PROFESSIONAL OPPORTUNITIES IN NON PROFIT ORGANISATIONS (NPOs) FOR
CHARTERED ACCOUNTANTS
CA. Rajkumar S. AdukiaB.Com (Hons.), FCA, ACS, ACWA, LL.B, MBA, IFRS(UK), DIPR, DLL & LW, Dip Criminology
Mob: 098200 61049/093230 61049E Mail: [email protected]
Non-Profit Sector- Background
• Non profit organizations (NPOs) are organizations that use surplus revenues to achieve their goals rather than distributing them as profit or dividends.
• "NON-PROFIT" SECTOR - Sphere of social activity undertaken by organizations that are not for profit
Non Profit Organisations (NPOs)
• NPOs are also known as:– Not-for-Profit Organizations– Non-Governmental Organizations– Voluntary Organizations– Civil Society Organizations– Community Based Organizations– Charitable Organizations– Third Sector Organizations – Social Benefit Organizations– In Hindi - Seshcha Sevi Sangasthas/ Sanghatanas
Charity and NPOs
• Charity - giving voluntarily to those in need
• Covers the giving of both money, and of the self through service
• Charitable Organizations (COs) - a type of Non Profit Organization (NPO)
• Only difference between COs and NPOs is that COs centre also on social well-being along with non-profit and philanthropic goals.
Voluntarism
• Voluntarism - dating back to 1,500 BC when it was mentioned in the Rig Vedas
• Is an altruistic activity and intended to promote goodness or improve human quality of life
• volunteer efforts keep expenses down for non-profit and philanthropic organizations empower individuals and groups to help others
NPO Facts
• 20 Lakh NGOs in India as at March 2014 (Central Bureau of Investigation’s estimate)
• With population of 1.2 billion - one NGO per every 600 people
• Rs 6654 crore to various NGOs by Union & State Governments between 2002-09 (received through RTI queries by Asian Centre for Human Rights)
• more than $2 billion received by about 22,000 NGOs from abroad ($650 million from US) for the financial year 2010-11
History & Evolution
• Charitable Trusts and Voluntary Organizations are India’s secular and institutional manifestation
• Voluntary organizations were active in cultural promotion, education, health, and natural disaster relief as early as the medieval era
• Towards the end of the 19th century the corporate community in India also began setting up welfare and development organizations
• 19th and early 20th century - voluntary organizations received legal recognition with enacting of various laws
Development Of Modern Voluntarism And The Indian Non Profit Sector
Five Phases• The mid to late colonial period (1810s to 1947) - The Era of
Church, National Bourgeoisie, Gandhian Philanthropy, and Separatist Movements
• The early post-independence period (1947 to the late 1950s) - The Era of Religion-Based and Gandhian NPOs
• The period between 1960 and 1970; - Increased Differentiation• The period between 1980 and 1990 - The Predominance of
NGOs and the Era of Separatist and Fundamentalist Movements and Organizations
• The more recent past since then
Characteristics of NPOs
• Service to a specific group or public at large - not to earn profit• Source of Income – mainly from:
– Subscriptions from members– Donations– Legacies– Grants-in-aid– Income from investments
• No distribution of surplus• Entity Concept - NPOs are separate entities other than the
individuals by whom they are managed
Structure/ Formation of NPOs
• structure or management is not the essence of these organizations. It is their objectives that distinguish them from the business organizations.
• can be formed as - Any formal organization having a legal existence of its own with right to enter into contracts and transactions in its own name
• easier to carry conviction for a NPO in the below mentioned forms than any other forms:– Trust, by making a Trust deed– Society, under the Registrar of Societies– Registration as a section-8 Company under the Companies Act, 2013.– Non Trading Corporations– Autonomous Bodies
Structure/ Formation of NPOs
Trust Company
Society NonTrading Corpotarion
Autonomous Bodies
Other Forms
Structure/ Formation of NPOs
NPOs formed as Trusts• Trust is a relationship whereby property is held by one party for
the benefit of another• The India Trust Act, 1882 - Act to define and amend the law
relating to Private Trusts and Trustees. Thus this Act is not applicable to public trusts. The Public Trusts are governed by their respective state trusts acts. Eg.– The Maharashtra Public Trusts Act, 1950– The Rajasthan Public Trusts Act, 1959– The Tamil Nadu Public Trusts (Regulation of Administration of Agricultural
Lands) Act, 1961
Tru sts
Public Trusts
Religious Trusts
Non Religious Trusts
Private Trusts
• Two types of trusts in India: private trusts and public trusts
Structure/ Formation of NPOs
NPOs formed as Trusts• Applicability of Indian Trust Act, 1882
Even though it is designed for private trusts, in absence of any specific law for public trusts, courts have held that the principles & spirit of the Trusts Act would apply also for public trusts in India. (Sheikh Abdul Kayum and others v. Mulla Alibhai and others [ AIR 1963 SC 309]
Structure/ Formation of NPOs
NPOs formed as Societies• Association of persons formed to deliberate & promote a
specific purpose• The Societies Registration Act, 1860 is the Act for the registration
of Literary, Scientific & Charitable Societies• Other laws applicable:
– The Religious Societies Act, 1880– Various State Acts governing Societies
Structure/ Formation of NPOs
NPOs formed as Companies• Section 8 of the Companies Act, 2013 - Companies with
charitable objects, etc• Companies that can be registered:
– That have their objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object
– Which intend to apply profits or other income in promoting their objects– which intend to prohibit the payment of any dividend to their members
• Are issued license by the central government allowing them to be registered as limited companies under this section without adding the words “Limited” to their name
Structure/ Formation of NPOs
NPOs formed as Non-Trading Corporations (NTCs)• Impart Non Trading activities for the benefit of its member,
without carrying commercial or profit making activities• Non-trading corporations (NTCs) appear under the entry 32 in
List II of the Seventh Schedule to the Constitution of India.• Monitored by Registrar, NTC, delegated to Sales Tax Department• A few acts related to NTCs can be listed as under:
– Maharashtra Non-Trading Corporations Act, 1959– The West Bengal Non-Trading Corporations Act, 1965 – The Orissa (Non-Trading) Companies Act, 1959
Structure/ Formation of NPOs
Other forms for NPOs• Trade Unions
organization of workers pertaining to a particular trade, industry or a company and formed to promote and protect their interests and welfare by collective actionLegislation - Indian Trade Unions Act, 1926
• Political PartiesLegislation - Representation of the People Act, 1951
Structure/ Formation of NPOs
NPOs formed as Autonomous Bodies• Autonomous bodies are established by the Government to
discharge the activities which are related to governmental functions
• Although given autonomy to discharge their functions -Government’s control exists since these are funded by the Government of India
• mostly registered as societies under the Societies Registration Acts and in certain cases they have been set up as statutory institutions under the provisions contained in various Acts
Legislation for NPOs
Other forms for NPOs• right of all citizens to form associations or unions is guaranteed
by the Constitution of India, Article 19(1)(c)• Under Schedule VII of the Indian Constitution, the subject ‘Trust
and Trustees’ finds mention at Entry No.10 in the Concurrent List and ‘Charities & Charitable Institutions, Charitable and religious endowments and religious institutions’ find place at Entry No.28 of this list
• Thus both the Centre and the States are competent to legislate and regulate NPOs
• No comprehensive central law for legal incorporation of nonprofit organizations which applies to trusts, registered societies and section 8 companies alike
Professional Opportunities
1. Consultation2. Drafting Documents3. Stamping & Registration of NPOs4. Financial Reporting & Auditing5. Taxation
1. Direct Taxation – Income Tax2. Indirect Taxation – Service Tax & VAT
6. Consultants in funding – India & outside India7. Internal Audit and Risk Control
Professional Opportunities
8. Arbitration & Conciliation- Drafting Arbitration Agreement- Representing either of the party (plainant/defendant) to the dispute in
the arbitral proceedings- Assisting Arbitrator in drafting arbitral award- Assisting to go to Court of Law- Assisting in preparing submissions to arbitrator- Acting as a member of Arbitral Tribunal- Acting as an arbitrator where required
Professional Opportunities
9. Requirements & filings under Foreign Contribution Regulations (FCR)
- Foreign Contribution Regulation Act, 2010- Foreign Contribution (Regulation) Rules, 2011- Foreign Contribution (Acceptance or Retention of Gifts or
Presentations)Rules, 2012
10. Corporate governance for attracting CSR11. Credibility Rating12. Social Audit13. Other Areas
1. Winding Up/ Liquidation2. Business Process Reengineering services for NPOs
Developing work in NPOs
1. Writing articles in NPO related magazines and other publications
2. Participating as speaker in conferences3. Communicating with people related to NPO activities4. Building a NPO information website5. Writing books on topics covered under NPOs6. Projecting oneself as an NPO Expert7. Reaching out to the prospective service receivers8. Using social media to reach more number of people related to
NPOs9. Increase expertise in the field of NPOs by undertaking capacity
building initiatives