What is a NGO?
NGO’s are basically a non-profit organization which is incorporated with an objective to support under privileged section of the society and work for advancement of different issues like social, cultural, legal, environmental, art, science etc. As the name Non-Government Organization suggests they are operated by citizens on voluntary initiatives without any kind of interference from central or state governments.
What is NGO registration?
If you are willing to establish a non-profit organization for the working with an objective of betterment or advancement of any particular section of the society it is recommended to first get NGO Registration done. As it provides a legal entity to the organization which makes it more credible in the eyes of law and contributors.
In India one can go for registration in three legally possible ways; Trust registration, society registration or Section 8 Company registration. As all three business models are regulated by separate acts there are many distinct features of every model. One can choose a business model based on their personal requirement and preference, scale and level of operation. We will discuss this in detail in this article to ensure some clarity for you.
What are the laws applicable for NGO Registration in India?
In India it can be done in three forms under their regulating Acts. These three options are listed below:
- Trust Registration under The Indian trusts Act, 1882
- Society registration under Societies Registration Act, 1860
- Section 8 Company Registration under Companies Act, 2013
What is the purpose of NGO registration?
What distinguishes a non-government organization from any other organization is the objective with which it is established. The main objective of every organization is that profit making as it ensures smooth functioning and future growth. However, it is done with only one objective i.e. to help others. The sector it works in might differ but the ultimate objective and inherent desire of supporting the under privileged, social welfare is always there and works as a driving force. This can be done through many ways like education, trade, art, skill development, cultural promotion etc.
While starting a non-profit organization one must clearly define a clear vision for which it is established and will be operated. Along with clarity regarding organizational goals they must also define the beneficiary. Beneficiary can either be public in general or a set of people.
What are the modes for NGO Registration in India
As we discussed in India NGO is regulated by The Indian trusts Act, 1882, Society Registration Act, 1860 and Companies Act, 2013 in the form of Trust, Society and section 8 Company respectively. Here, we will discuss in brief about these organization and their basic features one by one.
Trusts can be registered either as a public trust or a private trust. If you are planning to set up a trust with an objective of trust registration, Public Trust is set up as per the applicable Act. Such public trust can work in the field of education, healthcare, support of under-privileged etc.
- NGO as trust is regulated by respective state Trust Acts. In case the state in which is planned does not have a separate Trust Act then t will be regulated by central Indian Trusts Act, 1882
- Name of such proposed trust is not required to be pre-reserved.
- In order to register a trust minimum 2 trusties and 1 settler is required.
- There are no clear provisions available for dissolving a registered public trust.
- All the operating principles along with clear definition of beneficiary must be mentioned in the Trust’s incorporation document.
One can also incorporate a Society as per the regulations of Society Registration Act 1860 as a non-profit organization. The only condition is that this must be done with an objective of promotion of science, arts, literature or any other non-profit objective.
- Society registration and further regulation is done as per Societies Registration Act 1860. This Act is interpreted by many states in different manner. Thus, it must be paid attention before initiating NGO registration procedure.
- Societies are basically membership based organizations.
- For NGO registration as a society minimum 7 members are required. If you plan to register the society on a national level, then minimum 8 members will be required from different states.
- Similar to Trust registration, no name reservation requirement is there in case of a Society. However, the applicant must not register with a name similar to any already registered society in that jurisdiction.
- Any registered society can be dissolved by its members after a discussion among themselves.
- All the operating principles along with clear defined rules and regulation must be mentioned in the memorandum of association of the Society.
Section 8 Company
It can also be done in the form of a Section 8 Company under Companies Act, 2013. Unlike any other company, Section 8 Company registration is not allowed to issue any kind of dividend to its shareholders. As they are formed for charitable purpose any profits earned are reinvested in the organization for furtherance of its main objects.
- Section 8 Company is regulated by the provisions of Companies Act, 2013.
- Minimum 2 directors are required to incorporate a Section 8 Company.
- Minimum two promoters are required. Promoters (shareholders) can be same person who are appointed as directors.
- Before filing final application for incorporation name of the proposed NGO must be approved. An application for the same is required to be submitted through RUN service.
- All the operating principles along with clear defined rules and regulation must be mentioned in the memorandum of association and articles of association of the section 8 Company.
Factors influencing the choice of model for NGO Registration
In current world many good Samaritans are realizing the need and value of upliftment of under privileged and recognition of other important social causes. With an intention to help. Large section of society is engaging in social causes and planning to set up non profit organizations.
In the process of NGO registration, the first crucial decision among many is to choose the type of model among trust, society and Section 8 Company. As we have discussed there are varied options available and one is required to narrow down their choice. This choice is influenced by many factors which we will discuss in brief here.
Following factors play a vital role in choosing the legal status for NGO:
- What’s your Orientation?
- Level of Operation
- Structure of the organization
- Compliance Requirements
Apart from the fact that NGO is done for charitable purpose one has to clearly define the purpose or vision of the organization. The vision also influenced the choice.
Another crucial factor will be the operational level of the intended organization. The scale of operation is important point of consideration. Therefore, if the area of operation will be regional, state-level, national etc. must be decided beforehand.
Structure of the organization is also be determined before initiating NGO registration. If the contributors are different from the actual management then Section 8 Company is a better option from a society and vice versa.
Before making a final decision regarding NGO it is required that one must consider all the compliance requirements for different types of set up. As in case of Section 8 Company annual compliances under Companies Act, 2013 are a mandatory requirement, Trust and Society do have any such annual compliance requirements.
What are the key elements for NGO Registration?
If you are planning for NGO registration, there are certain crucial decisions that are required to be finalized beforehand. As these key factors are required to be finalized and implemented through registration procedure. These key factors include:
In order to set up any kind of organization one must determine the vision for the it. A clearly set main objective helps the management to focus on the area of work and determines the area of operation.
Once you have finalized the area of operation you can determine the structure of the organization in which it will operate and will be most suitable for the vision for the proposed NGO.
3. GOVERNING BODY
In order to make sure that your nonprofit organization is working without any hindrance a governing body must be formed. This governing body shall include dedicated people who are like minded and have a single objective of furtherance of the main objects of the organization.
Before starting the procedure of registration the promoters must decide a name for the organization with which it will be registered.
5. LOCATION & AREA OF OPERATION
The applicant must have a registered office address available. While registration copy of registered office address must be available along with a no objection certificate from the owner of the property.
6. DRAFT BY-LAWS
In order to ensure smooth operation of the organization a detailed incorporation document/ by-laws must be drafted. These by-laws must clearly define the rules and regulations, objects, responsibilities along with dispute resolution provisions. Following documents will include by-laws in case of different business models;
- Trust Deed in case of Trust
- Memorandum of Association By-laws in case of Society
- Memorandum and Articles of Association ( MOA& AOA) in case of Section 8 Company.
What is the NGO Registration Procedure in India?
Here, we have provided a glimpse of registration procedure for NGO all the available legal entities.
Charitable Trust Registration Procedure in India
As per Indian trust Act following are the minimum requirement as a Trust in India;
- Clarity as to for what purpose it is created
- Intention to create a Trust
- Clear definition of the beneficiary
- Trust property assigned by the assignee
Once all the above required pre-requisites are met with you can proceed by following these basic steps;
- STEP 1: Choose an apt name for your NGO
- STEP 2: Determine the settlor, minimum 2 trustees and a clear definition of who will be the beneficiary.
- STEP 3: Prepare the MOA and by-laws and execute a proper trust deed containing all the key provisions and clauses.
- STEP 4: The Trust Deed must be executed on stamp paper of sufficient value based on the value of the property assigned to the Trust.
- STEP 5: Finally, the Trust Deed must be signed by all the trustees and settlor and registered with the Local Registrar of the area in which registered office of the NGO is located.
Society Registration Procedure in India
If you are planning for registering a NGO in the form of a Society you are required to follow following simple steps:
- STEP 1: Choose an apt name for your NGO
- STEP 2: Form a governing body of the proposed Trust.
- STEP 3: Prepare the MOA and by-laws of the proposed Society including all the rules and regulations for the NGO registration and operation.
- STEP 4: Once everything is finalized the applicant is required to submit this MOA and rule and regulation document along with the registration forms to the Registrar of Society of state in which jurisdiction the registration is done.
Section 8 Company Registration Procedure in India
If you are planning for registering a NGO in the form of a Section 8 Company, then there are certain additional formalities that are required to be met with. Following steps are involved in the form of a Section 8 Company:
- STEP 1: Choose an apt name for your NGO and make sure that it does not resemble any already registered company or Limited Liability Partnership. This proposed named must be filed for reservation through Reserve Unique Name facility available on the MCA portal. Maximum 2 names can be filed through in one go.
- STEP 2: Once name is approved you are required to prepare the MOA and AOA of the organization along some other required documents like projected Profit and loss statement, statement of assets and liabilities, brief description of work etc.
- STEP 3: Once all the documents are prepared submit an online application to respective ROC for issue of License in Form INC-12.
- STEP 4: After review by the ROC, license is issued. Then, file incorporation application in SPICe Form along with the required document as attachments.
- STEP 5: After proper verification of the application Certificate of Incorporation (COI) will be issued. This COI will contain the Company Identification Number (CIN) along with Company’s PAN & TAN number.