NON PROFIT (NGO)

GOVERNANCE
Course Code: GP-518A
Program: BS

Ujala Siddiq, PhD Scholar,

NDU, Islamabad.
Non Profit (NGO) Governance

Textbook
The Management of Non-Governmental
Development Organizations - 2nd edition, by
David Lewis, published by Routledge 2005,
ISBN 0-203-00216-4 Master e-book ISBN.
Non Profit (NGO) Governance

LECTURE - SEVEN

Starting an NGO in Pakistan

Starting an NGO in Pakistan

Overview - Pakistan NGO Legal Regulations

• There is no single body of law that governs NGOs in
Pakistan. The Constitution guarantees citizens the right to
assembly “subject to any reasonable restrictions imposed by
law in the interest of Public order.”
• In addition, depending on the source, there are between 10
to 18 different laws in Pakistan that may govern an NGO.
Several of these laws are based on British laws enacted by
colonial rulers in the mid- to late 1800s before Pakistan was
partitioned from India.
• The kinds of laws that govern NGOs fall into two categories:
registration laws that define internal governance and the
reporting relationship between the state and the NGO, and
taxation laws.
Starting an NGO in Pakistan

Overview - Pakistan NGO Legal Regulations

• Type A. There exists a set of laws governing various types of
nonprofit organizations which either require registration
explicitly or implicitly to confer recognition. These have been
categorized as Type A laws in the following list of Acts and
Ordinances.
• Type B. Some of the laws which require registration, but
endow members with the right to gain from benefits either
financially or in kind.
• Type C. Marginally influencing laws
Starting an NGO in Pakistan

Registration of NGOs
• As such the majority of NGOs can choose
which regime to register under. 

• The majority (65.4%) of NGOs are registered

under the Societies Registration Act while
around 20% of NGOs are not registered under
any act.
Starting an NGO in Pakistan

Regulatory Framework
• The Ministry of Social Welfare and Special Education and the
Provincial Social Welfare Departments are responsible for
registering and monitoring organizations under the
Voluntary Social Welfare Agencies (Registration and Control) Ordi
nance 1961
.

• The District Offices of the Industry Department are responsible

for registering organisations under the
Societies Registration Act 1860.

• Not-for-profit companies are required to apply for a licence from

the Securities and Exchange Commission (SEC).
Starting an NGO in Pakistan

Types of Registered Organizations

Societies
• NGOs can be registered under the Societies Registration Act
of 1860 for any literary, scientific or charitable purpose.
• The Societies Registration Act is the oldest NGO registration
act and societies are the most common and convenient
form.
• Societies that may be registered under this Act include:
charitable societies, societies established for the promotion
of science, literature, or the fine arts, for instruction, the
diffusion of useful knowledge, the diffusion of political
education the foundations, etc.
Starting an NGO in Pakistan

Types of Registered Organizations

Societies
• Basic Requirements to Establish a Society
– At least seven founders,
– A signed Memorandum of Association,
– A copy of the society’s rules and regulations,
– A fee of 50 Pakistan rupees, and
– An application submitted to the Registrar of Joint Stock
Companies in the province in which the NGO is located.
Starting an NGO in Pakistan

Types of Registered Organizations

Trusts
• A trust is a “’gift’ of property to a person or institution providing benefit
to both parties,” and may be either a public trust, which benefits the
public at large, or a private trust, which benefits individuals.
• Private trusts for public charity are governed by the Trusts Act, 1882.
There is no law specifically governing public charitable trusts. However, a
public charitable trust may register under one of the other registration
acts. The advantages to registering as a trust under the Trusts Act
include:
– A high level of control over the administration and management of the NGO
– little to no interference from the outside;
– A simple registration procedure;
– Irrevocability; and eligibility for income tax exemption.
• There are also no meeting or account maintenance requirements for a
trust.
Starting an NGO in Pakistan

Types of Registered Organizations

Waqfs (Muslim Trusts)
• Another type of trust that may serve as an NGO is a waqf.
• Waqfs are Muslim trusts initially created for personal benefit or the
benefit of one’s descendants, but eventually expand to benefit the
public. Waqfs may be created for “any purpose recognized by Islam as
religious, pious or charitable.”
• Waqfs are “created for the ultimate benefit of mankind,” thus, Waqf
property vests in God. The Mussalman Waqf Act, 1923 and the Provincial
Waqf Property Ordinances, 1979, govern the management and
administration of a waqf.
• The Mussalman Waqf Act, 1923, requires that within six months of
creation, the mutawalli (trustee) must submit a statement of particulars
to the local court
Starting an NGO in Pakistan

For Registration of NGOs

• Draft of By laws, objects and signed Memorandum
• List of members with NIC copy (7 members at least under
societies act and 25 for social welfare act)
• List of office bearers
• Office building contract in case of rented building or
certificate of ownership
• Affidavits from president of NGO as NGO and members are
not involved in any negative activity.
• A fee of Rupees 50/-
• An application submitted to the Registering body in the
province in which the NGO is located.
Starting an NGO in Pakistan

Registration of NGO under Societies Registration Act, 1860

Step-by-Step Process:
• The proposed society should have minimum 20 members
including at least 07 officers
• Complete documents as mentioned in the section
• Prepare two copies of Memorandum of Association as well as
Article of Association of the Society
• Memorandum of Association should be signed by all the
members of the society
• Every page of the Article of Association should be signed by at
least three Officers
• Prepare the Minutes of the 1st meeting of the members of the
society
• Office of the NGO shall be in Commercial Area
Starting an NGO in Pakistan

Registration of NGO under Societies Registration Act, 1860

Step-by-Step Process:
• Registration fee of Rs. 500/- should be deposited in National
Bank of Pakistan (NBP) through a challan Form under the head
of Account C-03818-Other receipt fee for Registration of
Societies under Societies Registration Act, 1860 (138).
• Annual Progress / Audit Reports, details of projects / services,
bank accounts and list of officers / executive body members
along with contact numbers must be provided to Register Joint
Stock Companies every year so as to avoid legal proceedings.
Starting an NGO in Pakistan
Registration of NGO under Voluntary Social Welfare
Agencies (Registration & Control) Ordinance, 1961
Step-by-Step Process:
• The proposed society should have minimum 20 members
including at least 07 office bearers
• Complete your documents as mentioned in the section
• Prepare and sign the Form B and Constitution of the NGO
• Every page of the constitution should be signed by at least three
Officers
• Prepare the Minutes of the 1st meeting of the members of the
society
Starting an NGO in Pakistan
Registration of NGO under Voluntary Social Welfare
Agencies (Registration & Control) Ordinance, 1961

Step-by-Step Process:
• Registration fee of Rs. 500/- should be deposited in National
Bank of Pakistan (NBP)
• Annual Progress / Audit Reports, details of projects / services,
bank accounts and list of office bearers / executive body
members along with contact numbers must be provided.
Starting an NGO in Pakistan

Benefits of Registration
• All NGOs, including international NGOs may be eligible for
certain tax exemptions. However such exemption has to be
applied for directly to the Ministry of Finance and is not
automatically granted.
• No exemption is granted for income from property, capital
gains and business activities. 
• To be eligible for these benefits a charity must register with
the Central Board of Revenue. Approval is for a three year
period, after which a new application must be made.
• The ability to enforce by-laws;
Starting an NGO in Pakistan

Benefits of Registration
• Legal status “at the official level and among donors;”
• The ability to open a bank account;
• The ability to sign contracts;
• The ability to qualify for financial assistance and tax
exemption.
Starting an NGO in Pakistan
Reporting Requirements

• Organizations registered under the

Voluntary Social Welfare Agencies (Registration and Control)
Ordinance 1961
are required to maintain accounts and submit an annual
report and audit report to District Officers.
• The report must detail the management of the agency, its
activities and plans for the next year. Accounts and reports
are made publicly available.
• Registered Societies must submit a copy of the membership
list annually. No other monitoring is undertaken.
• Not-for-profit companies must submit annual returns,
audited accounts and other documents for examination.
Accounts are open to public scrutiny.
Starting an NGO in Pakistan
Reporting requirements
• The Economic Affairs Division (EAD) asks International NGOs
to explain their plans. The EAD role is strategic, considering
an NGO’s proposals within the wider development
framework to coordinate activities of government and
NGOs, minimize duplication of effort and focus on needs.
• NGOs, which benefit from tax exemptions, are required to
submit annual audited accounts, a list of donors and
beneficiaries and other financial information to the Central
Board of Revenue.
Starting an NGO in Pakistan

Steps to Start an NGO

• Starting an NGO can be a very time-consuming process.
• It requires a strong vision and dedication from an individual
or group that share a common concern about a community.
• If initiated correctly in an organized and strategic way, the
services implemented to benefit the community can be very
helpful and resourceful.
Starting an NGO in Pakistan

1.  Establish Purpose/Vision/Goals

• The first essential step in starting an NGO is to determine the
purpose of the organization.
• Do so with a clear and concise written statement that
describes the charitable mission of the organization.
• The statement must be broad enough to reflect the values of
the NGO and why it exists.
Starting an NGO in Pakistan

1.   Establish Purpose/Vision/Goals

• It is also necessary to envision what the organization
will become and what the long term goals and
objectives are.
• This should be done through short-term planning (an
annual plan) as well as long-term planning (a
strategic plan).
Starting an NGO in Pakistan

2.   Establish an Initial Board of Directors

• When setting up an NGO, the founder(s) must recruit the

initial board of directors.
• It is helpful to start with a small group of committed
individuals because the first board is the foundation of the
NGO.
• The members must have strong legal, financial, and
technological skills and should know that they are expected
to serve on the basis of the public’s best interest.
Starting an NGO in Pakistan

2.   Establish an Initial Board of Directors

• People who clearly understand the mission and goals of the
organization and who have new and progressive ideas to
contribute are essential.
• Most importantly, the initial board should be able to work as
a team in order to help the organization get started and gain
acceptance from the community.
• The size and structure of the board, as well as the people
who make it up, may change based on the size and needs of
the organization once the NGO becomes officially
established . 
Starting an NGO in Pakistan

3.   Seek Legal Expertise

• Because there are many legal matters that an NGO must deal
with in first starting up, it is sometimes helpful to seek a
lawyer. A lawyer can help with:
• Registering the NGO
• Filing articles of incorporation
• Filing reports
• Tax issues
• Securing licenses
• Even though many of these matters may be simple, a lawyer
who specializes in this area is timesaving and reassuring.
Starting an NGO in Pakistan

4.   Write Articles of Incorporation

The following are general examples of what is often expected:
• Name of the NGO
• Purpose/Mission
• A statement declaring the NGO is nonprofit
• Location of the NGO
• Number and names of the board members
• Extent of personal liability
• Whether or not the NGO has capital stock (usually it will not)
• How long the NGO is expected to exist (this may be declared
as everlasting).
Starting an NGO in Pakistan

5. Draft Rules and Regulations/By laws

The rules and regulations must contain:
• Membership requirements,
• The makeup of the governing body,
• Meeting and quorum requirements,
• Meeting notice requirements,
• Procedures for the election and removal of officers, and
• Accounting and audit procedures
Starting an NGO in Pakistan

5.   Draft Bylaws

• While the articles of incorporation prove the accountability

of the organization to the external world, the bylaws
represent the responsibilities of the NGO to itself.
• The bylaws of an NGO specify how it will run. They act as a
rule book determining structure, power, and organization.
• The bylaws are self-imposed by the NGO and therefore,
should conform to the needs of the specific organization.
• The bylaws help to resolve and minimize disputes and
should be available to all members of an NGO for reference .
 5.   Draft Bylaws

Though it varies depending on the individual needs of an NGO,

some general information included in the bylaws may be:
• Members and qualifications and length of memberships
• Board size, responsibilities, structure
• Structure of board meetings
• Committee Structure
• Officer Duties
The bylaws, like the articles, must also be sent to the board for
final approval.
Starting an NGO in Pakistan

6.   Hold an Initial Board of Directors Meeting

• Once the NGO is legally incorporated (through an issued
charter in most cases) an initial board of directors meeting
should be held.
• The board members should officially adopt the bylaws in the
first meeting because they should explain how the board
functions.
• The first meeting is important in establishing officers,
committees, and discussing preliminary projects.
Starting an NGO in Pakistan
7.   Set Up An Accounting System

• All NGOs need a system for recording where money comes

from and how it is used.
• Seeking the help of an accountant who can help set up a
bookkeeping system and explain how to use it is highly
recommended.
• Board members may be helpful in finding a volunteer
accountant or an inexpensive one specializing in helping
nonprofits get started.
• Often times NGOs have an accountant on the board who is
familiar with these systems, which is also a useful option. It
is important to decide whether the bookkeeping system
should be cash or accrual:
Starting an NGO in Pakistan
7.   Set Up An Accounting System

Cash based accounting is a system where:

• Revenue is recorded when added to a bank account.
• Expenses are recorded when money is withdrawn from the
bank.
• This system is very straightforward. However, it only tells the
NGO how much money is in a bank account and nothing
more.
• It does not reveal how much money might be owed to the
organization or how much money the NGO owes .
Starting an NGO in Pakistan

Accrual based accounting records:

• Revenue that is earned (may be before or after it is received)
• Expenses when incurred (may be before or after payment).
• The information provided through accrual based accounting is
more useful to an organization than cash based accounting
because it paints a broader financial picture.
• It allows an NGO to see not just its immediate payments and
deposits, but also what kind of money they owe or may be
receiving in the future.
• This allows an organization to be more aware of its financial
status.
Starting an NGO in Pakistan

8. Come Up With a Fundraising Plan

• Money required for an NGO to operate primarily goes into

the overall operation of the NGO (administration, utilities),
and projects.
• Both the board of directors and the executive director
should be active participants in fundraising and it is
important that writing grants, seeking contributions, and
other fundraising skills are acquired skills early in the NGOs
development.
• In order to come up with the best fundraising strategy, it is
important to identify what the needs are of the NGO and
what sources can best fulfill these needs.
Starting an NGO in Pakistan

Summary of Steps
• Establish purpose, vision and Goal
• Establish an Initial Board of Directors
• Seek Legal Expertise
• Write Articles of Incorporation
• Draft Rules and Regulations/By laws
• Draft By Laws
• Initial meeting of board of directors
• Setup an accounting system
• Fund raising Plan
Starting an NGO in Pakistan

Challenges
• Due largely to insufficient social development and
unsupportive governments, the legal regulations governing
NGOs in Pakistan are unconnected and often incompatible.
• One common feature, however, is that whether NGOs
successfully satisfy their legal obligations is usually up to the
discretion of government officials and not based on
objective criteria.
• The biggest casualties of the “system” are NGO
accountability and the effectiveness of NGOs in achieving
their objectives, though not all blame falls on the
government.
• The inability of NGOs to, so far, come together and
successfully regulate themselves also contributes to a lack of
credibility.
Starting an NGO in Pakistan

Challenges
• Continuing on this path will only further alienate a public too
ready to believe in hidden agendas.
• Only through a sustained effort by the state and the NGO
sector working together to reform the registration and tax
laws into a cohesive and hospitable legal regime will they
improve the lot of those they profess to represent - the
people of Pakistan.
Q&A
THANKS