A company not distributing profits is a company incorporated for one or more lawful objectives where profits are not distributed to members as dividends. It is governed by the special provisions of the Companies Act relating to non-profit-distributing companies.
Membership
The Act generally requires at least five promoters to establish such a company and requires the membership to remain at five or more after incorporation.
Profit restriction
The defining characteristic is that profits are not distributed to members in the manner of ordinary shareholder dividends.
Name
The Companies Act provides special naming treatment for this category and states that, except with OCR's prior approval, such a company does not use words such as "Company", "Limited" or "Private Limited" in its name in the same way as ordinary companies.
Not the same as every non-profit body
A company not distributing profits is one legal form. Associations, foundations, trusts and other bodies can be governed by different legislation and registration systems.