter their capital structure at any time to meet their growing needs. By bringing in donations and subscriptions from members and the general public, funds can be raised later to sustain business operations.

Benefits of a NGO company: While the Company Auditor’s Report Order (CARO) is not applicable to NGO companies, they do enjoy tax benefits under section 80G of the Income Tax Act of 1961. 

For NGO companies, there is no stamp duty to pay. The NGO company does not need to pay the stamp duty on its Memorandum of Association (MOA) or Articles of Association (AOA) like a public or private limited company.

In the case of a NGO Company, the company’s members have a distinct legal identity. Registered partnership firms can also become members and become directors of the company. NGO companies have a perpetual existence, so the entry or exit of any member will not affect their operations.

Limitation of liability: Members of a NGO company are only liable for losses that are incurred by the company as per their proportional share subscriptions.

Unlike any other charitable organization, NGO companies have greater credibility and reliability. They are governed by the provisions of the Act, so they have to conduct mandatory audits every year, and they cannot alter their Memorandum of Association regarding their non-profit objectives.

The tax exemption for the donors is granted under Section 12A and 80G of the Income Tax Act, 1961, where donations are received by the NGO company. 

Eligibility for NGO company incorporation

  • NGO companies in India can be started by individuals and HUFs.
  • The directors and shareholders of the company must comply with all the provisions of the Act and comply with all the compliances and requirements.
  • Among the directors in a NGO company, at least one must be an Indian resident. 
  • There must be an objective for the grant, namely, sports, social welfare, scientific progress, and education of lower-income groups.
  • In any form of cash or kind, the company’s founders, directors, and members directors cannot be remunerated.
  • It is not acceptable to distribute profit to directors and members of the company directly or indirectly.

Incorporating a Company Under NGO 

Directors 

If the NGO company is to be incorporated as a private limited company, at least two directors are required, whereas if the company is to be incorporated as a company limited by guarantee, at least three directors are required. Private limited companies can have a maximum membership of 200, whereas public limited companies can have no limit.

Name and Capital Requirements

The formation of a NGO company does not require any minimum paid-up capital. NGO Registration that are integrated into the NGO structure need not use the words ‘Limited’ or ‘Private Limited’ in their corporate name.

Objects of charity

Companies incorporated under NGO have non-profit objectives. Their MOA and AOA must state the non-profit objective. NGO companies will use all profits they generate for charitable purposes or reinvested in the company. They will not distribute the profits to their members. They will be used for furthering the company’s main objectives.

 

Administration

Companies under NGO are managed by the Board of Directors in accordance with the Memorandum of Association and the Articles of Association, unlike trusts under other trusts which are managed by trustees.

Various Acts of Regulation

Companies Act, 2013 requires NGO companies to follow its rules and regulations. It is necessary to keep books of account and file returns with the Registrar of Companies. In addition to following the provisions of the Income Tax Act and GST Law, NGO companies cannot change the provisions of the Memorandum of Agreement or Memorandum of Agreement without prior approval of the Central Government. 

 Obtaining a DSC  (Digital Signature Certificate) 

During the registration process, the forms for submitting the company must be digitally signed by the proposed directors. A government-recognized certification agency issues digital signature certificates (DSC). The cost of obtaining a DSC varies depending upon the certifying agency. You must obtain a DSC of the Class 3 category. The list of such certified agencies can be found here. 

Application for Director Identification Number (DIN)

Applicants for a DIN have to submit Form DIR-3 or SPICe+ with the application for registration in the company. The DIN must be applied for in Form DIR-3 or SPICe+. It is essential that you submit the application online on MCA Portal with a scanned copy of the necessary documents, including a copy of the PAN, a copy of the directors’ identity and address proofs. An attesting professional must attest every form, whether it is a chartered accountant, a company secretary, or a cost accountant.

Registration forms for NGO’s

Form name Form Purpose
SPICE+  The Application for Incorporation of the Company
INC 12 Licensing application
INC 13 Association Memorandum
INC 14 Statement from a practicing Chartered Accountant
INC 15 Application declarations from each applicant
INC 16 An application for a Section 8 license is required
INC 22 The current status of the registered office
DIR 2 Directors’ consent
DIR 3 ROC application for DIN
DIR 12 The appointment of directors
   
   
   

NGO Registration Forms: Purpose and Use

Form INC-12 

As part of the INC-12 form, companies must submit drafts of their Memorandum of Association (MOA) and Articles of Association (AOA) in order to obtain a license from the Department of State to operate as a NGO company.

In Form INC 13, the MOA and AOA pages of a NGO company must be formatted according to a prescribed format be signed by each subscriber along with their address, name, occupation, and description, with at least one witness. 

In Form INC 13, the MOA and AOA are prescribed formats for NGO companies. 

  • Incorporation 13 – Memorandum of Association
  • Proposed Articles of Association
  • Each subscriber to a Memorandum of Association must sign this form to declare that the draft has been drawn up in accordance with NGO’s requirements
  • For the next three years, here is an estimated statement of income and expenditures
  • The following is a proposed list of promoters and directors of the company

After the company’s license is issued, the following forms must be submitted 

 

The SPICe+ form

Incorporation applications are called SPICe+ forms. A company can be reserved in the first part of the forms, but only one name can be declared for approval. Before choosing a name, it is recommended that applicants use the free name search facility available on the MCA portal. Depending on the search criteria, the system will display names of existing companies that are similar to your own. You can avoid naming the company after a company that already exists if you do this. 

Along with the SPICe+ Form, you must attach the following documents:

  • All subscribers need to sign the articles and the memorandum of the company
  • Subscribers and the first director’s declaration that they are not guilty of any offense or misbehavior
  • Application forms INC14 and INC15 containing statements from a Chartered Accountant and each applicant, respectively
  • The registered office is the official address for correspondence
  • All subscribers to the MOA, including the first directors, should submit their addresses and identification proofs
  • Each director and shareholder should have a passport-sized photo
  • In case the registered office of the company is on rented property, a copy of the rental agreement 

Incorporate INC 22

An INC 22 must be filed within 30 days of incorporation in order to provide notice of the company’s registered office address. 

Form DIR 12 

It must be filed within 30 days of the date that the company’s directors are appointed. The form DIR 12 must be filed.

How to incorporate a NGO company

Step 1– Form DIR-3 should be filled out and submitted to the ROC for a DIN. You will need to attach proofs of identity and addresses to obtain the DSC. Prepare the DSC for the proposed Directors. 

Step 2 – Following approval of the DIR-3, the ROC will assign the proposed directors a DIN. 

Step 3 –  Complete the INC-12 form and submit it to the ROC along with the papers mentioned above in order to apply for a license for a NGO company.

Step 4 – The license will be issued in Form INC-16 following approval of the form.

Step 5 – Once you have obtained the license, you should submit the SPICe+ Form along with the required attachments to the ROC for incorporation.

Upon reviewing the documents, the ROC will issue the company a Certificate of Incorporation and a unique Company Identification Number (CIN).  

Penalties under the Companies Act for non-compliance

A NGO license will be revoked if it fails to adhere to the legal provisions of the Act. If the company conducts its activities fraudulently or in a manner that is not consistent with the objectives for which it was established, the license will be revoked.

In the event of an indictment, the fine will range from Rs.10 lakh to Rs.1 crore if the company violates the provisions of the Act.

A director or officer in violation of the provisions of the Act will be fined at least Rs.25,000, but the fine can range up to Rs.25 lakh.

Annual compliance reports for NGO companies

NGO companies must comply with the same regulations as other companies.

  • Meetings of the board should be held at least twice per year
  • Maintaining the books of accounts
  • Financial statement preparation
  • Audit report required
  • Filing of income tax returns
  • Form AOC 4 is to be filed with financial statements
  • Besides filing an annual return, other e-filing forms including MGT 7 are required every year
  • Additional requirements such as 12AA, 80G, etc. are needed to complete the registration

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