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Trust Registration

Difference Between Trust, Society and Section 8 Company

Narendra Kumar

| Updated: Jul 27, 2017 | Category: NGO, Section 8 Company, Societies Registration

trust Registration

Any organization that devotes its funds to welfare is not profit organization. This includes schools, colleges, hospitals, religious organization (NGO’s). There are three common forms of NGOs- Trust, Society and Section 8 Company. Which one should you choose?

What is Trust Registration?

Let’s discuss the trust. Trust is the oldest form of charitable organization. There are private, or Public Trusts are primarily created for the benefit of family members or a very small set of known persons. A Private trust is Indian Trust Act 1882. Trust act is not applicable to the public trust.

In Maharashtra and Gujarat, public charitable trust must be formed and registered under the Bombay must be formed and registered under the Bombay Public trust Act 1950. Other states, public Trust are mostly governed by common law.

Trust is the easiest to form and Operate. However, as there is no regulatory oversight, disputes have to go to the court. The trust deed can also be modified only by the settlers, and if he is not available, you need to go to court or to change the trust deed there are no regulatory requirements for governance or public filing of accounts.

What is Society Registration?

Societies are a relatively modern form. Seven persons come together for a common purpose in a general body. These may be Indian or foreigners. You can add more members. Each public body members has one vote.

Societies in many states are governed by the Societies Registration Act 1860.in its original or amended form. Its Memorandum says so.  Governance and public filing requirement vary from one state to another. In general. Every society has to file a list of governing body members annually. Many states ask for the filing of audited accounts as well. However there are as many which do not the main societies Registration Act, 1860 itself does not have any provision for filing of audited accounts.  Except for TamilNadu states, members and office bearers can also be paid employees of the society is more difficult than trust but easier than a company. This form works best for people with state-level objectives, who want to focus on their formalities

What is Section 8 Company Registration?

These are limited companies established under the Companies Act. The Government grants them an exclusive license under Section 8 Company. There are three conditions for this.

  • The company should form for a charitable trust
  • Income and profits should be applied toward these objects
  • It should not pay any dividend to its members

It can be formed with only two members may be Indian or foreigner it should have at least two directors, who need not be m a member.

Which one is better Trust or Society or Section 8 NGO?

These forms can be used for Non-profit Work Just like a truck can be used for carrying passengers & bicycle for carrying almost anything each form has its own advantages and handicaps Trust is easy to form and run –but unwieldy when it comes to changing objects or setting disputes You can choose a trust if you are dedicating your own property to public good

In India, a nonprofit organization for a charitable purpose can be registered under the different Authorities. It could be registered as a trust, society and section 8 company. A charitable purpose is defined under Section 2 (15) of Income-tax act “Charitable purpose “includes relief of the poor, education, Yoga, medical assistance, Preservation of environment (Incl. watersheds, forests, and wildlife) and preservation of monuments or places or objects of artistic or historical.

Interest and the advancement of any other object of general public utility “Charitable purpose do not include the purpose that relates exclusively to religious teaching or worship. While selecting the form in which it should be registered non-profit making, the entity must evaluate the objects and the area of operation, persons involved in its constitution and the sources of income to achieve its purpose. To facilitate the decision making a comparative analysis of a different form of registration available for non-profit making entities i.e. Trust, Society & section 8 Company.

Income tax act gives equal treatment for exempting their income and granting an 80G certificate, whereby donors to nonprofit organizations may claim a rebate against donations made. Foreign contribution to non-profits is governed by FC(R) regulations and the Home Ministry.

CAF would like to clarify that this material and the provides only broad guidelines and it is recommended that legal and or financial experts be consulted before taking any important legal or financial decision or arriving at any conclusion.

Primary Instrument of Trust Registration

The primary instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the Trust) should be enshrined. In every trust deed, the minimum and a maximum number of trustees have to be specified. The Trust deed should be signed by both the settlers & trustee/s in the presence of two witnesses. The trust deed should be executed on judicial stamp paper, the value of which would depend on the valuation of the trust property.

Application for Trust Registration

The application for Trust Registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.

The applicant has to affix a court fee to the form and pay a registration fee which may range differently, depending on the location and value of the trust office and trust property

The applicant should sign the application form before the registrar, sub-registrar deputy registrar, Regional officer or superintendent of the local office of the charity commissioner or authorized registrar. The application should be submitted, together with a copy of the trust deed

There are more two documents to be submitted at the time of making a request for registration are affidavit and consent letter.

Primary Instrument of Society Registration

The primary instrument of any society is the memorandum of association and rules and regulation (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined

Application for Society Registration

Registration can be done either at the state level (i.e. in the office of the Registrar of societies) or at the districts (In the office of the District Magistrate or the Local office of the Registrar of Societies)

The procedure varies from state to state. However, generally, the application should be submitted together with

  • Memorandum of association
  • Rules and regulation
  • Consent letters of all the members of the managing committee authority letter duly signed by all the members of the organizing committee
  • An affidavit was sworn by the president or secretary of the society on non-judicial stamp paper, together with a court fee stamp
  • Declaration by the members of the managing committee that the funds of the society will be used only to further the aims and objects of the society.

All the previous documents which are required for the application for registration should be submitted in duplicate, together, with the required registration should be submitted in duplicate, together with the necessary registration fee. Unlike the trust deed, memorandum of Association & Rules &b Regulation need not be executed on stamp paper

Primary Instrument of Section 8 Company

For a section 8 company, the primary instrument is a Memorandum & Articles of association  (No stamp paper required)

Let us help you in Comparison between Trust, Society and Section Non-Profit Organization:

SR. NO TITLE SECTION 8 COMPANY TRUST SOCIETY
1 Minimum members required 2 –Two 2 –Two 7-Seven
2 Ownership Shareholders Trustee Members
3 Transfer of Ownership Transfer of shares Not permissible Member Resolution
4 Liabilities Limited Unlimited Limited
5 Stamp Duty Not applicable Non-Judicial Stamp Not applicable
6 Reliability High Low Moderate
7 Time for formation 60-70 days 15-20 days 15-20 days
8 Payments to members and directors Only for Actual Work Allowed Allowed
9 Management Director Trustee Allowed
10 Post Formation and directors Strict guidelines & compliances No major statutory compliances Moderate compliances

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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