FCRA registration primarily for non-governmental organisations (NGOs) and entities receiving foreign contributions for charitable, social, or developmental purposes. Private companies in India are generally not required to obtain FCRA registration unless they are involved in specific activities that qualify them as NGOs under the Act.
Introduction
Foreign donations in India are regulated by the Foreign Contribution Regulation Act, 2020 [FCRA], which aims to assure that foreign funding does not affect internal security. First enacted in 1976, the Act was amended significantly in 2010 with a set of new rules to tighten oversight over foreign donations. The Act makes it obligatory for all non-governmental associations, groups, and NGOs to be registered, thereby subjecting them to the FCRA. These organisations need compliance with FCRA for the purpose of legally accepting and using foreign funds on their operations.
Eligibility
To apply for registration in FCRA, an association should be registered under any of the existing laws, like the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of Companies Act, 2013.
- The organisation should generally have completed three years of existence and wholeheartedly worked for the cause that it has proposed to use foreign contribution.
- It has to be an NGO/association, and the organisation should have spent a minimum ₹15 lakh in the last three years. Expenditure items could be selected but without including Executive Expenditures as defined under Rule 5 of FCRA, 2011.
- If the trusteeship comprises capital investments like land, buildings, vehicles, and any equipment, etc., an undertaking that under no circumstances shall these assets be diverted during the said organisation’s FCRA registration is valid.
Once an FCRA application is made in the prescribed format, the following criteria are checked before providing registration. The ‘person’ or ‘entity’ making an application for registration or grant of prior permission:
- Is not fictitious or benami
- Not been prosecuted or convicted for following activities that are aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another
- Has not been prosecuted or convicted for propagation of communal tension or disharmony in any specified district and/or any other part
- Has not been proven to be a misutilizer or diverter of its funds
- Not for the commission of any offence or prevention from sedition and violence methods
- Will not use foreign contribution or allow that to be used for personal gain, shell company type transactions
- Has not violated any provision of this Act
- Has not been barred from receiving foreign contributions
- The who, being an individual—(i) has not been convicted under any law for the time being in force; and (ii) no prosecution is pending against such person for any offence
- The person being other than an individual, none of its directors or office bearers has been convicted under any law for the time being in force, nor is prosecution for any offence pending against him;
When Does FCRA Apply to Private Companies?
Organisations that want to accept foreign donations for specific cultural, social, economic, educational or religious programs need to be registered under FCRA OR they must get the “prior permission” from The Ministry Of Home Affairs. Trust, Society or Section 8 Company perfect status for FCRA application
Purpose of Contribution
Under the FCRA, no foreign contribution can be used for activities ‘detrimental to national interest.’ What is prohibited includes acts or projects that might endanger national security, public interest, or public order. The prime intention of the Act is to do away with using foreign money for activities that can cause damage to the country’s stability or safety and also ensure the protection of integrity and the well-being of our nation. Every such function shall not be used for celebrating religions and unlawful activities disturbing the peace, security, or public morality of India. It should not be influenced by the received foreign contribution.
- The unity and integrity of India
- The public interest, the security of the state, and the strategy to be officially noticed in every situation and whatever a division of government might decide is the necessary amount of particular equipment presented or required—are free, equitable political elections
- Good relations with any government abroad
- National integration or unity is the feeling of oneness between people in a country and their willingness to be regarded as nationalists
- It will not be an offence; it shall endanger no one’s life or physical integrity.
Registration Requirement
For registration under FCRA it must be a Trust, Society or Section 8 company that has been functional for at least 3 years. The organisation must have spent at least ₹10,00,000 on their goals over the last three years. The accounts of the company should be audited by a chartered Accountant for the last 3 years. The following required documents must be submitted for the registration:
- Company Incorporation certificate
- MOA (Memorandum of Association) and AOA (Article of association)
- Latest three years audited financial statements
- Last 3 years income tax returns
- Contact Information (including phone number and email address)
- Round seal of the association
- The organisation must not have received any foreign contribution without the prior approval of the government to receive it.
Regulatory Compliance
- NGOs must have FCRA registration to collect foreign contributions. This would be valid for 5 years, and this needs to be renewed
- NGOs to maintain separate bank accounts for foreign contributions
- All registered NGOs are required to file annual returns, listing out the various foreign contributions received and utilised with the Ministry of Home Affairs
- The second category refers to Foreign Grant Permission, which allows NGOs not registered under the FCRA and other organisations (including individuals) to receive foreign contributions for a specific project or purpose after seeking prior permission from the Ministry of Home Affairs.
Conclusion
The registration under FCRA is usually not applicable for the private companies in India unless they are carrying on with activities contemplated by Section 8 of Companies Act, 2013 While trusts of a charitable non-governmental organisation and societies registered under Societies Registration Act can receive foreign contributions without seeking FCRA registration as well institutes carrying out research work on Educational, Social, Religion, Service other percentage activities or interest in India have not been required to obtain it; private limited companies engaged in the construction business must be subject to its regulations. Consult Vakilsearch experts for more information.
Frequently Asked Questions
What is the purpose of FCRA registration for private companies?
FCRA (Foreign Contribution Regulation Act) registration is required for private companies in India that receive foreign donations or contributions. The purpose is to regulate and ensure that these funds are used for legitimate purposes, such as social, cultural, or educational activities, without compromising national security.
Do all private companies need FCRA registration?
Not all private companies need FCRA registration. It is mandatory only for those companies that are involved in charitable, social, or educational activities and receive foreign contributions. Commercial private companies that do not engage in such activities or do not receive foreign funds are exempt from FCRA registration.
What are the key compliance requirements under FCRA?
Companies with FCRA registration must maintain a separate bank account for foreign contributions, submit annual returns to the Ministry of Home Affairs, and ensure that foreign funds are used only for the purposes specified in their registration. They must also comply with periodic inspections and audits to ensure transparency.
How can a private company apply for FCRA registration?
A private company can apply for FCRA registration by submitting an online application through the FCRA portal of the Ministry of Home Affairs. The application must include details of the company’s activities, financial statements, and a commitment to adhere to FCRA regulations. After scrutiny, the Ministry grants or rejects the registration.
What happens if a private company does not comply with FCRA regulations?
If a private company does not comply with FCRA regulations, it may face severe penalties, including fines, cancellation of FCRA registration, and prosecution under the FCRA Act. Non-compliance can also lead to reputational damage and restrictions on receiving foreign contributions in the future.
