FAQs
 

1 A Are foreigners allowed as board members of the company ?

Answer : There is no apparent bar on the foreigners becoming members of the company.

 

1 B Will there be subsequent problems if foreigners are the board members ?

Answer : It is difficult to get FCRA registration if foreigners are there as subscribers or board members. Normally, FCRA registration is not granted to such organisations. The FCRA is silent in this regard but FCRA authorities confirmed that FCRA registration is not given if foreigners are its subscribers/members. We did come across instances of organisations being given FCRA registration inspite of having foreigners as board members/trustees. But these are exceptions and we have to assume that FCRA registration will not be given, unless the foreigners involved are too distinguished and intervention of higher authorities is availed.

The difficulties involved in getting FCRA permission for NGOs having foreigners on Board is a deterrent for foreign NGOs contemplating the option of floating an Indian NGO. Therefore, foreign NGOs should explore other legal and legitimate way of controlling an Indian NGO.

 

1 C Can foreigners be inducted as ex-officio or nominated board members ?

Answer : There should not be any problem in having foreigners as ex-officio or nominated board members. The memorandum of association of the company can be suitably drafted so as to have Ex-Officio directors or nominated directors.

The foreign NGO may provide that, for instance, the country director will be an ex-officio board member of the Indian Company . A foreign NGO may also reserve the power to nominate board members who may or may not be foreigners. Retention of such power should provide a controlling interest to the foreign NGO and thus some kind of line management from the head quarter can be maintained.

During study, one of our consultant has came across at least one Indian NGO which was floated by a huge foreign agency, where the power to nominate key functionaries was retained by the foreign NGO. The Indian NGO so floated was successfully existing with all the legal registration including FCRA registration.

2. What is the time period for which a company can remain registered under the Companies Act, 1956 ?

Answer : The registration under Companies Act, 1956 is permanent in nature and provides perpetual existence. Under extreme circumstances such companies can be liquidated. The authority is the official liquidator of companies.

 

3. Can an Indian company registered under section 25 of the Companies Act 1956 have activities outside India ?

Answer : The Companies Act, 1956 do not prohibit activities outside India. The FEMA and FCRA are silent in this regard and under the liberalized regime of RBI, current account transactions are allowable without any prior permission. Therefore, there should not be any problem in transfer of foreign exchange, subject to
the guidelines of FEMA.

The most important legislation in this context is the Income Tax Act, which under section 11(1)(c), prohibits the activities of Indian NGO outside India without specific permission of the CBDT. An Indian NGO spending money on activities outside India will be subject to income tax on that portion of its income.

 

4. What if the documents required to be filed for registration under section 25 of the Companies Act 1956 are not available in English or Hindi language ?

Answer : If any documents required for registration under section 25 of the Companies Act 1956 are not in English or in Hindi, a translation of that document either in English or in Hindi certified to be correct by any promoter or proposed director, or in the case of an association which is already in existence, by any member of its executive or governing body, shall be furnished to the Regional Director together with the document.

5. To whom the application for licence under section 25 should be made ?

Answer : The application for licence under section 25 should be made to Regional Director at Mumbai/Calcutta/Kanpur/Chennai. Click here for addresses and areas of jurisdiction of the Regional Directors

 

6. What are the forms and documents required to be filed for requesting licence under section 25 of the Companies Act, 1956 ?

Answer : The application in the form of covering letter shall be accompanied by a list of documents. Click here to get a complete list of documents.

 

7. Does a notice about application to Registrar shall be given in the newpaper ?

Answer : Yes, within one week of making application to the Regional Director a notice about making the application to Regional Director is required to be published in newspaper. The said notice shall be in the form set out in Annexure II of the Companies Regulation, 1956, or in a form as near thereto as circumstances admit. The notice shall be published in one English newspaper and one vernacular newspaper of the local area in which the Registered Office is situated

A certified copy of this notice shall be sent to the Regional Director.

 

8. After getting licence under section 25 from the Regional Director, whether a company can start its functioning ?

Answer : No, after licence is granted by Regional Director, an application is to be made in Form No.1 to the Registrar of Companies for the registration of companies alongwith a list of documents. For the list of documents required to be filed, click here.

9. Can a company in respect of which licence under section 25 is in force can alter the provisions of its memorandum with respect to its objects ?

Answer : A company in respect of which a licence under section 25 is in force can change its memorandum with respect to its objects only with the previous approval of the Central Government obtained in writing. The Central Government may revoke the
licence of such a body if the alteration is made without its approval. But at least formal procedures are there for alteration in the memorandum or association. It is not that rigid like a trust, where a deed cannot be changed.

 

10. Can licence granted under section 25 be revoked ?

Answer : The licence granted under section 25 can be revoked by the Central Government and upon revocation, the Registrar shall enter the word “Limited” or “Private Limited” at the end of the name of the company and the company shall cease to enjoy the exemption granted by this section. Provided that before a licence is revoked, the Central Government shall give notice in writing of its intention to the company, and shall afford it an opportunity of being heard in opposition to revocation.

 

11. Does an association wanting to get registration under section 25 requires to have minimum paid up capital as required under the provisions of section 3 of the Companies Act, 1956 ?

Answer : No, as per sub section 6 of section 3 of the Companies Act, 1956, a company registered under section 25 shall not be required to have minimum paid up capital.

12. What is the time limit for granting licence under section 25 of the Companies Act, 1956 by the Regional Director ?

Answer : As per the Citizen’s Charter of the Department of Company Affairs, Schedule II, Serial No.2, Regional Directors are required to grant the licence within 30 days from the date of filing the application.