Your Advocate
This week Your Advocate is Barrister Tanjib-ul Alam Advocate, Supreme Court of Bangladesh. He is the head of the chamber of a renowned law firm, namely, 'Tanjib-ul Alam and Associates ',which has expertise mainly in commercial law, corporate law, admiralty, employment and labor law, land law, banking law, constitutional law, telecom law, energy law, Alternative Dispute Resolution, Intellectual Property Rights and in conducting litigations before courts of different hierarchies.
Query
What is the procedure of converting an existing non-profitable organization into a profitable organization? Is it necessary to change the objectives of its Memorandum? For a profitable organization what particular objectives are required?
Response
Thank you for your question. With regard to your question on the procedure of converting a non-profit organisation into a profitable one, the answer would depend on the nature of non-profit organisation. There are different types of non-profit organisation for example (a) society registered under the Societies Registration Act, 1860, (b) voluntary organisation registered under the Ministry of Social Welfare, (c) trust under the Trust Act, 1882 and (d) company under section 28 of the Companies Act, 1994.
As a matter of general principle, assets of a charitable organisation (non-profit organisation is most likely to be a charitable organisation) is not allowed to be converted into a profit making venture as in case of profit-making organisation, the shareholders are the owners of the company. On the other hand, in case of a non-profit organisation there is no particular owner as the assets are dedicated for the "cause". If a charitable organisation is dissolved, the assets of such organisation cannot be distributed amongst the members, rather the assets should be given to another charitable organisation. Since profit making organisations like limited liability companies are by definition owned by the shareholders, if a charitable organisation is converted into a limited liability company, it would amount to taking over the assets of the organisation by the shareholders of the new company. As such, it is unlikely that there is any scope to convert a charitable organisation into a profit making company.
Assuming that the above are not applicable, if the constitution of the non-profit organisation allows conversion of the same into a profit making organisation, then the procedure prescribed in the Constitution should be followed.
Since you have not indicated the nature of incorporation i.e. whether your organisation is a society, trust or company and whether the constitution of the organisation allows such conversion, it is difficult to give you any specific answer.
As an alternative, a non-profit making organisation may consider incorporating a profit making company as its sister company.
For detailed query contact: info@tanjibalam.com.
Correction
Source: Human Rights Summer School 2010
In our last issue(Nov. 12, 2011), with the write up, 'Studying law' by Dr. Uttam Kumar Das, this picture was published. The source of the photograph was unintentionally dropped. We regret for any inconvenience.
