By CS Arpit Garg
Starting a NGO is a way to contribute towards social causes as a whole. Many Companies felt an attraction towards philanthropy. Contribution towards social causes can be in any way like promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
It is very well known that ” Charity brings to life again those who are spiritually dead”
But the biggest doubt every company or individual face as what to constitute in NGO as Society, Trust or Section 8 Company. All these have the same objectives but the constitution is different. So now let’s differentiate between all three:
| S. No. | Basis of Difference | Trust | Society | Section 8 Company |
| 1. | Legislation | Indian Trust Act, 1882 is applicable. | Society can be a State level society or a National level society in case of state-level society State Acts are applicable, whereas, for the societies operating all over India Societies Registration Act, 1860 is applicable. | Section 8 Companies are governed by Companies Act, 2013. |
| 2. | Regulating Authority | Deputy Registrar of the relevant area. | State Divisional Magistrate of a particular area. | Registrar of the Companies (ROC) of the State in which the Section 8 companies registered office is located. |
| 3. | Constitution Document | Trust Deed | Memorandum of Association & Rules and Regulations | Memorandum & Article of Association |
| 4. | Stamp Duty | Non-Judicial Stamp duty is required as per the State Stamp Act. The stamp duty can depend on the value of the Trust property if any. | No Stamp duty is required. | No Stamp duty is required. |
| 5. | Members Required | Minimum three persons are required. These persons could be the artificial person created under the law or a foreigner serving in this capacity. | Minimum seven persons are required for State-level society. Eight members from different states are required to form a national level society, these persons should be the individuals only. | Minimum two persons are required for Section 8 Company. |
| 6. | Management | Trust is managed by their Trustee or Board of Trustee. | Societies are governed by Managing Committee or by Governing Council. | Board of Directors is solely responsible for the management. |
| 7. | Ownership | Trust properties are owned by the Trustees. | All the properties of the society are held by society itself in its own name. | Company is the absolute owner of the property. |
| 8. | Dissolution | Generally, public trust cannot be dissolved. | A society may be dissolved with the approval of 3/5th members of the society. | A Section 8 company may be winded up as prescribed under the Companies Act. |
| 9. | Annual Compliance | Annual return filing about the working of the trust is not required | Society is must file the annual return with the registrar of the societies as prescribed in Societies Registration Act. | A Section 8 Company is required to file an annual return and annual accounts with the Registrar of companies. |
| 10. | From the point of view of Grant of subsidy by the government | Preferences is less | Preferences is less | Preferred mostly |
| 11. | From the point of view of Foreign Contribution Regulation Act, (FCRA) registration | Less preferred | Less preferred | Most preferred |
| 12. | Transparency in working | Low | Low | Working is highly transparent as everything is into public domain. |
| 13. | Change in the board of directors/ trustees Members | It’s very easy in case of a Trust if the testator is there. | Society functions through the governing council and any change are to be as per the constitution documents, so changes are complex. | Easy |
| 14. | Change of Registered office | Difficult | Complex | Easy |
| 15. | Cost factor | Medium | High | Medium |
| 16. | Time Period involved in registration/ formation | 10-15 days | 30-45 days | 30-45 days |
In today’s scenario where every aspect in the incorporation and compliance follows, Section 8 Companies are the best form of doing NGO activity.
For any queries or suggestion contact
CS Arpit Garg
Founder – Compliance Arena & Practicing Company Secretary
8447773833
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