19 points of Difference between Trust, Society and Section 8 company

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 19 points of Difference between Trust, Society and Section company


By CS Divyanshu Sahni
Mob: 9871027426

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1. TRUSTS
The public charitable trust is a possible form of not-for-profit entity in India. Typically, public charitable trusts can be established for a number of purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Indian public trusts are generally irrevocable. No national law governs public charitable trusts in India, although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts.
2. SOCIETIES
Societies are membership organizations that may be registered for charitable purposes. Societies are usually managed by a governing council or a managing committee. Societies are governed by the Societies Registration Act 1860, which has been adapted by various states. Unlike trusts, societies may be dissolved.
3. SECTION 8 COMPANIES
A section 8 company is a company with limited liability that may be formed/ incorporated for “promoting commerce, art, science, religion, charity or any other useful object,” provided that no profits, if any, or other income derived through promoting the company’s objects may be distributed in any form to its members.

DIFFERENCE BETWEEN TRUST, SOCIETY & SECTION 8 COMPANY
S. No.
Basis of Difference
Trust
Society
Section 8 Company
1
Statute/Legislation
Trusts governed by the Indian Trust Act, 1882.
Societies are governed by the Societies Registration Act 1860, which is an all-India Act. Many states, however, have variants on the Act.
Section 8 Companies are governed by the Indian Companies Act, 2013.
2
Jurisdiction
The trusts are under the jurisdiction of Deputy Registrar/Charity commissioner of the relevant area.
The power to register a society lies in the hand of Registrar of societies (charity commissioner in Maharashtra).
The power to register a section 8 Company lies in the hand of Regional Director & Registrar of Companies of concerned state.
3
Registration Document
For Registration of Trust main instrument is Trust deed.
For Registration of society main instrument is Memorandum of Association and rules & regulations.
For registration of section 8Company main instrument is Memorandum and Articles of Association.
4
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 and articles of association.
5
Members Required
At least two trustees are required to register a public charitable trust.  In general, Indian citizens serve as trustees, although there is no prohibition against non-natural legal persons or foreigners serving in this capacity.
Minimum:
– Seven members are required for formation of state level society.
– Eight members required from separate states for formation of national level society.
Minimum 2 for a private company and 7 for a public ltd company.
6
Board of Management
Trusts are governed by their trustees or by board of trustees.
Societies are usually managed by a governing council or managing committee. 
It is managed by the board of directors.
7
Legal Title
Legal title of the property of a trust vests in the hands of trustees. 
In a society, all properties are held in the name of the society.
In section 8 Company, all properties are held in the name of Company.
8
Revocable/ Irrevocable
Indian public charitable trusts are generally irrevocable.   
Societies may be dissolved. Dissolution must be approved by at least three-fifths of the society’s members.
A section 8 Company may be dissolved.
9
In case of Inactiveness
If a trust becomes inactive due to the negligence of its trustees, the Charity Commissioner may take steps to revive the trust. Furthermore, if it becomes too difficult to carry out the objects of a trust, the doctrine of cy pres, meaning “as near as possible,” may be applied to change the objects of the trust. Thus, it appears that grantors can feel fairly secure that the charitable nature of a trust will be honored, even if the original, specific purposes of the trust cannot be carried out.
Upon dissolution, and after settlement of all debts and liabilities, the funds and property of the society may not be distributed among the members of the society. Rather, the remaining funds and property must be given or transferred to some other society, preferably one with similar objects as the dissolved entity.
Upon dissolution and after settlement of all debts and liabilities, the funds and property of the company may not be distributed among the members of the company. Rather, the remaining funds and property must be given or transferred to some other section 8 Company, preferably one having similar objects as the dissolved entity.
10
Annual Compliance
There is no requirement of annual return filing.
Societies must file annually, with the Registrar of Societies, a list of the names, addresses and occupations of their managing committee members.
There is requirement of annual compliance by filing of annual accounts and return of company with the RoC. 
11
Online filing facility
Online filing facility in not available. Compliances are more complicated & time consuming
Online filing facility is not available. Everything has to be submitted in the office of Registrar of Societies in hard copy. Compliances are more complicated & time consuming.
Online facility is available. The Compliances, like annual filing, appointment & removal of directors, shifting of registered office, increase in capital, change in object clause & others can be done online at MCA portal. It is very easy, time saving and transparent process.
12
Time Period involved in registration/ formation
10-15 days
30-45 days
60-75 days
13
Cost factor
Low
Medium
High
14
Registration with Income Tax u/s. 12A & 80G as NGO
At par with society & Section 8 Company.
At par with trust & Section 8 Company.
At par with trust & Society.
15
From the point of view of Grant of subsidy by the government
Less preferred
Less preferred
Most preferred
16
From the point of view of Foreign Contribution Regulation Act, (FCRA) registration
Less preferred
Less preferred
Most preferred
17
Transparency in working
Low
Low
High as everything is available online.
18
Change in board of directors/ trustees Members
Easy
Complex
Easy
19
Change of Registered office
Difficult
Difficult
Easy


Reporting Foreign Contributions:-
Under the Foreign Contribution (Regulation) Act, (FCRA), all not-for-profit organizations in India (e.g., public charitable trusts, societies and section 8 companies) wishing to accept foreign contributions must  a) register with the Central Government; and b) agree to accept contributions through designated banks.  Furthermore, not-for-profit entities must report to the Central Government regarding foreign contributions received, within 30 days of their receipt, and must file annual reports with the Home Ministry.  The entity must report the amount of the foreign contribution, its source, the manner in which it was received, the purpose for which it was intended, and the manner in which it was used.  Foreign contributions include currency, securities, and articles, except personal gifts under Rs. 1,000 (approximately $20).  Funds collected by an Indian citizen in a foreign country on behalf of a not-for-profit entity registered in India are considered foreign contributions.  Moreover, funds received in India, in Indian currency, if from a foreign source, are considered foreign contributions.
   
According to FCRA guidelines if 50% or more of the “office bearers” (not members of the board of management) of a trust/society or section 8 Company change, the organization must apply to the Home Ministry for approving the change. This approval could take as long as three to four months. 
However, in the interim period, the FC(R)A registration granted to the organization would stand “suspended”. 

FC(R)A guidelines require that an organization allowed to receive funds from a foreign source, may provide funds from its FC(R)A account to another organization, only if the other organization also has clearance from the Home Ministry to receive funds from a foreign source.  
If the foreign donor agency specifies in writing that the whole or part of the grant may be taken to “corpus”, the recipient organization may do so. Such corpus fund may be invested in an approved security.

The “interest” or “dividend” generated should be accounted for as amount received by way of interest on deposit drawn out of funds received from a foreign source.
In other words, even the interest/dividend received in India in Indian rupees must be disclosed in the Return Form FC-3.

Disclaimer:
Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.

I am hopeful that this write up would be of some help w.r.t. your professional working and endeavors 
Thanks&Regards
CS Divyanshu Sahni
Mob: 9871027426
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