Difference between Trust, Society and Section 8 Company

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Difference between Trust, Society and Section 8 Company

Registrationwala

Do you ever wish you could do good for the society at large? If so, you can consider opening a non-profit organization. There are various kinds of non-profit organizations in India such as trusts, societies and section 8 companies. You can choose any of them for the purpose of promoting social welfare, social development and other charitable reasons. In this article, we will shed some light on the difference between trust, society and section 8 company. By learning about these non-profit organizations and how they differ from each other, you can easily decide which one is right for you!

What is a Trust?

A trust is a business structure which is formed with the intention of promoting the development of literature, science or other noble causes. Trusts help to alleviate scarcity, provide education to children and offer medical assistance. All the trusts in India are registered under the Trusts Act 1882. Establishing a legally registered trust ensures legal validity and existence as a separate legal entity. 

What is a Society?

A society is an association of parties who fulfill a common purpose or serve a common mission jointly. Societies in India are registered under the Indian Societies Registration Act 1860. Such a purpose or mission can be related to development of any philanthropic, scholarly works or academic research. 

 

A society’s incorporation requires a minimum of seven individuals to be associated. To acknowledge the association formally, an MoA (Memorandum of Association) is signed and then submitted to the RoC (Registrar of Companies). This way, a society gets legally registered. The MoA of the trust consists of the society’s name and its purpose.

What is a Section 8 Company?

A Section 8 company is a non-profit organization registered under the Companies Act 2013. The reason why it’s called the section 8 company is because it is registered under Section 8 of the Act. Section 8 company’s goal is to promote non-profit activities like social welfare, arts, sports, education, research, commerce, religion or environmental protection.

 

Prior to being established as a non-profit organization, the section 8 companies require approval and license from the Central Government. The income, donations and charities earned by a section 8 company must not be used for personal gain and must be spent on the promotion of prescribed objectives of the organization.

Trust vs Society vs Section 8 Company: Key Differences

Let’s explore the key differences between trust, society and section 8 company using the table below:

S.No.

Basis of Difference

Trust

Society

Section 8 Company

1

Legislation

The Indian Trust Act 1882 governs all the trusts registered in India.

The Societies Registration Act 1860 governs all the societies registered in India. However, some states have their own variants of the Act.

The Companies Act 2013 governs the Section 8 companies.

2

Concerned Authority/Jurisdiction

Under the supervision of the local area's deputy registrar or charity commissioner, trusts are registered.

The Registrar of Societies is the concerned authority to register a society.

The Regional Director & Registrar of Companies in the relevant state has the authority to register a section 8 company.

3

Primary Document for Registration

Trust Deed

Memorandum of Association.

Memorandum and Articles of Association.

4

Minimum Number of Individuals Required

A minimum of two trustees are needed for a public charitable trust’s registration.


Typically, Indian citizens serve as trustees. However, non-natural legal persons or foreigners can also be trustees.

At least seven members are needed to create a state level society.

Section 8 company’s formation mandates a minimum of 2 directors and shareholders. Directors and shareholders can be the same people.

5

Management Board

Trustees of the Board of Trustees govern the trust.

Typically, a governing council or managing committee manages society.

The board of directors manage the section 8 company.

6

Dissolution

Generally speaking, the Indian public charitable trusts cannot be revoked.

It is possible to dissolve a society with approval of at least three-fifths of the members of the society.

It is possible to dissolve a section 8 company in accordance with the Companies Act’s provisions.

7

Yearly Compliance

Annual return filing is not required for a trust.

Each year, societies are required to submit a list of the names, addresses, and jobs held by the members of their managing committee to the Registrar of Societies.

Annual compliance is required, and it is fulfilled by filing the section 8 company's return and annual accounts with the RoC.

9

Cost Required

Low Cost

Medium Cost

High Cost

10

Registration with Income Tax under Section 12A & 80G

Comparable to society & Section 8 Company.

Comparable to trust & Section 8 Company.

Comparable to trust & Society.

11

Preference by GOI for subsidy grant

Moderately preferred form

Moderately preferred form

Most preferred form

12

Preference for getting registered under Foreign Contribution Regulation Act

Moderately preferred form

Moderately preferred form

Most preferred form

Conclusion

The Trust, Society and Section 8 companies all are different forms of Non-Profit Organizations. All of them are set up with the intention of doing good for the society, and not for selfish gains. By opening a trust/society/section 8 company, you can help hundreds or maybe thousands of people. By going through this blog post, you must have learned the differences between trust vs society vs section 8 company. If you need assistance in opening an NGO in India, connect with Registrationwala. We’ll help you to file your NGO registration application with the concerned authority and help you to obtain the certificate of incorporation in a smooth and hassle-free manner. 

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