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Why Does an NGO Need Transaction Advisory Services?
An NGO may receive or undertake transactions involving substantial amounts of money or assets. A poorly structured transaction can result in Regulatory non-compliance, Tax implications, FCRA violations, CSR compliance issues, Disputes with donors or funding organisations, Improper utilisation of restricted funds, Governance issues, Unintended liabilities, Audit objections, Difficulty in obtaining future grants, Reputational damage and Potential regulatory action.
Professional transaction advisory helps the NGO identify these issues before the transaction is implemented.
Typical situations where an NGO may need advisory support include:
A. CSR Funding :- A company proposes to provide ?50 lakh or ?5 crore to an NGO for implementation of a CSR project. The NGO may need advice on CSR eligibility, CSR-1, Project structure, Grant agreement, Permitted expenditure, Milestones, Utilisation reporting, Administrative expenses, Asset ownership, Monitoring and impact reporting.
B. Foreign Grant:- A foreign foundation proposes to provide funding to an NGO. The NGO needs to consider FCRA registration/prior permission, Permitted purpose, FCRA bank account, Donor agreement, Restrictions on utilization, Administrative expenses, Reporting requirements, Foreign exchange considerations, Project-wise accounting.
A transaction should ideally be reviewed before the foreign funds are accepted.
C. Acquisition or Transfer of Property:- An NGO proposes to purchase, sell, lease or transfer land/building. Advisory may be required for Title due diligence, Ownership, Encumbrances, Stamp duty, Registration, Tax implications, Source of funds, Governing-body approval, Restrictions attached to grant/foreign funds, Documentation.
D. Transfer of Assets:- An NGO may wish to transfer or acquire Land, Buildings, Vehicles, Equipment, Computers, Medical equipment, Furniture, Other capital assets. Where the assets have been acquired from foreign contribution, CSR funds, government grants or restricted donations, additional considerations may arise.
E. Collaboration Between NGOs:- Two NGOs may wish to jointly undertake a project. Advisory can determine Responsibilities of each organization, Funding arrangements, Ownership of assets, Project management, Employment responsibilities, Reporting, Intellectual property, Confidentiality, Termination, Dispute resolution.
F. NGO Restructuring:- An NGO may wish to Restructure its operations, Transfer activities, Consolidate projects, Transfer assets, Establish a Section 8 company, Collaborate with another NGO, Transfer a project from one entity to another.
Such transactions require careful consideration of existing registrations, grants, assets, liabilities and donor restrictions.
What Does Transaction Advisory Cover?
Our Transaction Advisory Services can cover the entire transaction lifecycle.
1. Transaction Assessment:- We understand:
2. Due Diligence:-We review relevant:
3. Risk Identification:-We identify potential
4. Transaction Structuring:-We advise on an appropriate structure for the proposed transaction.
5. Documentation:-We prepare/review:
6. Compliance:-We identify applicable:-
7. Closing & Implementation:- We assist the NGO in completing the transaction and maintaining appropriate documentation.
8. Post-Transaction Compliance:-We assist with:
9. Documents / Information Required From the NGO:-To provide meaningful transaction advisory, the consultancy firm generally requires the following information.
A. Basic Organisation Documents
Tax Documents:-Where applicable:
FCRA Documents:-Where the transaction involves foreign contribution:
CSR Documents:- Where the transaction involves CSR funding:
Financial Information:-Depending upon the transaction:
Transaction-Specific Information:-The NGO should provide:
Additional Documents Depending on Transaction:-
For Property Transactions:
For Grants:
For Corporate/CSR Transactions:
10. What Will the NGO Get From the Consultancy Firm?
We provide clear, structured and documented advisory output, rather than merely a general opinion. Depending upon the nature of the engagement, deliverables may include:
Transaction Advisory Report:-A written report explaining:
Due Diligence Report:- Where due diligence is required, the NGO may receive a report covering:
Legal + Tax + Regulatory + Financial + FCRA + CSR + Governance with identified issues categorised according to their significance.
Risk Matrix :-A transaction-specific risk matrix may be provided:-
|
Risk Area |
Issue |
Risk Level |
Recommended Action |
|
FCRA |
Purpose restriction |
High |
Obtain prior review |
|
FCRA |
Tax treatment |
Medium |
Obtain tax confirmation |
|
Contract |
Termination clause |
High |
Renegotiate |
|
Governance |
Approval required |
Medium |
Pass resolution |
|
Asset |
Ownership issue |
High |
Clarify ownership |
Transaction Structure
We provide a proposed structure showing Source of funds → Legal arrangement → Documentation → Utilisation → Reporting → Closure
Draft/Reviewed Documents Depending on the engagement, we provide
Compliance Checklist:- The NGO can receive a transaction-specific checklist covering:
Before Transaction
During Transaction
After Transaction
Negotiation Support:- Where specifically engaged, the consultancy firm may assist the NGO in reviewing and negotiating:
11. Benefits to the NGO:- Professional Transaction Advisory can help an NGO to:
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