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What are the Dissimilarities between Trust, Section 8 Company & Society?

Dissimilarities between Trust & Section 8 Company & Society
| Updated: Jan 16, 2021 | Category: Section 8 Company, Trust

A Non Governmental Organization also referred to as non profit organizations in India, can be registered under different authorities for a charitable purpose. These organizations are formed to promote social development, welfare and other charitable purposes. The NGO registration can be done under three types, that is, as a Trust, Society or Section 8 Company. However, all these three types have different purposes and uses based on what is intended to be achieved through the formation of the organization. Therefore, this article will help you know about what are the dissimilarities between Trust, Section 8 Company & Society.

Trust

Trust is a form of Charitable Organization. It can be either public or private. It is formed for the purpose of providing benefits to the deprived section of the society. Trust is governed by the Indian Trust Act 1882. Trust registration is done by submitting Trust Deed by the organization. Trustees are appointed by the creator of the Trust and are given powers and control of the administration of property with a legal obligation to administer is solely for the purposes specified.

Society

Society is governed by the Society Registration Act 1860[1]. It is formed by 7 or more members who come together for a common purpose that is, the charitable purpose. Society registration is done by submitting the document Memorandum of Association (MOA) of the society.

Section 8 Company

Section 8 Company is governed by the Companies Act 2013. A company under this section is formed for promoting charitable objective relating to commerce, arts, science, health etc. Section 8 Company has the privileged and performs its duties subject to the obligations of Limited Companies. Section 8 Company registration is done by submitting the documents Memorandum of Association (MOA) and Articles of Association (AOA) drafted by the company to the Registrar of Companies. Dissimilarities between Trust, Section 8 Company & Society.

S. no

Basis of Differences

Trust

Society

Section 8 Company

1.

Statute/ Legislation

Governed by Indian Trust Act, 1882.

Governed by Societies Registration Act 1860.

Governed by Indian Companies Act, 2013.

2.

Jurisdiction

Registered under the jurisdiction of Deputy Registrar/ Charity Commissioner of the prescribed area.

Registration lies in the hands of Registrar of Societies.

Registration is done with the Regional Director and Registrar of Companies of concerned area.

3.

Registration Document

Trust deed required to register a Trust

Memorandum of Association of the society to register societies.

Memorandum of Association and Articles of Association to register a Section 8 Company.

4.

Minimum requirement

At least 2 trustees required to register public charitable Trust.

Minimum 7 members required to register a society.

Minimum 2 directors and shareholders are required to register Section 8 Company. Directors and Shareholders can be the same person.

5.

Board of Management

Trusts are governed by trustees or by Board of Trustees.

Societies are governed by a governing council or managing committee.

Governed by Board of Directors.

6.

Dissolution

Generally Public Charitable Trusts cannot be dissolved.

Societies may be dissolved with the approval of 3/5th members of society.

Section 8 company may be winded up or dissolved as prescribed under the Companies Act.

7.

Annual Compliance

There are some Annual Compliance requirements depending upon whether the Trust is Private trust or Public Trust.

Annual filing of a list of names, occupations and addresses of the members of the Managing Committee of the society, with the registrar of Societies.

Annual Compliance of filing of accounts and filing of annual return of Section 8 Company, with the Registrar of Companies (ROC).

8.

Time period involved in Registration

10 to 15 days.

30 to 45 days

60 to 75 days

9.

Cost Factor

Low.

Medium.

High

10

Grant of subsidy by the government

Not Much preferred.

Not Much preferred

Mostly preferred

11.

From the point of view of Foreign Contribution Regulation Act, (FCRA) registration

Low/ moderately preferred.

Low/moderately preferred

Most preferred

12.

Registration under the Income Tax, 1961

Allowed.

Allowed

Allowed

13.

Stamp Duty

Trust deed to be executed on non-judicial stamp paper, vary from state to state.

No stamp duty required for Memorandum of Association and rules and regulations.

No stamp duty required for Memorandum of Association and Articles of Association.

14.

Geographical Area and Operation

Whole of India

State wise, but can operate in the whole of India after taking all India registration.

The whole of India.

15.

Legal Title

Vests in the hands of Trustees

Held in the name of the society.

Held in the name of the company.

16.

Transparency in working details

Low

Low

Works highly transparent as everything is into public domain.

17.

Change of Registered office.

Difficult

Complex

Easy

18.

Change in board of Director.

Easy

Complex

Easy

From the above dissimilarities between Trust, Section 8 Company & Society, we get an overview of the important points that needs to be considered before choosing a type of organization.

When does the forming of a Trust be considered?

  • In cases where there is more than one family member running the business.
  • If the trustee has to hold the office for his or her lifetime without the need for an election.
  • When there is privacy in activity and flexibility in the division of benefits.

When does the forming of the Society be considered?

  • It is an ideal organization when one wants an elected body to manage it.
  • It the member do not wish to be bound in perpetuity to it, society easily allows for exit of its members.
  • If a person depends upon an organization which can easily be winded up, then he must go for forming a Society as Society is easier to wind up as compared to Section 8 Company and Trust.

When does the forming of Section 8 Company be considered?

  • Formation of Section 8 Company can be considered if the purpose is for executing a wide range of activities.
  • To gain the credibility and reliability as THE Central government has approved this establishment.
  • Achieving the legal structure of the company without needing a high capital.

Conclusion

With the above stated dissimilarities between Trust, Section 8 Company & Society, it is much clear that though these three types are non-profit organization, there are substantial differences in their method of operation and formation. The appropriate type of NGO must be chosen by the person according to the needs and purpose required for its formation.

Also, Read: Know the Complete Difference between Non- Profit Organization and an NGO

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Japsanjam Kaur Wadhera is an Advocate and has completed her BA.LLB (Hons) and has experience of writing various research papers during her college time. Earlier she was working as an Associate Advocate in a reputed Law Firm. She has an extreme interest in writing legal content and her core area falls under legal enactments, tax and finance.

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