The Company Act, 2006, lists three types of companies. One among such is the not-for-profit company.
A not-for-profit company is a company established with the conditions that it shall not be distributing or paying any profit any dividends or any other money out of the profits earned or savings made for the attainment of any objectives to its members. It has non-commercial purposes of social well-being.
As per the Company Act, the minimum number of members required for registering a not-for-profit company is five (5) with no limit on the 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 company not distributing profit is Rs 15,000 and there is no renewal charge. The aforementioned fee excludes the government taxes levied by the ward office.
Restriction on profit distribution
Not-for-profit companies are restricted from distributing dividend, bonus or any other amount, from the profits earned to their members or employees. If the company is earning profit through any means, it shall be reinvested in services or business growth for delivering services. The income and property of the company are not distributable to its incorporators, members, directors, officers or persons relating to any of them and must be used to advance the purpose for which it was incorporated.