The NGO board: duties, independence and conflicts of interest

An NGO’s board is the group of people legally responsible for it: the trustees of a trust, the governing body of a society or the directors of a Section 8 company. They must act in the organisation’s interests, follow its founding document and the law, look after its money and never use their position for personal gain, and they answer for its work even when staff run it day to day.

Funders look at the board closely, because it is the best guide to whether an organisation will still be standing, and honest, in five years. A board that meets, reads the accounts, declares its interests and minutes its decisions is worth more to a CSR team than a list of famous names.

This guide covers who the board is in each legal form, what board members must do, composition and independence, conflicts of interest and the Income-tax Act’s rules on related persons, meetings and minutes, the board’s role in money and safeguarding, and a calendar for the year.

Who the board is

Whatever it is called, the board sets direction, approves budgets and policies, appoints and oversees the chief executive, and makes sure the organisation obeys the law. Staff, including a founder who works full time, run the programmes.

What board members must do

The duties are much the same in every form:

• Loyalty. Act in good faith in the organisation’s interests and for its objects, not for yourself, your family, a funder or the person who invited you.
• Obedience. Follow the founding document, the conditions of every registration and the law.
• Care. Prepare for meetings, read the accounts, ask questions and use independent judgement. Signing what you haven’t read is not a defence.
• No personal benefit. Don’t profit from your position. Declare any interest and step out of decisions where you have one.
• Collective decisions. The board decides together. One trustee or director can act alone only where the board has delegated authority in writing.

Trustees carry personal responsibility for the trust’s property, and can be liable for losses they cause by breaching the trust. Tax law adds its own reach: if a registered NGO becomes liable to the tax on accreted income (for example, when its registration is cancelled), its principal officer or trustee is liable to pay it along with the organisation.

Composition: skills, diversity and independence

Build the board around what the organisation needs, not around who is famous or available:

• Skills. Someone who understands money and can read accounts; someone who knows your field, such as a teacher for an education NGO or a doctor for a health one; someone with legal or management experience; and, if you work with children or vulnerable adults, someone who understands safeguarding.
• Community voice. At least one person with lived experience of the issues you work on, or a leader from the community you serve. If a seat isn’t possible yet, set up an advisory panel whose views the board must hear.
• Independence. Members with no family, business or financial ties to the founder or to each other, who aren’t paid by the organisation. The law doesn’t require trusts or societies to have independent members, and most Section 8 companies needn’t appoint independent directors either, but funders look for them. A board made up of one family is the arrangement CSR teams question most.
• Terms. Fixed terms, a limit on consecutive terms and a plan for new members keep the board fresh. Write them into the deed, rules or articles.

Separate the roles. The chair and the chief executive are better as different people. If the founder is both a trustee and a paid employee, the board, not the founder, should set the founder’s pay and review their work, with the founder out of the room.

Conflicts of interest and related persons

A conflict of interest arises when someone who takes or influences a decision could gain from it, personally or through a relative, friend or business. Having a conflict isn’t wrong in itself. Hiding it is. The rule is simple: declare it, record it and step away from the decision.

The Income-tax Act, 2025 makes this a tax matter. It calls the people closest to an NGO related persons (formerly “specified persons”, under section 13(3) of the 1961 Act). Under Section 355(h), they are:

• the author or founder of the organisation;
• anyone whose total contributions exceed ₹1 lakh in the tax year, or ₹10 lakh in all up to the end of the tax year;
• where the founder or such a donor is a Hindu undivided family, its members;
• any trustee or manager, by whatever name called;
• relatives of the founder, of such a family’s members, or of a trustee or manager (spouses, brothers and sisters, parents, grandparents, children and grandchildren, and the spouse’s equivalents, among others);
• any business in which the founder, a trustee or manager, such a family member or any of their relatives has a substantial interest, that is 20% or more of the voting power or profits.

Watch the words: under the 2025 Act, “specified person” means something different (any organisation that has ever been registered), so use “related person” for insiders.

The risk areas are predictable: renting a trustee’s building, hiring a founder’s relative, buying from a trustee’s firm, lending the NGO’s money, letting someone use its car or premises for free, or paying a director’s family member as a consultant. None of these is automatically forbidden, but each needs the interest declared, a fair process, a price no higher than the market and a minuted decision taken by people without the conflict.

Section 8 companies also follow the Companies Act’s rules on disclosure of directors’ interests (Section 184) and on related-party transactions (Section 188), with some relaxations for Section 8 companies. Your company secretary can confirm which apply.

Meetings, minutes and decisions

• How often. A Section 8 company’s board must meet at least once in every six calendar months, under the 2015 relaxation for Section 8 companies, as long as it is up to date with its annual filings. Trusts and societies meet as their deed or rules say. For any NGO, a quarterly meeting is good practice.
• Papers. Send them a week ahead: the agenda, the accounts to date, progress against the plan, risks and any decisions needed.
• Minutes. Record who attended, the quorum, every declaration of interest and who stepped out, what was decided and any dissent. Sign them at the next meeting and keep them safely: CSR teams ask for them in due diligence.
• What the board alone decides. The budget, the audited accounts, the auditor, policies, the chief executive’s appointment and pay, bank signatories, large contracts, property, and any change to the founding document.
• Delegation. Write down who can approve what, and up to what amount, so staff can act without waiting for a meeting and without exceeding their authority.

The board’s role in money

The board doesn’t keep the books, but it is answerable for them. It should:

• approve the annual budget and review income and spending against it every quarter;
• appoint the auditor, meet them, and approve the audited accounts;
• require two signatories, or two approvals, for payments, and competitive quotes above set limits;
• make sure the NGO spends at least 85% of its income on its objects each year or accumulates it properly (see the 85% rule), and invests only in the forms the Income-tax Act permits;
• track the expiry dates of every registration and approval.

See accounts and audit for NGOs for what the board should expect to see.

The board’s role in safeguarding

If the NGO works with children or vulnerable adults, safeguarding is a board responsibility, not just a staff one. The board adopts and reviews the safeguarding policy, names a safeguarding lead, makes sure staff and volunteers are recruited safely and trained, and receives regular reports on concerns, without names. It never investigates a case itself.

The law reaches the top. Under section 19 of the Protection of Children from Sexual Offences Act, 2012 (POCSO), anyone who knows or suspects that a sexual offence against a child has been or may be committed must report it to the police or the Special Juvenile Police Unit. A person in charge of an institution who fails to report such an offence concerning a subordinate under their control faces up to one year in prison and a fine (section 21(2)). See child protection and safeguarding. Once the NGO has 10 or more employees, the POSH Act also requires an Internal Committee (see POSH for NGOs).

A board calendar

The Academy’s Starting an NGO course has a lesson on good governance from day one, and Running a CSR Foundation goes deeper on boards, committees and conflicts.