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Trust, Society – Advantages, Disadvantages and Registration Process

Income Tax Department treats both Trusts and Societies similarly and the procedure for Exemption of Income or Grant of 80G Certificates is same under both entities; we should see the benefits of forming both Trusts and Societies separately so that a decision can be made as to which formation to go for.

Trust

A public charitable trust should be formed only when one wishes to make an endowment of property for perpetuity and the trustees’ desire that this property be used only for specified charitable purposes with close control by the original settlors/trustees.

Main Characteristics of Trust are:

  • Trusts are governed by Relevant state trust act or Bombay Public Trusts Act
  • 2 persons are required to form a trust with no upper limit.
  • Trust is set up by a trust deed on non-judicial stamp paper worth some percentage of the value of the trust property (Stamp duty varies from state to state)
  • Trust deed contains the aims and objectives of forming the trust and the mode of management of the trust.
  • The composition of the board changes mainly by appointment and not election.
  • Alteration of the objects laid down in the trust deed is difficult and only the settler can modify them
  • The charities commissioner has more power to intervene in the affairs of a trust than in a society
  • Trust cannot be dissolved easily

Registration process:

  • The following documents are submitted with the Local registrar:
    • Trust Deed on stamp paper of the requisite value
    • One passport size photograph & copy of the proof of identity of the settler,
    • One passport size photograph & copy of the proof of identity of each of the trustees,
    • One passport size photograph & copy of the proof of identity of each of the two witnesses.
    • Signature of settler on all the pages of the Trust Deed
    • Signatures of the two witnesses on the Trust Deed.
  • The settler & two witnesses are required to be personally present in the office of the Registrar , along with their identity proof in the original.
  • The Registrar retains the photocopy & returns the original registered copy of the Trust Deed.

Society

Societies are generally established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs, etc.

Main Characteristics of Society are:

  • Societies are governed by Societies Registration Act
  • 7 persons are required to form a society with no upper limit
  • Members have to file a MOA on non-judicial stamp paper, setting out the objectives of the society before the registrar of societies in the state in which the society is set up.
  • The legal requirements are much simpler than in the case of a trust or Section 25 companies.
  • Complete renewal of members is possible and objects can be modified easily
  • Easier to wind up a society
  • Society has a more democratic set up with membership and an elected body to manage the society
  • Due to democratic procedures, the society can be taken over by elements opposed to the founding members

Registration process:

  • The founder members have to agree on a name for the society
  • The members have to prepare the Memorandum and Rules and Regulations of the society
  • The following documents are prepared, signed and submitted for society registration:
    • Covering letter requesting registration of the society, signed by all founding members
    • MOA of the society in duplicate along with a certified copy
    • Rules and regulations of the society in duplicate along with a duplicate, duly signed by founding members
    • Affidavit by the president or secretary of the society stating relationship between the subscribers
    • Address proof of the registered office of the society
  • The signed MOA and rules and regulations are filed with the Registrar of societies.

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