Formation of Non Profit/Section 25 company

Section 25 Company or a Non-Profit organization (NPO) is a Company established for promoting commerce, art, science, religion, charity or any other useful object, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.

An NPO/NGO can be formed for promotion of any useful object like sports, education, research activities etc. The term No Profit does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefited out of those profits.

    Key Benefits:
  • Many privileges and exemptions under Company Law.
  • Exemption from requirement of Minimum Paid-up capital.
  • Exemption of Stamp duty for registration.
  • Non-application of Companies Auditor’s Report Order (CARO) 2003.
  • Registered partnership firm can be a member in its own capacity.
  • Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.
    Key Conditions:
  • Profit or Income of the Company shall be applied for the promotion of the mainobject
  • Declaration of dividend or distribution of profit to the promoters is not allowed
  • No member shall be appointed as a remunerated officer
  • No remuneration / benefit shall be paid to a member being a servant / officer of the Company (except reimbursement of out of pocket expenses, reasonable interest on money lent or reasonable rent on the premises)

  • Subsequent alteration of MoA & AoA requires prior approval of Central Govt. (i.e. Regional Director)
    Key Requirements:
  • Minimum 2 Shareholders (for Private Limited Co.) and 7 Shareholders (for Public Limited Co.)
  • Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
  • The directors and shareholders can be same person
  • DIN (Director Identification Number) for all the Directors
  • DSC (Digital Signature Certificate) for two of the Directors

Steps involved in formation of Section 25 Company/ Non-Profit organization

Step No.

Steps Timeframe (Working days) Processing
1 DSC 2 Documents required:
Self attested

• Address proof
• Identity proof

2 DIN

Approved DIN is a pre-requisite for incorporation process
5
Apply for DIN and get a provisional DIN
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Certification/Attestation of
Director’s personal details

Sending the same to the DIN Cell
and getting it approved
3 Pre- Name Application Search --
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The Promoters have to provide
atleast 6 (Six) names in the order
of priority.

To make an online search of
availability of names as desired
by the Promoters
4 Application for Name Availability

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6 names for the
proposed Company

Main Object Clause
6 To draft the Main Object Clause to be pursued by the Company after incorporation.
5 Representations before RoC on behalf of Promoters 1 Changes to be made in the Name application, if any, suggested by the RoC

6 Application to Regional director (RD) for issue of License 35 • Filing of Form 24A Attachments:
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3 Printed Copies of MOA & AOA
List of Directors
Declaration from a practicing Company Secretary
Declaration from Promoters
Consent to act as Directors of the Company
Statement of assets and Liabilities
Statement of proposed work
Statement of estimated Income &
Expenditure
Statement of grounds
Copy of advertisement/Public
Notice
Power of attorney
Photocopy of name approval
letter

7 Representations before RD in case of any objections 5 Changes to be made in the relevant documents, as suggested by the RD
8 Public Notice/Advertisement 3
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With in 7 days of application to
the RD

Shall be published in one newspaper in principal language of the district (district of Registered office of the proposed Company) and in one English newspaper
9 Documents required (after issue of license by RD)
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Printing of Altered Memorandum and Articles of Association (MOA / AOA)
Other Forms like:

• Form 32

• Form 18

• Form1

• Letter of Authority/PoA

2 Stamping of documents namely:

• Letter of Authority/Power of Attorney

• Form1

• Processing of eForms
10 Final Process:
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Filing all the above documents with the ROC

Follow up with the ROC
office
10 Online uploading of e-Forms
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Payment of Registration fees

Collecting the Certificate of Incorporation
In case of NPO being a Public Limited Company
11 Application for Certificate of Commencent of Business
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A Public Limited Company, in addition to Certificate of Incorporation, must obtain a Certificate of Commencement of Business before its operation
10 Documentation

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Preparation of Statement in lieu of Prospectus (SLP)(If the Company is not issuing the Prospectus to raise funds from general public)

CA certification of SLP

Preparation of Form 20

Consent letter of the Auditor

Preparation of Statement of Preliminary Expenses

Online filing of eForm 20