What is an NGO
NGO (Non-Government-Organization) is agroup or institution which is:
Largely independent of government and which have
Primary humanitarian or cooperative rather than commercial objectives.
NGO's included charitable and religious associations that mobilize private funds for development, distribute for family planning services and promote community organization. They also included independent co-operatives, community associations, water-user societies, women's groups and pastoral associations. Citizen groups that raise awareness and influence policy are also NGOs.
Characteristics of an NGO
Non-profit making, voluntary, service-oriented organization.
Organization of private individuals who believe in certain basic social principles and take proper efforts for the development of concerned communities.
Assisting in empowerment of people
Working for the empowerment of socially marginalized groups
Not affiliated to political parties.
Committed to the route causes of the problems and trying to better the quality of life especially for the poor , the oppressed marginalized in urban and rural areas.
The related area of working for NGO's
Art and craft
Cities and urban
Culture and heritage
Science and technology
Other social and cultural activities.
Formation of NGO
Based on the Indian Acts an NGO can be formed as:
as a charitable trust
as a society under the societies registration act
as a licensed company under section 25 of the companies act, 1956
Formation of an NGO as a trust
Charitable trust is one which works for the benefit of the public or of mankind. In most of the cases some property is dedicated to public utility, an institution is founded and somebody is entrusted with the duty of performing the Acts.
The registration of a trust is optional but in case of a charitable trust in relation to an immovable property, for claiming exemption of the income tax, it has to be registered.
Registration of trust under public trusts act
in some states like Maharashtra and Gujarat, charitable trust is required to be registered under public trusts act, 1950 as a public trust and they comes under the supervision of the charity commissioner of the State.
Formation of an NGO as a society
A society is a company or an association of persons united together by mutual consent to act jointly for same common purpose.
As per the societies registration act, 1860, a society can be formed my minimum 7 persons for any of the following purposes :
Grant of charitable assistance
Creation of military orphan funds
Promotion of science
Literature or the fine arts
Instruction and diffusion of useful knowledge
Diffusion of political education
Foundation or maintenance of libraries or reading rooms for general use of members or the public,
Public museums and galleries of paintings and other works of Collection of natural history
Mechanical and philosophical inventions
Instruments or designs.
Besides, the State governments are empowered to add more objects to the above list.
The advantage of forming a society
Gives a corporate appearance to the organization,
Provides greater flexibility as it is easier to amend the memorandum and bylaws of the society than in case of a trust, terms of which are strictly manifested in the trust deed.
However formation of the society requires more procedural formalities than in case of a trust.
Who can form a society?
Individuals (excluding minors but including foreigners)
Are eligible to form a society
There are two important documents which have to be drafted, signed and witnessed in the prescribed manner before obtaining the registration of the society. First one is the memorandum of association and the second one is the rules and regulations.
The memorandum of association: It is the charter of the society. It describes the objects of the society's existence and its operation.
Rules and regulations: the rules and regulations of the society are framed to :
a: guide the members of the governing body
b: To regulate the functions of the society
c: To regulate its internal management
After the memorandum and rules and regulations of the society have been drafted, signed and witnessed in the prescribed manner, the members should obtain the registration of the society.
As per the society's registration act 1860, following documents are required to be filed with the registrar of societies:
Covering letter requesting for registration.
Memorandum of association (MOA)
Rules and Regulations bylaws.
An affidavit of the President/secretary of the society.
Documentary proof in respect of premises such as house tax receipt or rent receipt of the registered office of the society or no objection certificate from the landlord of the premises.
An authority duly signed by all members of the managing committee.
A declaration by the members of the managing committee about the proper utilization of the funds.
After the registration formalities have been completed and the registrar is satisfied about the compliance of the provisions of the act, he then issues a certificate of registration.
An unregistered society cannot claim benefits under the income tax act
Formation of an NGO as a company
Under section 25 of the companies act, 1956, an association can be formed as a company
For the purposes of promoting commerce, art, science, religion, charity or any other useful object
With intention to apply its profits or other income for promoting its objects
Which prohibits payment of any dividend to its members?
Procedure for obtaining a license u/s 25 of the companies act.
For obtaining a license the association shall follow the following steps
The availability of the name should be assessed and from the registrar of companies.
Memorandum of association ( MOA ) and articles of association (AOA) are to be drafted.
Applying to the jurisdictional registrar of companies for incorporation of the company, along with memorandum and articles, prescribed forms and other documents.
The registrar issues a certificate of incorporation after satisfactory compliance of all formalities. From that date the company comes into existence.
An application with the following documents should be submitted to Regional Director, Company Law Board of the region in the prescribed form:
Typewritten copies of draft memorandum and articles of association of the proposed company.
Detailed information of promoters like names, addresses etc.
List of companies, association and other institutions in which promoters are directors or hold responsible positions, with the description of positions held
List of members of the proposed Board of Directors
Declaration in the prescribed form by an advocate, attorney, pleader, chartered accountant or a whole time practicing Company Secretary.
Copies of accounts balance sheet and reports on working of association for last two financial years.
Statement of assets and liabilities.
Sources of income and estimate of annual income and expenditure.
A note on works already done and proposed to be done by the association.
Grounds in brief for making application u/s 25.
Declaration signed by each of the application.
After making application to the regional director a notice is required to be published in the newspaper within a week.
A copy of the application with all enclosures and accompanying papers should be sent to the registrar of companies of the state.
After the approval of the draft memorandum and articles by the regional director, the association should apply to the registrar of companies The registrar then issues a certificate of incorporation.
Association already registered as company
An association already registered as a company may also apply for a license u/s 25, to the regional director, company law board.
The license is granted by the regional director after the scrutiny of the applications and considering the recommendations of the registrar made on the application.