Laws and Legal Compliances for setting up Sports Academies in India: Lawyers Advice
An academy is a place of study or training in a special field. In a diverse country like India, a wide range of sports are played at the domestic, national and international level. India has therefore always had the need for Sporting Academies and has seen some famous ones. However, a lesser known fact is that in order to establish such sporting academies, there is a long and complicated procedure that needs to be followed.
A sports academy may be registered as a Section 8 Company under the Companies Act, 2013 which provides for the formation of companies with charitable objects, as a society under the Societies Registration Act, 1860 and also as a trust under the Indian Trusts Act, 1882. However, while the Indian Trusts Act is an archaic law, the laws and institutional framework relating to societies differ from state to state, the Companies Act, 2013 provides a uniform law throughout the country.
Companies Act, 2013:
Establishment of a sports academy under Section 8 of the Companies Act, 2013 can be done by an individual or an association of individuals if its main object is the promotion of sports, it intends to utilise its profits, if any for furthering its objects and intends to prohibit the payment of dividend to any of its members and If the Central Government is satisfied of the above-mentioned objects, it may allow such individuals or association of individuals to be registered as a ‘Limited Company’ under Section 8 of the Companies Act, 2013, without the addition of the word ‘Limited’ or ‘Private Limited’, as the case may be. Rules 19 and Section 20 of the Companies (Incorporation) Rules, 2014 are the relevant provisions for the incorporation of such a company.
The registration procedure for the same is as follows:
• In order to incorporate a limited company there must be at least two 2 members in the company. The company will have to obtain the Directors Identification Numbers (DIN) as per Section 153 of the Companies Act, 2013 as well as digital signatures for the same as it will be required for e-filings under MCA21.
• Thereafter, the application for the name of the company must be applied under Part A of the Spice+ which will be followed by Part B of Spice+ for the incorporation of the company.
After the approval of the name of the company by the Registrar of Companies there are certain pre-incorporation steps that need to be followed.
• Section 19 Companies (Incorporation) Rules, 2014 required Section 8 companies to make an application under Form no. INC 12. However, The Companies (Incorporation) Sixth Amendment Rules, 2019 has removed the requirement of filing Form No. INC 12, in order to simplify the process of incorporation.
• Section 19 Companies (Incorporation) Rules, 2014 also requires the memorandum of association of the proposed company to be filed in Form No. INC 13 as specified in the Companies Act, 2013. Furthermore, a declaration is to be attached in Form No. INC 14 that the draft Memorandum of Associations and Article of Associations are compliant with the provisions and requirements of Section 8 of the Companies Act, 2013. It is also important to note that such declaration is to be made on an appropriate stamp paper and is also to be notarized by an Advocate, Chartered Accountant, Company Secretary or even Cost Accountant. A declaration is also to be filed under Form No. INC 15 on a stamp paper and the same has to be notarized by each member of the company who is applying. These forms are also to be accompanied by estimates of three years of the future annual income and expenditure of the company, specifying the sources of the income as well as the object of the expenditure.
• After the approval of the above-mentioned forms, the license will be issued in Form No. INC 16. The incorporation application will then be filed in Form no. INC 7 along with the Memorandum of Association, Article of Association, declaration by professional under Form No. INC 8, affidavit by each subscriber of the memorandum under Form no. INC 9, identity and address proof of said subscribers, Specimen Signature in Form no. INC 10, PAN card, in case there is any change in the name of the promoters after approval, a No Objection Certificate as well as Board Resolution authorizing to subscribe to the Memorandum of Associations.
• Form No. INC 22 need for the Registered Office and DIR 12 for the first director need not be filed separately as this will be covered by the filing of the Spice+ form.
• The registrar, after being satisfied with the forms that are filed with the Registrar of Certificates, shall issue the certificate of incorporation along with the Unique Company Identification Number.
• In order to register under Section 80 G of the Companies Act, 2013, it has to apply under Form No. 10G which is to be submitted to the commissioner of Income Tax.
• One of the benefits of a Section 8 company registering itself under Section 80G of the Companies Act, 2013 is that the organisation or person who makes a donation to the said company/ Non-Government Organisation will receive a fifty percent deduction from his/her taxable income.
• After the incorporation of said company, the company is also to follow certain poNt incorporation compliances such as conducting of the Annual General Meeting (Form no. MGT 15), submission of the directors report (Form No. AOC 4), filing of annual returns (Form No. MGT 7) and filing Income Tax Returns (Form No. ITR 6).
Societies Registration Act, 1860:
As per Section 1 and Section 20 of the Societies Registration Act, 1860, any seven or more persons associated for scientific, literary or charitable purpose such as the diffusion of knowledge, may be subscribing their names to a memorandum of association and filing said memorandum of association with the Registrar or Joint-Stock Companies may form themselves as societies under the said Act. A sports academy may therefore also be registered under the Societies Registration Act. In case a society proposes to operate on a national level, it is essential for the society to have one member from at least 7 states of India, each. The Memorandum of Association shall contain the name and objects of the society being registered. In addition to the Memorandum of Association, a copy of the rules and regulations of the society. Such copy must be certified to be a correct copy by at least three members of the society’s governing body. The said rules are regulation must in consonance with the provisions of the Societies Registration Act, 1860 and be filed alongside the Memorandum of Association while registering. The President or the Secretary of the society must also provide an affidavit on a non-judicial stamp paper worth rupees ten only, regarding the relationship between the subscribers of the Memorandum of Association as well as an affidavit for changing the name of the society in case the proposed name is found to already have been registered. A fee of rupees fifty only shall be paid when the Registrar of Societies has approved of the grant of registration and all the formalities are complete.
The Societies Registration Act, 1860 does not have any mandatory compliances after the registration has been completed. However, it is essential that the society functions within the framework of the Memorandum of Association and rules and regulations as described during registration of the same.
While the Societies Registration Act, 1860 is a central act, each state has its own set of rules and framework for the institutions governing and the overall functioning of the societies.
Indian Trusts Act, 1882:
Lastly, a sports academy can also be registered as a trust under the Trust Act of a specific state and in case that state does not have its own Trust Act, it may be registered under the Indian Trust Act, 1882. Private trusts are also governed by the Indian Trusts Act, 1882.
A trust may be created by any person who is competent to contract and with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a Minor. It is essential that the subject matter of the trust must be transferable to the beneficiary. Therefore, since the subject matter of a sports academy trust would be the sports academy itself, it must be transferable to the beneficiary. The first step in the registration of a trust would be the trust deed which is to be attached with a non-judicial stamp paper of rupees hundred only. The trust deed comprises of all the names and addresses of the settlors of the trust and other trustees, name of the trust, beneficiaries of the trust, the minimum and maximum number of trustees allowed and their tenure, registered office address, the trust property, the objectives of the trust and the rules and regulations of the trust.
In addition to being registered under any of the above-mentioned statutes, it is also very important for the sports academy to comply with the local laws in relation to the infrastructure of the academy such as land laws, the health and safety measures that are to be taken and other such necessary laws and rules which need to be complied with in order to set up a sports academy.
After such academies are set up, it is possible for them to receive financial assistance from the Government under the Khelo India Scheme if they are academies run by Sports Authority of India or are different Non-Sports Academy of India academies accredited (Government and Private) under the Khelo India Scheme.
Therefore, in order to start a sports academy, it is important to keep in mind the goals and objectives of the academy and thereafter register it through the most suitable act. Sports academies are essential in developing and nurturing the sporting talent in the country and therefore it is of utmost importance to have a comprehensive legislation that can define the procedure for creation, registration and working of sports academies in India.
Authored By: Adv. Anant Sharma & Suvigya Buch