The three types of organizations that are about to be discussed within this article are Non-Governmental organizations NGOs. These organizations are generally formed to promote social welfare, social development, and other charitable purposes.

In India, such an organization may be established as a Section 8 Company, Trust, or Society. Bear in mind that these are not the same. They have different purposes and uses depending upon what you intend to achieve through the establishment of the organization.

NGO – TRUST, SOCIETY OR COMPANY

Section 8 Company: Section 8 companies are governed by the Companies Act 2013.  A company under this section can be formed for promoting charitable objects relating to art, commerce, science, health, and so on. These companies enjoy all the privileges and subject to all obligations of Limited Companies.

Trust: Trust is considered to be the oldest form of Charitable Organization. Trust can be either private or public. It is primarily created for the benefit of a section of people. Trust is governed by the Indian Trust Act 1882. The main instrument for Registration of Trust is Trust Deed. The creator of the Trust also appoints trustees. The trustees are given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.

Society: Societies are governed under Society Registration Act 1860. It is generally formed by seven or more people who come together for a common charitable purpose. The main instrument for the Registration of Society is the Memorandum of Association.

The registration process of NGOs under the Indian Trust Act, Society Registration Act, or The Companies Act, 2013 is different, but the status of the organization is equal an NGO. There is no difference in getting funding from the Sources mentioned above.

Basis Section 8 Company Trust Society
Statute/ legislation The Companies Act, 2013 Relevant state Act Societies Registration Act, 1860
Jurisdiction Registrar of Companies Deputy Registrar/Charity Commissioner Registrar of Societies
Registration documents Memorandum and articles of association Trust Deed Memorandum Of A Society
Stamp Duty Differ from state Trust deed to be executed on non-judicial stamp paper, vary from state to state. Differ from state
Members required Minimum 2 Minimum 2 trustee Minimum seven committee members. No upper limit.
Board of Management Board of directors Trustee/Board of trustee Governing body of council/Managing or executive committee
Grants and subsidies from the government Considerable (possible) Not much Not much
Preference in registration under  FCRA  Preferred Low preference Low preference
Transparency  High Low Low
Legal right over the property Held in the name of the Company Held in the name of the Trust Held in the name of the Society
Annual compliance requirement Annual compliance of filing of accounts and filing of annual return of Section 8 company, with the Registrar of Companies (ROC). There is some annual compliance requirement depending on whether the trust is Private trust or Public Trust.

 

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

 

What Should You Choose?

  1. Section 8 Company – Executing a wide range of activities and gaining reliability and credibility.
  2. Trust – More than one family member is running the business. Privacy in activities is much needed.
  3. Society – Ideal organizational body if you want an elected body to manage it. It also allows for an easy exit of its members.

Conclusion

From the above comparison, we get an overview of the important points that need discussion before choosing from the proper type of organization. Apart from these, there are some other important matters that need to be taken into consideration for choosing a better option for your business- Trust, Society, or Section 8 Company.

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