NGO Registration

In India, there are majorly 3 types of charitable organisations, also known as NGOs and all 3 of them are governed by different entities. 

1. Trust
2. Society
3. Not-for-profit Company also known as Section 8 Company

WHAT IS A TRUST?

Trust Registration is done in India by the Trust Act, 1882. A Trust is created for the beneficial interest of the Beneficiary. We can broadly classify trusts into two categories on this basis:

1. Private Trusts
2. Public Trusts

Where the Trust is created for the benefit of a specified person or class of persons, it is known as a Private Trust. On the contrary, where the Trust Property is administered for the benefit/enjoyment of general public or a fluctuating class of persons and not just limited to a selective group, it is known as a Public Trust. As such, a Private Trust need not be charitable or religious in nature as opposed to a Public Trust.

What are the requirements for creation of a Trust?

1. Settlor/Author: A person who is the owner of a property and wants to create a Trust for benefit of a particular person or group of persons.

2. Trustee: A person in whose favour the Trust Property is bequeathed upon by the Settlor/Author and a Trust is created by declaration inter vivos or by a will.

3. Beneficiary: The person or class/group of specified persons for whose beneficial interest the Trust is created.

4. Objective: Any Trust is created with a particular objective. Such objective should be stated clearly under the terms of a Trust Deed or verbally when there is no Trust Deed.

5. Trust Property: There must be property (movable/immovable) which the Settlor wants to bequeath upon the Trustee for creation of a Trust.

6. Trust Deed: A written document which is duly signed by the Settlor/Author and the Trustee, specifying the Objective and Beneficiary of the Trust so created.

Such Trust Deed is not required where:

• the Trust Property is movable and;
• the Trust is created through a will.

7. PAN: For the Trustee to pay tax on behalf of the Beneficiary(ies), it is required to apply for a Permanent Account Number (PAN). The application should be made before the Assessing Officer, in duplicate, in Form No. 49A.

8. TAN: If the Trust needs to deduct tax at source for its employees or other staff engaged to manage or administer Trust Property, then it needs to apply for Tax deduction Account Number (TAN) before the Assessing Officer, in duplicate, in Form No. 49B.

9. FCRA Registration: Every Trust needs to apply for registration under Section 6(1), Foreign Contribution (Regulation) Act, 2010 (“FCRA”), if it is desirous of accepting donations from foreign sources.

10. Separate account for Foreign Contributions (FC A/c): If the Trust wants to receive foreign donations and is registered under FCRA, it needs to open a separate account for this specific purpose.

11. Separate set of records for foreign contributions: Every organisation/individual needs to maintain separate set of records exclusively for the receipt and utilization of foreign donations/contributions.

12. Approval from RBI: In case where the beneficiary is a non resident, prior approval from RBI is required to that effect.

13. TIN Registration: If a Private Trust deals with the trading and manufacturing of goods and services, even when the motive is not to earn profit, it needs to apply for Taxpayer Identification Number (TIN) before the Excise and Taxation Department of its respective State. Such TIN is used for filing VAT and Service Tax Return subsequently.

Documents/Details Required for Trust Registration

Following self-attested documents of the members is required: 

1. Two identity proof documents of Trustees – Copy of Aadhaar Card/ Voter ID Card/ PAN Card (compulsory).
2. Address proof (Voter ID, Passport, Driving license, etc.)
3. In case your own premise, ownership and sale deed and one address proof document of registered office (like water, telephone, mobile bill or copy of bank pass book or net banking statement mentioning address of the applicant).
4. In case the property is on rent, then you need to submit a copy of the rent agreement with NOC from Landlord.
5. Passport size photo of Trustees.
6. Occupation details, Email address, Contact details.
7. Trust deed.

Trust Deed Registration

The Trust Deed must be executed on Stamp Paper of suitable value and signed by the settlor and two witnesses. Once the Trust Deed is executed, it can be registered with the Local Registrar. The Registrar would then register the Trust, retain photocopy of the Trust deed and return the original registered Trust Deed back to the settlor.

Steps for Physical Registration

1. Take all the necessary documents and Trust Deed draft to the Registrar office in the city.
2. Pay the required fees.
3. On being satisfied, registrar shall do the formalities and give a date for physical verification.
4. After that, get the deed ready in proper stamp paper, self-attested copy of KYC, original KYC and the Settlors themselves and get the Trust registered.

Steps for Online Registration

A trust is required to apply for registration in Form No. 10A. The documents which are required to be furnished along with application Form No. 10A are as follows:

1. where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
2. where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
3. self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
4. self-certified copy of the documents evidencing adoption or modification of the objects, if any;
5. where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up; note on the activities of the trust or institution;
6. self-certified copy of existing order granting registration under section 12A or Section 12AA, as the case may be; and
7. self-certified copy of order of rejection of application for grant of registration under section 12A or Section 12AA, as the case may be, if any.

Advantages of a Trust

1. Limited liability is possible if a corporate trustee is appointed
2. The structure provides more privacy than a company
3. There can be flexibility in distributions among beneficiaries
4. Trust income is generally taxed as income of an individual.

Disadvantages of a Trust

1. The structure is complex
2. The Trust can be expensive to establish and maintain
3. Problems can be encountered when borrowing due to additional complexities of loan structures
4. The powers of trustees are restricted by the trust deed.

WHAT IS A SOCIETY?

A society is an association of several individuals combined using a mutual accord to deliberate, govern and act cooperatively for some communal purpose. Societies are usually registered for the advancement of charitable activities like sports, music, culture, religion, art, education, etc.

Society Registration, under The Society Registration Act in India, lays down certain procedures for the sake of society registration & operation. This act was implemented with the purpose of augmenting the legal stipulations of society registration for the advancement of literature, fine arts, science or distribution of awareness for bountiful purposes. The society registration act, 1860 has been accepted by several state governments without or with further amendments.

According to section 20 of the Society Act, 1860, a society registration can be done for the following purposes:

• Promotion of fine arts.
• Diffusion of political education.
• Grant of charitable assistance.
• Promotion of science and literature.
• Creation of military orphan funds.
• Maintenance or foundation of galleries or public museum.
• Maintenance or foundation of reading rooms or libraries.
• Promotion or diffusion or instruction of useful knowledge.
• Collections of natural history.
• Collections of mechanical and philosophical inventions, designs, or instruments.

Documents/Details Required for Society Registration

1. PAN Card of all the members of the proposed society has to be submitted along with the application.

2. Residence Proof of all the members of the society also has to be submitted. The following can be used as valid residence proof: Bank Statement/ Aadhaar Card/ Utility Bill/ Driving License/ Passport.

3. Memorandum of Association: The memorandum of association has to be prepared which will contain the following clauses and information:

• The work and the objectives of the society for which it is being established.
• The details of the members forming the society.
• It will contain the address of the registered office of the society.

4. Rules & Regulations of the Society: The rules and regulations of the society also have to be prepared which will contain the following information:

• Rules and regulations by which the working of the society will be governed and the maintenance of day to day activities.
• It will contain the rules for taking the membership of the society.
• The details about the meetings of the society and the frequency with which they are going to be held is to be mentioned.
• Information about the Auditors.
• Forms of Arbitration in case of any dispute between the members of the society.
• Ways for the dissolution of the society will also be mentioned

Once the rules have been formed, they can be changed but the new set of rules will be signed by the President, Chairman, Vice President and the Secretary of the Society.

5. Covering letter: A covering letter mentioning the objective or the purpose for which the society is being formed will be annexed to the beginning of the application. It will be signed by all the founding members of the society.

6. Proof of Address: A copy of the proof of address where the registered office of the society will be located along with a NOC from the landlord if any has to be attached.

7. List of all the members: A list of all the members of the governing body has to be given along with their signatures.

8. Declaration: A declaration has to be given by the president of the proposed society that he is willing and competent to hold the said post.

All the above documents have to be submitted to the Registrar of Societies along with the requisite fees in 2 copies. On receiving the application, the registrar will sign the first copy as acknowledgement and return it while keeping the second copy for approval. On proper vetting of the documents, the registrar will issue an Incorporation Certificate by allotting a registration number to it.

The signed Rules & Regulations, as well as Memorandum, has to be filed with the concerned society or registrar of state with a mentioned fee. If the registrar is fulfilled with the society registration application, then they will certify that the society is registered.

Steps for Registration

Similar to Partnership firms, society can also be either unregistered or registered. But, only the registered societies will be able to withstand consigned properties and/or have an ensemble filed against or by the society.

Society registration is maintained by state governments. Thus, the application for society registration must be created to the specific authority of the state, where the registered office of the society is situated.

For Society registration, the establishing members must agree with the name of society first and then prepare for the Memorandum, followed by Rules & Regulations of the society.

1. Selection of a Name

When selecting a name for society registration, it is vital to understand that according to Society Act, 1860, an identical or similar name of a currently registered society will not be allowed. Moreover, the proposed name shall not suggest for any patronage of the state government or the government of India or fascinate the provisions of the Emblem & Names Act, 1950.

2. Memorandum of Association

The Memorandum of Association of the society along with Rules & Regulations of society must be signed by every establishing member, witness by Gazetted Officer, Notary Public, Chartered Accountant, Oath Commissioner, Advocate, Magistrate first-class or Chartered Accountant with their official stamping and complete address.

 

The memorandum must contain the name of the society, the object of the society. Also, it consists of details of members of the society registration along with their names, addresses, designations, and occupations. The following document has to be prepared, submitted and signed for the sake of registration:

• Requesting society registration by providing covering letter, signed by all establishing members.
• Duplicate copy of Memorandum of Association of society along with certified copy.
• Duplicate copy of Rules & Regulations of society along with duplicate copy duly signed by all establishing members.
• Address proof of registered office of society as well as no-objection certificate (NOC) issued by landlord.
• Affidavit avowed by secretary or president of society declaring relationship among subscribers.
• Minutes of meeting regarding the society registration along with essential documents.

WHAT IS A COMPANY NOT FOR PROFIT / SECTION 8 COMPANY?

Registered under The Companies Act, 2013, where it is proved to the satisfaction of the Central Government (Power delegated to ROC) that a person or an association of persons proposed to be registered under this Act as a limited company— 

1. has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
2. intends to apply its profits, if any, or other income in promoting its objects; and
3. intends to prohibit the payment of any dividend to its members.

the Central Government may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word ― “Limited”, or as the case may be, the words ― “Private Limited”, and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.

Documents/Details Required for Incorporation of a Section 8 Company

Following self-attested documents of the Proposed Director and members is required: 

8. Two identity proof documents of Directors and Shareholders – Copy of Aadhaar Card/ Voter ID Card/ PAN Card (compulsory).
9. Address proof of the Director or the Shareholder (Voter ID, Passport, Driving license, etc.)
10. In case your own premise, ownership and sale deed and one address proof document of registered office (like water, telephone, mobile bill or copy of bank pass book or net banking statement mentioning address of the applicant).
11. In case the property is on rent, then you need to submit a copy of the rent agreement with NOC from Landlord.
12. Passport size photo of the proposed director & shareholders.
13. Occupation details, Email address, Contact details of directors as well as shareholders.
14. MOA and AOA subscriber sheets.
15. DIN (Director Identification Number) of all directors.
16. DSC (Digital Signature Certificate) of all directors.
17. Nationality proof of foreign national subscriber (if any).

Steps for incorporation

1. Reservation of name for 20 days using the SPICE+ (INC-32) Application on MCA. The name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, and the like etc. 
2. Preparation of MOA of Section 8 Company must be in form INC-13 while there is no format prescribed for AOA for Section 8 Company. One can adopt table F provisions. MOA & AOA of the company shall be signed by each subscriber who shall mention his name, address, description and occupation in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation.

3. File the following forms within next 20 days with SPICE+ :-

INC-13	Memorandum of Association
	Articles of Association (No specified format)
INC-14	Declaration in by CS/CA/CWA in practice, that the draft MOA & AOA have been drawn up in conformity with the provisions of Section 8 and rules made thereunder relating to registration of the company under Section 8 and matters incidental or supplemental thereto have been complied with
INC-15	Declaration by each of the persons making the application
INC-9	Declaration shall be submitted by each of the subscribers to the memorandum and each of the first directors named in the articles
DIR-12 and DIR-2	Particulars of first director of the company and his interest in other firms or body corporate along with his consent to act as a director
	An estimate of the future annual income and expenditure of the company for next three years
	Name Approval Letter received from CRC

Note:-  SPICe 33 and 34 i.e e-MOA and e-AOA can’t be used for Section 8 Company. Section 8 companies are mandatorily required to file MOA and AOA as pdf attachments to SPICe-32.

Certificate of Incorporation of the company will be issued by Registrar of Companies(ROC) after approval of the above. The company should file for seeking permission to commence the business within 180 days of the date of incorporation.

Advantages of a Section 8 Company

1. Section 8 Company is a separate legal entity and is different from its members. The Company has perpetual existence. Along with having organized operations and greater flexibility.

2. A Section 8 Company is exempt from the requirement of paying stamp duty on the MOA and AOA of the private or public limited company, which is applicable for registration of other kinds of company structures.

3. No minimum capital limit has been mentioned for a Section 8 Company in India. And the capital structure can be altered at any stage as per the growth requirements of the company. This implies that it can be formed without any share capital. The funds necessary for carrying the business operations can be brought, later, in the form of donations and/or subscriptions from members and the general public.

4. Requirements of Companies Auditor’s Report Order or CARO do not apply to this type of company.

5. For Section 8 Companies in India, many tax benefits are granted.

6. Section 8 Companies are more reliable than all other forms of charitable organizations. They are governed by the Companies Act and are regulated strictly. Such as the requirement of a mandatory annual audit, and both the “MOA and AOA” cannot be altered at any stage or situation. The rules on managing the profits and losses of the company make these companies trustworthy.

7. Those donating to a Section 8 Company are eligible for tax exemptions u/s 12A and 80G of the Income Tax Act.

8. A registered partnership firm can become a member in its individual capacity and obtain Directorship.

Disadvantages of a Section 8 Company

1. Profit or Any other Income of the Company is applied for the promotion of the main object only.
2. Declaration of dividend or distribution of profit to the members is not allowed.
3. No member can be appointed as a remunerated officer of the Company.
4. No remuneration / benefit shall be paid to a member being a servant / officer of the Company (except reimbursement of out of pocket expenses, reasonable interest on money lent or reasonable rent on the premises)