FAQ questions on Registration of NGOs / NPOs under Section 42 of the Companies Act, 2017:
1. What is Section 42 of the Companies Act, 2017, and why is it important for NGOs/NPOs?
2. What are the eligibility requirements for registering an NGO/NPO under Section 42?
3. How many promoters or directors are required for registration, and what qualifications must they have?
4. What documents are needed to apply for a license under Section 42?
5. How can I reserve a name for my NGO/NPO with SECP?
6. What is the procedure for obtaining a license from SECP for an NGO/NPO?
7. After getting the license, how can an NGO/NPO apply for incorporation with SECP?
8. What are the post-incorporation compliance requirements for NGOs/NPOs under Section 42?
9. How much government fee is payable for registration and incorporation of an NGO/NPO?
10. Can NGOs/NPOs registered under Section 42 distribute profits among their members?
11. What is the process of renewal of a Section 42 license, and how often is it required?
12. Are NGOs/NPOs allowed to receive foreign donations, and what compliance is required for that?
1. Introduction
Non-Governmental Organizations (NGOs) and Not-for-Profit Organizations (NPOs) play a significant role in social welfare and public service initiatives. In Pakistan, such organizations can be registered under Section 42 of the Companies Act, 2017 through the Securities and Exchange Commission of Pakistan (SECP). This section provides a structured framework for establishing non-profit entities with legal recognition and operational transparency.
2. Requirements for Registration
To register an NGO/NPO under Section 42, the following prerequisites must be met:
- Minimum of Three Promoters/Directors having minimum B.A qualification
- Valid CNICs/Passports of the Promoters.
- Cell No. registered on the CNIC of the promoters and their valid email address.
- CVs of the promoters along with attested copies of latest degrees and experience certificate.
- One expert of each field (each object) of the NGO
- A Distinct Name for the Organization (must not resemble any existing entity)
- Draft Memorandum and Articles of Association (MoA & AoA) specifying the objectives of the NGO
- undertaking of Initial donation by the promoters (minimum Rs. 200,000/ each)
- No Objection Certificate (NOC) from Relevant Authorities (if required)
- Undertaking from each Promoter stating no involvement in illegal activities.
3. Complete Procedure for Registration
i. Name Reservation
- Submit an online application through the SECP eServices Portal.
- Pay the prescribed name reservation fee.
- Upon approval, SECP reserves the name for 90 days.
ii. Submission of Incorporation Documents
After name reservation, submit the following documents:
Submission of application-3 for issuance of license to the licensing department of SECP along-with following documents
1. Copy of national identity card (NIC)/ NICOP/valid passport (in case of foreigner) of each promoter, proposed directors and proposed chief executive officer;
2. Curriculum vitae of each promoter, proposed directors and proposed chief executive officer as per Appendix-A to this Application;
3. An affidavit by each promoter, proposed directors and proposed chief executive officer as per Appendix-B to this Application;
4. A copy of the draft memorandum and articles of association as per Table F of the First Schedule to the Act;
5. A letter of authority on stamp paper of requisite value as per Appendix-C to this application by all the promoters in favor of either one of them or an authorized intermediary to present the application before the Commission on their behalf, and to make other amendments, additions, corrections etc., in the documents and also to collect license;
6. Copy of availability of name letter issued by the registrar indicating that the proposed name is available;
7. If the association is already registered under any other law for the time being in force, the following shall also be annexed with the application:
i. a copy of the audited balance sheet, income and expenditure account and the annual report on the working of the association for the financial year immediately preceding the date of the application;
ii. copy of certificate of registration or any document evidencing registration under any other law, duly certified by relevant authority;
iii. resolution of all existing members for the proposed change of status along with names of proposed members of the section 42 company being formed;
iv. list of members of the association, duly certified by relevant authority;
v. latest copy of its constitution or charter or statute, duly certified by relevant authority;
vi. list of all pending disputes among the members and pending court cases filed by or against the association with brief description thereof, if any.
· Original challan or other evidence of payment of fee specified in Seventh Schedule of the Act (not applicable in case of online filing).
· Memorandum and Articles of Association (MoA & AoA)
iii. Grant of License
- SECP reviews the submitted documents and, if found satisfactory, issues a License under Section 42.
- The license remains valid as long as the NGO adheres to compliance requirements.
iv. Filing for Incorporation
- Once the license is issued, the NGO must file an Incorporation Application with SECP.
- Required forms include:
- Form 1 (Declaration of Compliance)
- Form 21 (Registered Office Address)
- Form 09 (Particulars of Directors & CEO)
- After review, SECP issues a Certificate of Incorporation, confirming the NGO’s legal status.
4. Post-Incorporation Compliance
- Tax Registration: Obtain National Tax Number (NTN) from FBR.
- Appointment of auditor and legal advisor.
- Audited Accounts Submission: NGOs must submit annual audited financial statements to SECP.
- Renewal of License: SECP may require periodic renewals based on compliance performance.
- Regular Filings: NGOs must file annual returns, financial statements, and directors' reports.
5. Details of Government fees
- Name Reservation Fee: Rs. 1000/
- License Application Fee: Rs. 150,000/
- Company Incorporation Fee: Rs. 30,000/
- Annual Filing Fees: Depends on entity size and compliance obligations
6. Other Related Matters
- NGOs registered under Section 42 must utilize their income only for charitable purposes and cannot distribute profits to members.
- Dissolution of the NGO requires approval from SECP, and remaining assets must be transferred to another non-profit entity.
- Foreign Donations Compliance: NGOs receiving foreign funds must comply with Economic Affairs Division (EAD) regulations.
Conclusion
Registering an NGO / NPO under Section 42 of the Companies Act, 2017, ensures legal recognition, credibility, and accountability. Adhering to SECP's structured process and compliance requirements facilitates smooth operations and access to funding opportunities. NGOs must diligently follow the regulatory framework to maintain their status and contribute effectively to social welfare.
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