Posted on by Nikita Bhatia

Difference Between Trust, Society and Section 8 Company

The most of common structures for Non-Profit Organization in India are Trust, Society and Section 8 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 Registration of Society is the Memorandum of Association.

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

    S No. Basis of Difference Trust Society Section 8 Company
1 Statute/Legislation Trust is governed by the Indian Trust Act, 1882. Societies are governed by the Societies Registration Act 1860. Many states, however, have variants on the Act. Section 8 Companies are governed by the Indian Companies Act, 2013.
2 Jurisdiction Trusts are registered 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. The power to register a section 8 Company lies with the Regional Director & Registrar of Companies of concerned state.
3 Registration Document The primary instrument for Registration of Trust is the Trust deed. The primary instrument for Registration of Society is its Memorandum of Association. The primary instrument for Registration of Section 8 Company is the Memorandum and Articles of Association.
4 Minimum Requirement 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. Minimum 2 directors and shareholders. Directors and Shareholders can be the same person.
5  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.
6 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.
7 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 Registrar of Companies.
8 Time Period involved in registration 15-20 days 20-25 days 30-45 days
9 Cost factor Low Medium High
10 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.
11 From the point of view of Grant of subsidy by the government Moderately preferred Moderately preferred Most preferred
12 From the point of view of Foreign Contribution Regulation Act, (FCRA) registration Moderately preferred Moderately preferred Most preferred

From the above comparison, it is evident that a Section 8 Company is one of the best forms of running a NPO. However, it has high cost of registration, maintenance and takes substantial amount of time for its incorporation. Trust and Societies are effective structures from an economic standpoint. Trusts are easy to form and maintain, hence highly popular.

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Nikita Bhatia
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2 Replies to “Difference Between Trust, Society and Section 8 Company”

  1. Dear Ms. Bhatia

    We want to have a National level Society Registration. Could you tell about its merits viz- a viz a Section 8 company particularly in respect of the following-
    a. To have working people as part time board members
    b. To procure Govt. grants and funding
    c. To get CSR funds from Private Sector
    d. Liability of its board members in case of a financial debacle

    We look forward to hearing from you.
    N.K.S Prasad
    For
    Thanks and with regards

  2. Can a Trust be converted into section 8 company?
    What should be the mode of investment for this kind of company?
    Donations from local individuals, foreign donations are allowed?
    Foreign direct investment is allowed?

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