ASSOCIATION NOT FOR PROFIT

UNDER SECTION 42 OF THE COMPANIES ACT, 2017

Association not for profit is a structure available to legally formalize the pursuit of charitable objectives or some other social mission by a group of individuals.

Associations not for profit also generally known as ‘NGOs’ or non-governmental organization because it has objectives similar to a government organization but operates independently from government. Any such an association can be formed for promoting commerce, art, science, religion, health, education, research, sports, protection of environment, social welfare, charity or any other useful object.

An association not for profit may have many revenue streams including contributions by members, donations, charity, grant, aid, gift, subsidy, income from trust property, and income from any other lawful business activity of the association. All such income, donations and profits are applied to promote association’s objects and not distributed among its member in any form directly or indirectly. Normally members and their dependent family members are not even allowed to take salaries, remunerations or compensations for their services and effort, all the services rendered voluntarily for the achievement of association’s objects.

In Pakistan, Companies Act, 2017 regulates the formation of an association not for profit and provide a structure similar to Limited Liability Company to undertake charitable activities which are not against the laws, public order, security, sovereignty and national interests of Pakistan.

Securities and Exchange Commission of Pakistan (SECP) permits the association through grant of license to be registered as a public limited company, without mentioning the word “Limited” with its name. Securities and Exchange Commission of Pakistan (SECP) may also impose certain specific conditions on license and can revoke such license on violation of these conditions.

On revocation of license, association needs to stop all its activities at once except money recovery and after satisfaction of its liabilities, shall transfer all its assets to another association not for profit with similar objects, after that member are liable to formally wind up the association not for profit. Member, officer and their family members will not be allowed to join that other association to which assets are transferred for a period of five years.

PROCEDURE TO REGISTER AN ASSOCIATION NOT FOR PROFIT / NGO:

As discussed above, in Pakistan, an association not for profit or NGO can be incorporated and regulated under the provisions of Companies Act, 2017 with Securities and Exchange Commission of Pakistan.  Following is the step by step procedure to register / incorporate an association not for profit:

Step 1:    NAME AVAILABILITY AND RESERVATION 

First step to register an association not for profit is to check availability of your proposed name and then reserved your proposed name for 60-days. You can initially check availability of your proposed name on SECP official website in the light of Section 10 of the Companies Act, 2017. For name reservation you need to file a formal application, online or physical, along with payment of prescribed fee to your relevant Companies Registration Office of Securities and Exchange Commission of Pakistan through online eService Portal or physically. 

Step 2:    APPLICATION FOR GRANT OF LICENCE

At the second step you need to apply for grant of license to act as association not for profit and to register as Limited Liability Company without mentioning the word “limited” with company’s name. An application for grant of license is to file with Securities and Exchange Commission of Pakistan along with followings documents as required under the Associations with Charitable and Not for Profit Objects Regulations, 2018:

  1. Application for Grant of License on the prescribed NFP Form-1
  2. Resume of all promoters/proposed directors/CEO
  3. Affidavits / undertakings from promoters
  4. Estimated Income and Expenditure Statement
  5. Brief statement of the work already done or proposed to be done
  6. Authority Letter in favour of a person to present the application
  7. Paid bank Challan of Rs.25,000/- as licensing fee
  8. Copy of name availability letter
  9. Draft Memorandum and Articles of the proposed association
  10. Copies of CNICs/Passport of all promoters

The Securities and Exchange Commission of Pakistan, while considering the application for grant of license under section 42 of the Companies Act, 2017 read with Regulation 4 of under the Associations with Charitable and Not for Profit Objects Regulations, 2018, may require any further information/documents as it may deem necessary.

Step 3:  INCORPORATION OF ASSOCIATION AS A COMPANY

After grant of license from SECP the proposed association not for profit shall submit incorporation application, online through eService Portal or through physical, along with following documents with the concerned Companies Registration Office (CRO) of SECP:

  1. Name Reservation Letter
  2. Application Form on prescribed Form-II
  3. Approved copies of Memorandum & Articles of Association by SECP.
  4. Copies of CNICs/Passports of Promoters
  5. Copy of licence issued by SECP
  6. Copies of NTN Certificates of Directors
  7. Special Power of Attorney
  8. Proof of Prescribed Registration Fee payment

According to Securities and Exchange Commission of Pakistan the processing time for the application of incorporation is four (4) working hours if the application is complete in all respects.