Legal Capacity of an NGO to Enter into a JV

• An NGO registered as a trust, society, or Section 8 company under Indian laws can enter into a JV, provided its charter documents permit commercial collaboration.
  
• The NGO must ensure that the JV’s purpose aligns with its core objectives, especially if it enjoys tax-exempt status under the Income Tax Act.
  
• The NGO’s governing body or board of trustees must pass a resolution approving the JV and defining the terms of engagement.
  
• If foreign funds or partners are involved, additional compliance under FCRA and FEMA may be required.
  

Purpose and Scope of the JV with an NGO

• A JV with an NGO is typically undertaken for social impact ventures, public-private partnerships, rural development projects, education, healthcare, or skill development.
  
• The JV structure can be used to mobilize private investment, technical expertise, or operational scale while maintaining a not-for-profit mission.
  
• It may also help in leveraging government schemes, CSR funding, or international development assistance.
  

Form of the JV Entity

• The JV can be formed as a separate legal entity, such as a private limited company, Section 8 company, or LLP, depending on the project’s nature.
  
• If formed as a for-profit company, it must operate within the regulatory scope of the NGO’s mission to avoid violation of tax exemptions.
  
• The JV agreement should define roles, capital contribution, governance, profit sharing, and exit terms for both the NGO and the partner(s).
  
• The NGO’s share in the JV may be in the form of services, facilities, or intellectual contributions rather than financial investment.
  

Compliance and Restrictions

• The NGO must ensure that the JV does not divert its charitable assets or compromise its non-profit status.
  
• Income received by the NGO from the JV must be used strictly for its charitable purposes, failing which it may lose its Section 12A or 80G registration.
  
• If the NGO is FCRA-registered, any foreign contribution to the JV must be carefully vetted and approved by the Ministry of Home Affairs.
  
• Proper documentation, governance records, and reporting are critical to avoid scrutiny by tax and regulatory authorities.
  

Transparency, Audit, and Accountability

• The JV must maintain separate books of accounts, statutory registers, and undergo regular audits.
  
• Any revenue-sharing arrangement with the NGO must be documented and disclosed in its financial statements.
  
• Annual reports, impact assessments, and program outcomes may be required depending on the project’s nature and funders.
  
• Transparency in operations builds credibility with donors, regulators, and community stakeholders.