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NON-PROFIT COMPANY

WHAT IS NON-PROFIT COMPANY

A non-profit company is a company incorporated for public benefit or other object relating to one or more cultural or social activities, or communal or group interest.

Not for profit organisations are those organisations which are established for promoting a cause, it may be religious cause or may be related to environmental issues, child labour, children rights, for helping old age people for providing food for free etc.

SECTIONS/ REGULATIONS/ RULES/ SCHEDULE APPLICABLE TO NON-PROFIT COMPANY

  • Section 8 of the Companies Act, 2013;
  • Rule 19 and 20 of Companies (Incorporation) Rules, 2014;

NON-PROFIT COMPANY UNDER COMPANIES ACT, 2013

AS PER SECTION 8 OF COMPANIES ACT 2013; Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company

  • has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
  • intends to apply its profits, if any, or other income in promoting its objects; and
  • intends to prohibit the payment of any dividend to its members; the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word "Limited", or as the case may be, the words "Private Limited" , and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.

ADVANTAGES OF NON-PROFIT COMPANY

Some of the Advantages of Non-Profit Company are:

  • Many privileges and exemptions under Company Law vide notification dated 05th June, 2015.
  • Exemption of Stamp duty for registration
  • 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 main object.
  • 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).

UTILIZATION OF PROFIT

  • A Section 8 Company has to ensure that its profits and all other incomes are utilized only for the purpose of promoting its objects and not for any other purpose.
  • It should also ensure that its profits are not distributed as dividend among its members.
 
     
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