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FAQs
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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. |
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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