Registering your Non-Profit Organisation: Lessons from Our Journey

We receive a lot of queries from people regarding the process of registering a non-profit organisation in India under Section 8 of the Companies Act (2013). We thought it would be a good idea to list some common queries that we receive, along with the questions that we had when we first started the registration process for our non-profit Saryan Vigyan Foundation in December 2023. 

Please feel free to comment in case any of these provisions have been updated as we only wish to provide our personal experience for those of you who may be interested. Please also note that we do not have formal legal training and cannot guarantee the absence of any unintentional inconsistencies in this information. Nonetheless, we want to share this information with our readers, hoping it may prove helpful to some of you. 

Let’s dive in…

Q. What is a Section 8 company? https://www.indiafilings.com/learn/what-is-difference-between-ngo-and-section-8-company/

Q. Where can I find general information about registering a Section 8 company?https://www.setindiabiz.com/section-8-company-registration

https://vakilsearch.com/blog/ngo-registration-under-section-8-organization-a-complete-guide/

Q. Should I hire a Chartered Accountant (CA) or a Company Secretary (CS) to register a Section 8 company? In our experience, it is better to choose a firm that offers both CS and CA professional services. A Company Secretary (CS) will provide better guidance on government policies your company needs to adhere to, along with other general queries related to establishment of your company. A Chartered Accountant on the other hand will file all the relevant paperwork after scrutinising it in detail. In our experience, both are equally important, especially if you don’t keep tabs on government policy and law amendments.

How we went about it: To register our non-profit in Himachal Pradesh, we spoke to multiple CA & CS firms across Shimla, Chandigarh and Delhi (these are major cities around HP with access to quality CA/CS firms). Still, we found it very difficult to find someone who could answer our queries in a simple and easy-to-understand manner. Many firms did not return our calls or emails, as they were only willing to address even basic questions after we had made full payment—something we found rather odd.

We were finally able to talk to a CA in Bangalore (at BOCO), who helped us immensely and guided us to seek a firm closer to our company office for future considerations and convenience. While the registration process can be done online, and you may select a CA/CS firm from anywhere in India, the post-registration process may require meeting government officials of the State you are registered in (the rules vary from state to state) -- so it's best to find a firm locally. After much thought, we decided to go with setbizindia, Delhi who provided a detailed list of documents that we needed to submit. (This is not an advertisement or a paid promotion). After submitting all the documents to setbizindia, Delhi, we made the final payments. Within 18 days our Section 8 company was incorporated and approved by the Registrar of Companies, Govt. of India. We share further details later.

Other places where a CS may come in handy:

• There could be State-specific rules, particularly for non-profit companies, and a CS is generally more knowledgeable about such laws or regulations.

• The firm you go with should also have experience with Section-8 registrations. This is especially important while choosing NIC codes (National Industrial Classification codes), drafting the main object clause, and other details where practical expertise is crucial to ensure acceptance of your application. CS professionals usually have this practical experience.

• In our experience the CS was more knowledgeable and up-to-date on current policies and recent amendments. They were able to clarify our doubts with minimal back-and-forth with our CA, who likely needed to consult a CS before finalising the paperwork. 
  

Q. How many directors are needed to start a section 8 company? A minimum of 2 directors who may also be shareholders. The shareholders will own the company based on the amount of capital each one of them commits towards the formation of the company. In our case, we had 2 directors who are also listed as the shareholders.

Q. How much money needs to be invested in the beginning? There are two types of capitals - authorised capital and paid capital. These amounts need serious deliberation for for-profit companies. However, in our case, as there is no profit to be shared with the shareholders, we were advised to put Rs. 1,00,000 as authorised capital (this is the minimum amount). This amount was divided as 60:40 between the two shareholders in our case for convenience and became our paid capital. These amounts can be changed at a later date by filing an additional application any time during the course of the company’s working.

Q. Should we register the company under pvt. ltd. or public ltd.? Depends. If you want to raise funds by selling a part of your company, then public ltd is the way to go as a pvt ltd company caps the number of shareholders at 200 in India. However, for most non-profits, forming a pvt ltd would make more sense - primarily because the company is running on grants, donations or other forms of financial assistance that doesn’t involve selling of profits - as would be the case with traditional companies. We decided to register our non-profit as pvt. ltd. for this reason. While it is essential to pick one of the two when registering your non-profit company - you cannot include these suffixes in the formal name of your organisation if you are a section 8 company. This rule, while counterintuitive, is likely a rule for bureaucratic convenience to distinguish for-profit companies from non-profit companies. PS: The remaining questions are applicable for companies registered as private limited under Section 8 of the Companies Act (2013).

Q. Documents from each Directors/Shareholder 

1. Colour Photo

2. PAN Card

3. Aadhaar Card
   

Q. Latest Address Proof of Directors/Shareholder (any one)

1. Bank statements (first page and the last page alongwith latest transactions). Online statements are accepted. Note: Preeti’s official identity documents only had her first name (without a middle name or last name) which mismatched with her bank statements (where her name was listed as first name followed by her father’s first name). However, we did not face any issues regarding this inconsistency, which was a relief!
   

2. Electricity Bill (not be older than 2 months)

3. Mobile bill  (not be older than 2 months)

4. Gas bill  (not be older than 2 months)

5. Telephone bill  (not be older than 2 months)
   

Q. For Registered Address

1. Any one -  Bank statement of the owner of the address where the company is registered OR any utility bill (electricity bill/ mobile bill/ gas bill/ telephone bill) of the owner of the address where the company is registered. Note: We had a hard time procuring a utility bill for the address as our non-profit is registered in a rural area, where only the name of the address-owner along with name of the village & post office (VPO) is provided as address for all official documents. Water bills and gas bills are handwritten by local officials in the village, and not generated separately for each address. Additionally, electricity bills were rejected because they lacked a complete address, missing details such as the plot, house, or street number. Eventually, we provided a Jio mobile number statement of the owner, which was downloaded from the Jio app. For some reason, statements from other service providers were not accepted, but this solution worked despite the address being incomplete.
   

2. No Objection Certificate (NOC) from the address owner The CA helped us out with documents pertaining to the NOC extensively.

Overall, we paid a total of Rs. 13,525 in CA fees & government fees after procuring all the necessary documents and before filing them documents in January 2024. Our organisation was successfully incorporated and approved by the Registrar of Companies, Government of India, within the same month.

Q. How broad or narrow should the objectives & sectors of the company be (NIC Codes) for MoA & AoA documents? The broader the better. While the company objectives can be amended at any point in time, it will not be free of cost. So, keeping the objectives broader provides some degrees of freedom to your work. However, we can’t change the portfolio completely. Say, if you first decide to work in educating a village, and later think that providing financial assistance would be better - you cannot do so without updating the relevant documents, as the two don’t fall under the same NIC code. Therefore, having a clear vision, mission, and goals for your company before starting the registration process is highly beneficial, as it helps identify key areas while preparing these documents.

Q. Information and documents we provided our CA once the registration process began: All Information:

1. Authorized and Paid-up capital.

2. Shareholding ratio between both applicants (shareholders/directors)

3. Proper longitude and latitude for the registered office address

4. Bank name in which you are interested to open your company's current account (preferably a local SBI branch, but any reputable bank will do).

5. Nearest police station to the registered office

6. Nearest police stations to the current address of both applicants.

7. Address type of provided address for Registered office i.e. Commercial or Residential

8. Questionnaire forms for the company and for the both applicants. (These questionnaires were straightforward requiring basic information).
   

All Documents:

1. Registered address proof (Electricity Bill/ mobile bill/ gas bill/ telephone bill) in which you want to register your company should not be older than two months.

2. ID Proof other than PAN and Aadhar card (Voter ID/ Passport/ Driving License)

3. Residential address proof for Directors (Bank statement/ electricity bill/ mobile bill/ gas bill/ telephone bill) should not be older than two months.
   

Q. Documents that were delivered to us by our CA after registering a section 8 company: 1. Two Digital Signatures of Directors

2. DIN For Two Directors

3. Name Approval of Company (note: Name of the company should be unique for higher acceptance)

4. Memorandum of Association (MoA)

5. Articles of Association (AoA)

6. Professional Certification

7. Filing of Spice + Form

8. Certificate of Incorporation

9. Company e-PAN & TAN

Q. Can you add additional directors and shareholders to the organisation later? Yes, but for extra fees and with additional documents every time you do so.

Q. Can the directors and employees receive salaries in non-profit organisation Reasonable salaries are permitted to all employees including directors, provided they are employed full-time with the non-profit.

Q. Do directors, board of directors, or shareholders need to be physically present at the registered address at time of verification? No. But someone should be present for the verification of documents.

Overall, our experience was a positive one. Please note that these answers were put together in between Dec 2023 and Jan, 2024,  and may have changed with new government policies. It would be great if others could contribute towards this post and start a thread to keep it as updated as possible to help any first timers.

Wishing you all the very best on your own journey of starting and registering a non-profit organisation in India.