NGO

What are the Differences in Between Section 8 Company from Trust and Society under NGO?

calendar15 Oct, 2020
timeReading Time: 3 Minutes
Differences in Between Section 8 Company from Trust and Society under NGO

Some organisations devote their funds to the benefit of society. Collectively they are known as non-profit organisations: these are to be incorporated as schools, hospitals, religious institutes, and NGOs. The most prevalent form of NGO Registration in India comprises of Section 8 company, Trust and Society.

Description of Section 8 Company, Trust and Society

A brief description of Section 8 Company, Trust and Society are as follows-

Trust as NGO

Trust is the most traditional form of philanthropic organisations. They can establish in the way of a private or a public institution, which usually looks for the welfare of the individual members of the trustees. A private trust in India is often administered under the Indian trust act 1882[1], while no separate legislation has been granted for registration of the public trust.

Process for Trust Registration

To develop a Trust, one has to get a trust deed formed of the organisation stipulating all essential details of the trust including members, an investment made, policies agreed, etc. which can be altered at any time with the assent of all members. Trust Registration is the simplest form of a non-profit organisation, as it does not entail any administrative complications for the filing of annual accounts and governance.

Society

Societies have been grown in the modern era. In common, they can be developed with a minimum of 7 persons or more. In India, societies are administered under the Societies Registration Act 1860, which specifies for the filing of numerous statutory documents like MOA, AOA and declarations of the members to ROC to run it legally as a society.

Process for Society Registration

A society at intervals has to file essential documents and audited accounts to the registrar. It is not obligatory for a society to get enrolled under the act but to take benefit of the legal principles and the power to hold sessions in a court, it is mandatory to get the society registered. A Society can be recognised as the best form of non- profit organisation for people having state-level goals.

Section 8 Company

Section 8 company have restricted functionalities as compared to trust and society working as a non-profit organisation. Section 8 Company are limited companies authorised under the Companies Act, 2013. These are constituted in the form of a non-profit organisation which does not offer any trade for obtaining any profits or dividend income that is payable to its members.

Process of Section 8 Company Registration

Section 8 company Registration is governed under the Companies Act 2013; it can be efficiently established with a minimum of two members either working as shareholders or directors of the company or both.

Read our article:An Outlook on NGO DARPAN Registration

Difference of Section 8 Company from Trust & Society

The following table depicts the difference of Section 8 Company from Trust and Society-

Basis

Trust

Society

Section 8 Company

Governing law

Indian Trust Act,1882

Societies registration act, 1860 (Generally governed under state laws)

 

Indian Companies Act,2013

Judicial Authority

Registered under judicial control of Deputy Registrar/Charity Commissioner

 

Registrar of Societies (Distinct for each respective state)

 

Registrar of Companies/ Regional Director

Governing Document

Trust Deed

Memorandum of Association & Article of Association

MOA and AOA

Minimum Members

At least two members to register as a public charitable trust.

Minimum of 7 members required.

Minimum of 2 directors and two shareholders, shareholders, can also represent as directors.

Management

A board of trustees generally manages them.

Managed by Council of members or a Managing Committee

Managed by the Board of Directors (BoD).

Compliance Filling

It is not required to file an annual return.

Annual return and related  information to be filed with the registrar

Have to file accounts annually with Registrar of Companies

Cost of Registration

Low

Medium

High

Registration as NGO (as per section 12A & 80G of Income-tax Act ,1931)

At par with society & Section 8 Company

At par with Trust & Section 8 Company

At par with Society & Trust

Grant of Subsidies and benefits

Less preferred

Moderately preferred

Most preferred

Conclusion

Out of all, Section 8 company are more cooperative as compared to Trust and Society. The cost of registration and the maintenance charges in the formation of a trust or society is inadequate as compared to Section 8 company, but these are generally neglected during the grant of various government schemes.

Thus, Section 8 company are usually preferred to be registered as the most beneficial form of organisation to avail subsidies by the government. There is a substantial difference between the registration of the private company, public company and a Section 8 company. If you are willing to know more, Contact our experts at Corpbiz.

Read our article:Guide on NGO Registration: Types and Benefits

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