corporate law
In India, a vast number of non-governmental organizations (NGOs) are registered to engage in social welfare activities. NGOs can be established as Trusts, Societies, or Section 8 Companies in accordance with the Ministry of Corporate Affairs. Despite the increasing number of new registrations annually, many NGOs are often unaware of the necessary steps following their incorporation, resulting in challenges when initiating social welfare projects. The introduction of Corporate Social Responsibility (CSR) provisions in the Companies Act has amplified the need for vibrant NGOs, as companies subject to these provisions seek collaboration with NGOs for their social initiatives. This article outlines the essential steps to take from the incorporation of an NGO to the execution of social welfare activities.
To commence, the first step is the incorporation of an NGO. This can be done in one of three forms: Trust, Society, or Section 8 Company. Each registration type has its unique process and requirements, and the time frames for registration will vary depending on the act under which the NGO is incorporated.
Once the NGO is incorporated, a board meeting should be convened. This meeting is essential for determining subsequent activities, including fundraising strategies and identifying core areas for social welfare engagement.
To operate effectively, NGOs must complete the following registrations:
NGOs engaged in social welfare require funds to fulfill their objectives. Donors typically seek Section 80G deductions for their contributions. Therefore, it is advisable for every NGO to register under both Section 80G and Section 12AB at the initial stage.
For NGOs looking to secure government grants, registration with the Niti Aayog is mandatory.
If an NGO intends to raise funds or donations from corporate entities subject to CSR obligations, it must register with the Ministry of Corporate Affairs (MCA) using Form CSR-1 prior to approaching companies for CSR grants.
To maintain good standing, all NGOs must adhere to annual compliance requirements:
Each NGO is required to conduct a mandatory audit of its financial statements annually by a practicing Chartered Accountant.
NGOs must file their income tax returns by the stipulated due date. Failing to do so may result in the withdrawal of exemptions or relief granted to the organization.
NGOs receiving CSR grants must maintain documentation as specified by the donor company. Misuse of funds can lead to complications for both the NGO and its governing members.
It is essential for NGOs to renew their Section 80G and Section 12AB registrations at regular intervals as mandated by applicable laws.
Understanding the incorporation and operational requirements for NGOs in India is crucial for initiating effective social welfare activities. By ensuring compliance with the necessary regulations and registrations, NGOs can better position themselves to secure funds and collaborate with companies for CSR initiatives.