Under Indian
law, 3 legal forms exist for NGO or Non-Profit Organizations:
- => Trusts
- => Societies
- => Section 25 companies
Due to a better
laws, Section 25 companies have the most reliable strongest organizational
structure:
- => Indian Trusts have no central law.
- => Indian Societies have different legal and institutional frameworks from state to state.
- => Indian Companies (incl. Sec 25 companies), have one uniform law across the country - Companies Act 1956.
It is this robust Act that regulates the
formation, management and
accountability of a Section 25 company, thus making it more closely regulated
and monitored than trusts and societies, and recognised all over the
world.
A company
incorporated under Section 25 of the Companies Act 1956 is:
- => a voluntary association of people for promoting commerce, arts, science, religion, charity, etc.
- => wherein no profits or other income is distributed to its members by way of dividend, etc.
- => such a company is not required to suffix the term “limited” or “Private limited” to its name.
A
comparison
SECTION 25
COMPANY
|
SOCIETY
|
TRUST
|
|
Objects
|
Non-profit
activities
|
Charitable, Literary, Scientific, etc
|
Charitable, Socially beneficial
|
Statute/Law
|
Indian
Companies Act 1956
|
Societies Registration Act 1860
|
Bombay Public
Trusts Act or Indian Trust Act
|
Alternation of
objects
|
Complex
legal procedure
|
Simple procedure
|
Normally only Settlor can modify
|
Formation
|
Complex
procedure, 3-6 mths.
|
Simple and easy
|
Simple and easy
|
Management
|
Formalities
of Company law have to be observed.
|
Few restrictions imposed under the Act
|
Very few restrictions imposed under the Act
|
Meetings
|
To be held
as per provisions of law which are quite extensive.
|
Annual meeting as per law and Rules of the society
|
No provisions laid down
|
Penalties
|
Various
offences and lapses attract severe penalties.
|
Few offences and penalties have been prescribed
|
Very negligible
|
Legal Status
|
Full
legal status
|
Legal status with certain limitations
|
Legal status with limitations
|
Statutory
Regulation
|
Exhaustive
but mature
|
Very limited
|
Nominal
|
Removal of
members
|
Not
possible without consent
|
Possible without consent
|
Not applicable
|
Dissolution or
takeover by state
|
Very
difficult
|
Possible
|
Possible
|
Procedure of Registration of
Section 25 (Nonprofit) Company
Step-1
Apply in
Form No. 1A to concerned ROC, for availability of name in order of preference
(without addition to its name of the word "Limited" or the words
"Private Limited").
Step-2
Prepare
Memorandum & Articles of Association.
Step-3
Make an
application in E form 24A online to the Concerned Regional Director for issue
of license under Section 25 of the Companies Act, 1956. The application should
be accompanied by: -
- => Three Copies of MoA & AoA of the proposed Company.
- => A declaration confirming the application by Ozgian, who are qualified as CA / CS / Advocate on prescribed Stamp Paper.
- => Three copies of list of names, descriptions, addresses & occupation of the promoters as well as the members of Board of Directors of the proposed Company.
- => A statement showing details of assets & liabilities of the Association as on date with the application.
- => An estimate of future annual income & expenditure of the proposed company, specifying the source of income & object of expenditure.
- => A statement giving brief description of work, if any, already done by the association.
- => A statement specifying briefly the grounds on which the application is made.
- => A declaration in prescribed form on non-judicial stamp paper by each person making an application.
- => A letter of authority.
- => Payment of prescribed fees.
Step-4
Notice
pursuant to regulation 11 of the Companies Regulation, 1956 shall be published
within one week before or after the admission of the application in one or
more
newspapers (one in English and other in vernacular local
newspaper).
Step-5
Simultaneously
furnish the copy of application with all its enclosure and accompanying papers
to the concerned Registrar of Companies.
Step-6
The
Concerned RoC do the scrutiny of the information of Directors and Promotors of
the Proposed company and sent a Scrutiny report to the concerned RD within 15
days of the receipt of such application. The concerned ROC also gets the draft
MOA & AOA vetted and then list outs the modifications considered necessary
and forwards the same to RD within fifteen days of receipt of the copy. He may
normally advise RD to grant license to the proposed company or
not.
Step-7
The
concerned ROC may consult for the views of District Magistrate of the state
within whose jurisdiction the registered office of the proposed company is to
be located. Copy sent to RD and reply is generally directly received by ROC
from DM.
Step-8
In case,
the considerations for issue of license are more important, the RD may consult
the State Government too. The RD may also consult the ministries concern and
determine, if any, objections received.
Step-9
On
receipt of the above papers, the RD gets the MOA & AOA and other papers
generally scrutinized.
Step-10
Having
received all the necessary views from the ROC, DM, State Government, the RD
will take the decision for grant of license to the application or not.
(Generally the license is granted within 30 days from the date of filing of
application with the RD).
Step-11
Departmental
instruction shall be strictly followed. The license may be revoked, with
Company's right to be heard.
Step-12
After
obtaining the license the MOA & AOA be printed as approved.
Step-13
File the
necessary papers with ROC for registration along with filing fees (maximum
filing fees payable is Rs.5000/-) and also produce the license granted by the
RD. The Stamp duty is also chargeable in some states these days.
Step-14
The ROC
on making necessary scrutiny and correction will issue the certificate of
incorporation.
Expected
Processing Period for registering a
company under Section 25
&n
bsp;
Step No.
|
Particulars of Action/
Documents Required
|
Processing
Period
|
1
|
Apply
in Form No. 1A to concerned ROC, for availability of name in order of
preference. Info required: -
§
Full name & residential
address of each of promoters.
§
Names of the proposed
Company in order of their preference (without addition to its name of the
word "Limited" or the words "Private Limited").
§
Proposed main object of the
proposed Company (shall be one as depicted u/s 25 of the Companies Act,
1956).
Mention that the
proposed Company is to be formed under provisions of Sec. 25 of the
Companies
Act, 1956
|
3 -
4 working days
|
2
|
After
the name is approved, prepare Memorandum & Articles of Association;
preferably get it vetted by ROC / RD. Keep in mind that the MOA & AOA
are
drawn in consonance with provisions of the Sec. 25 & other applicable
provisions of the Companies Act, 1956.
|
3 -
4 working days
|
3
|
Make
an application with to the Concerned Regional Director for issue of license
under Section 25 of the Companies Act, 1956 with all the requisite enclosure
as given under:-
§
Three Copies of MOA & AOA
of the proposed Company
§
A declaration confirming the
application by CA / CS / Advocate on prescribed Stamp Paper.
§
Three copies of list of names,
descriptions, addresses & occupation of the promoters as well as the
members of Board of Directors of the proposed Company.
§
A statement showing details of
assets & liabilities of the Association as on date with the
application.
§
An estimate of future annual
income & expenditure of the proposed company, specifying the source of
income & object of expenditure.
§
A statement giving brief
description of work, if any, already done by the association.
§
A statement specifying briefly
the grounds on which the application is made.
§
A declaration in prescribed form
on non-judicial stamp paper by each person making an
application.
§
A letter of authority.
§ Copy of notice pursuant to regulation 11 of the
Companies
Regulation, 1956.
|
8 -
10 working days
(depending upon the preparation of documents, availability of each of the
promoters and publication of notice in newspaper)
|
4
|
Simultaneously
furnish the copy of application with all its enclosure and accompanying
papers to the concerned Registrar of Companies.
|
|
5
|
On receipt
of the above papers, the RD gets the MOA & AOA and other papers
generally
scrutinized, the RD will take the decision for grant of license to the
application or not.
|
30 -
45 working days
|
6
|
On
receipt of the license from RD, file the necessary papers with ROC for
registration along with filing fees & forms. The ROC on making necessary
scrutiny and correction will issue the certificate of
incorporation.
|
8 - 10
working days
|
