NGOs are registered at District Administration Office while NFPs are registered at OCR. Both need to register at the Tax office (IRD) after registering at the above-mentioned offices. Here is a breakdown of the differences between Non-Government Organizations (NGOs) and Not-for-Profit (NFP) Companies:
Relevant Laws:
NGOs are registered under the Association Registration Act, 2034.
NFP Companies are registered under the Companies Act, 2063.
Incorporation:
NGOs submit an application to the Chief District Officer (CDO).
NFP Companies submit an application to the Office of Company Registrar (OCR) along with the required documents.
Registering Entity:
NGOs register with the Office of Chief District Officer (CDO).
NFP Companies register with the Office of Company Registrar (OCR).
Activities:
NGOs may not have clarity on engaging in income-generating activities.
NFP Companies are allowed to engage in income-generating activities but cannot distribute profits to members.
Distribution of Profit:
Prohibited for both NGOs and NFP Companies.
Minimum Members:
NGOs require at least 9 members.
NFP Companies require at least 5 members.
Foreign Members:
Foreign nationals are prohibited from becoming members of NGOs but can be advisors.
Foreign nationals are allowed to become members of NFP Companies.
Board of Directors:
NGOs require at least 9 directors, including general members.
The number of directors in NFP Companies is prescribed in the Articles of Association (AOA).
Documents Required for Application:
Requirements differ but generally include constitutions, objectives, member details, source of income, etc.
Approval Requirements:
Both NGOs and NFP Companies need approval from relevant authorities before commencing activities.
Name of Company:
NGOs cannot change their names.
NFP Companies should not include ‘company,’ ‘private limited,’ or ‘limited’ in their names.
Affiliation:
NGOs may affiliate with the Social Welfare Council, which is mandatory for receiving donations.
NFP Companies may choose to affiliate but it’s not mandatory for all operations.
Renewal:
NGOs need to renew their certificates of incorporation annually.
NFP Companies do not need to renew their certificates of incorporation but need to fulfill annual compliance requirements.
Election of Board of Directors:
Elections are conducted periodically for NGOs.
Directors in NFP Companies are elected by members through an election procedure.
Sale and Transfer of Shares:
Not applicable for both NGOs and NFP Companies.
Tax Exemption:
Both NGOs and NFP Companies are entitled to tax exemption, which must be renewed annually.
Annual General Meeting:
Both NGOs and NFP Companies hold annual general meetings as prescribed in their constitutions or Articles of Association.
Submission of Annual Audit Report:
NGOs submit audited financial reports to the CDO office and IRD office.
NFP Companies submit audited financial statements to the IRD and the Office of Company Registrar.
Remuneration of Directors, Allowances, and Prizes:
Administrative expenses for NGOs cannot exceed 20% of the total project cost.
NFP Companies have certain limitations on expenses, usually not exceeding 25% of Gross Expenses.
Winding Up:
NGOs can be dissolved according to their constitutions.
NFP Companies may go for voluntary dissolution by adopting special resolutions.
Property after Cancellation of Registration:
NGO properties are transferred to the government after adjusting liabilities.
NFP Company properties are managed as per the Articles of Association or transferred to the government.
