Planning to start an NGO: Know the Legal Formalities

Introduction

Non-governmental organizations, or NGOs, were initially referred to as such in 1945 under Article 71 of the newly formed United Nations Charter.[1] Since there is no clear or official definition for NGOs, they are often defined as non-profit organizations that are not subject to government interference. A non-governmental organization (NGO) is an organization that is not for profit and operates autonomously of any government. They are frequently referred to as civil societies. They are established on international and regional levels to advance a political or social objective, such as the environment or humanitarian concerns ranging from health concerns to the eradication of social evils.

Activities of NGOs include, but are not limited to social advocacy and human rights work. They are vital to society’s development, community improvement, and public participation. They contribute significantly to global development, assistance and charity. They are not-for-profit by definition, but may have annual budgets in the millions or even billions of dollars. As such, NGOs receive income from a number of sources, ranging from membership dues to government assistance and private donations.

Classification of NGOs

NGOs are classified on the basis of:

• Type of activities: Development, human rights, environmentalism, consumer protection or health.
• Operation size: Local, regional, national or international.

According to the United Nations Department of Global Communications, an NGO is “a not-for-profit, volunteer citizen’s group organized on a local, national, or international level to address issues in the public interest.”[2]NGOs are charity and religious organizations that raise private donations for development, provide food and family planning assistance and encourage community organization. Additionally, they comprise autonomous cooperatives, community associations, water-user societies, women’s organizations, and pastoral organizations. Citizen groups that promote awareness and affect policy are also considered non-governmental organizations.[3]

In India, establishing and running an NGO is very identical to running a business, except that one must maintain transparency.

Registration of NGO’s as a Legal Entity

To establish an NGO in India, the very first step is to obtain an NGO registration. Before selecting whether to register an NGO under a given law, its aim and purpose of formation must be ascertained. The same is necessary for creating it as a legal entity and is critical in order to realize the objectives of the community in which the organization works. After its registration, a volunteer organization becomes a self-contained ‘legal entity’. It exists independently of its leaders or members and those working in the organization.

Types of NGO Registration

There are three methods to register non-governmental organizations in India-

1. Society registration: One approach to register an NGO is as a society. Individuals form societies for the aim of furthering charitable, scientific and various other objectives, as specified in Section 20 of the Society Registration Act 1860.[4]
2. Trust registration: The Indian Trusts Act, 1882[5], can be used to register a trust. These are public charitable trusts that are frequently established when real estate or other property is concerned. A trust is frequently used to provide medical assistance, alleviate poverty and promote education, among other things.
3. Section 8 Company registration: Section 8 under the Indian Companies Act, 2013 is the third method of registering an NGO.[6]Such corporations are intrinsically linked to trust and society. These corporations are formed to safeguard commerce, charitable organizations, social welfare, religions, environment, among others. However, the revenues of this corporation are not distributed to shareholders, instead are used to promote the company. They are registered as a charity under the Companies Act, 2013 and operate exclusively for charitable purposes. They enjoy a higher level of trust with stakeholders, government agencies and donors.

Requirements for Registration of NGOs

In accordance with the Societies Registration Act, 1860, a least of seven or more members is needed to form a trust or non-governmental organization and a minimum of eight promoters from seven different states is necessary to form a national level NGO, trust or society. The authorized person should be one of the promoters and must register the Trust or NGO, along with three suggested alternative names. The registrar finalizes the NGO’s name after comparing the recommended names to those already registered. Corporations, partnership firms, registered societies and individuals are all eligible to form a trust or NGO. Two critical documents necessary for NGO registration are Rules and Regulations and Memorandum of Association.

Documents needed for the Registration of NGOs

1. Identity Proof (Voter ID/ Aadhar Card, etc)
2. Registered Office Address Proof
3. Proof of residence
4. Passport
5. At least two shareholders
6. Minimum of two directors
7. At least one Director should be an Indian resident
8. Documents claiming the ownership such as Sale Deed or House Tax receipt along with a NOC.
9. Shareholders and Directors could be the same.
10.  Income tax PAN

Steps to form an NGO in India

1. Determine the NGOs goal.
2. Establish the committee members/ board of directors.
3. Choose the name of the NGO.
4. Articles of Association/ Memorandum Articles of incorporation.
5. Registration of the NGO.
6. Raise funds
7. Create a large network.

Legal Compliances

Permanent Account Number (PAN): It is a one-of-a-kind alphanumeric sequence assigned to all juristic bodies that is distinguishable under the Income Tax Act, 1961. The PAN number is designed to identify a person on a national level.

Tax Deduction Number (TAN): It is the Account Number for Tax Collection and Deduction. It is a ten-digit alpha-numeric sequence that all personnel competent for collecting and deducting tax (TDS) at source are supposed to receive.

Advantages of Registration of NGOs

Registered NGOs enjoy distinct benefits over their unregistered counterparts.The advantage of registering an NGO is that it provides it with legal status and makes it accountable for all funds received. However, in the event of an unregistered corporation, the assets are acquired in the name of any individual, who may then profit from them. It helps in reinforcing society’s ethical, legal and social values. Lastly, on being registered a NGO can apply to the Authority of Income Tax for tax exemption.

Conclusion

NGOs enable society to self-organize and are dedicated to the public good. It can be accomplished in a number of ways, including participation in pilot initiatives and through campaigns. Additionally, it serves as a liaison between the local populace and the government by keeping the public informed about the government’s plans and actions. In respect to other aspects in the context, such as those that promote interaction or teamwork and those that view the organization as a vehicle for a certain type of change, obtaining a legal framework contributes to the organization’s legitimacy. It essentially means that a registered organization is able to have its own existence, longevity, and viability throughout time.

This article is authored by Sabrina Bath, student at Symbiosis Law School, Pune

References

• https://pria-academy.org/pdf/ngom/NGOM_2unit.pdf.
• https://corpbiz.io/learning/online-ngo-registration-and-legal-procedure/.
• https://ngosindia.com/ngo-registration/how-to-start-ngo-form-register-and-run-ngo/.

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[1]Charter of the United Nations, Article 71.

[2]Leverty Sally, NGOs, the UN and APA, AMERICAN PSYCHOLOGICAL ASSOCIATION. (Oct. 22, 7:10 PM).

[3]World Bank, Definitions of an NGO (Oct. 22, 7:30 PM), https://www.gdrc.org/ngo/wb-define.html.

[4]The Society Registration Act, 1860, s. 20, No. 21, Acts of Parliament, 1860.

[5]The Indian Trusts Act, 1882, No. 2, Acts of Parliament, 1882.

[6]The Companies Act, 2013, No. 18, Acts of Parliament, 2013.