The Company Act of 2006 defines three types of businesses. One example is a non-profit organization.
A not-for-profit organization is one that was formed with the intention of not distributing or paying any profit, dividends, or other money to its members from profits earned or savings generated for the achievement of any goals. It serves non-commercial social well-being goals.
According to the Business Act, the minimum number of members required to register a not-for-profit company is five (5), with no maximum number of members.
General objectives of a not-for-profit company
- To develop and promote any profession or occupation
- To protect the collective rights and interests of the persons engaged in a specific profession or occupation
- To carry on any enterprise for the attainment of any scientific, academic, social, benevolent or public utility or welfare objective on the condition of not distributing dividends.
Following documents are required for registering a not-for-profit company.
- Two signed copies of the memorandum of association of the proposed company
- Two signed copies of the article of association of the proposed company
- The application for registration
- Notarised copies of citizenship certificates of all members
- The power of attorney: It is a document that provides authority to another person to act on behalf of directors/founders. The person providing the authority is regarded as the principal whereas the person to whom authority is provided is regarded as an agent.
Procedure for the registration of a not-for-profit company
Step 1: Online registration of the proposed name as in the registration of other companies
Step 2: Submission of the memorandum of association and the article of association along with the application for registration
Step 3: After examination of all submitted documents, the Office of Company Register will issue a certificate of registration.
Step 4: Application for business registration at the concerned ward office
Step 5: Application for permeant account number (PAN) registration at the concerned revenue office
Step 6: Registration at Social Welfare Council
A company receiving foreign grants is required to be registered with the Social Welfare Council. For a company not taking foreign grants, it is not compulsory to register.
The government tax for registering a non-profitable corporation is Rs 15,000, and there is no renewal fee. The above-mentioned charge does not include government taxes levied by the ward office.
Restriction on profit distribution
Not-for-profit organizations are prohibited from delivering dividends, bonuses, or any other money derived from their revenues to its members or staff. If the company makes a profit, it must reinvest money in services or business expansion in order to continue providing services. The company’s revenue and property are not distributable to its incorporators, members, directors, officers, or anybody related to any of them, and must be utilized to further the purpose for which it was formed.