An NPO can be a non-profit company, a trust or a voluntary association of persons. An organisation that is not-for-profit can be set up as a non-profit company. A non-profit company is similar to a normal profit company but it is not allowed to operate to make a profit and it can’t share the profits out amongst the company members.

Large organisations which run big programmes and budgets and have got lots of staff usually set up a non-profit company. It is a difficult structure to set up because there are complicated procedures and legal requirements to follow.

Non-profit companies have a separate or independent legal identity which is distinct from its members. This means –

• The organisation, not its members and staff, are responsible for the organisation’s debts, contracts and other legal responsibilities
• The assets of the organisation are in the name of the organisation, not its members
• The organisation carries on with its work even if its members or staff change
• The organisation can sue, be sued and enter into contracts in its own name

Who runs a non-profit company?

A company consists of members and directors. The members appoint the directors who have executive powers. The directors are responsible for the day-to-day running of the company.

How do you form a non-profit company?

All companies, including non-profit companies, are registered with the Registrar of Companies under the Companies Act. To register as a non-profit company your organisation must:

• Be established for a lawful objective
• Have as its main objective the promotion of religion, the arts, science, education, charity, social activity or a communal or group interest
• Only use its income and property to promote the main objective
• Not distribute its money or property to the members or staff, unless they are being paid for work they have done
• Appoint official auditors
• Keep financial and accounting records
• Hold an annual general meeting

The memorandum and articles of association for a company

The founding documents for a non-profit company are the memorandum and the Articles of Association. The memorandum sets out the purpose of the NPO and the Articles of Association say how it will work.