Procedure for Registration of a NGO - Section 25 (Nonprofit) Company in India

Under Indian law, 3 legal forms exist for NGO or Non-Profit Organizations:

1. => Trusts
2. => Societies
3. => Section 25 companies

Due to a better laws, Section 25 companies have the most reliable strongest organizational structure:

1. => Indian Trusts have no central law.
2. => Indian Societies have different legal and institutional frameworks from state to state.
3. => 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:

1. => a voluntary association of people for promoting commerce, arts, science, religion, charity, etc.
2. => wherein no profits or other income is distributed to its members by way of dividend, etc.
3. => 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: -

1. => Three Copies of MoA & AoA of the proposed Company.
2. => A declaration confirming the application by Ozgian, who are qualified as CA / CS / Advocate on prescribed Stamp Paper.
3. => 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.
4. => A statement showing details of assets & liabilities of the Association as on date with the application.
5. => An estimate of future annual income & expenditure of the proposed company, specifying the source of income & object of expenditure.
6. => A statement giving brief description of work, if any, already done by the association.
7. => A statement specifying briefly the grounds on which the application is made.
8. => A declaration in prescribed form on non-judicial stamp paper by each person making an application.
9. => A letter of authority.
10. => 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

                        

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