Non-governmental organisations, also known as non-profit organisations, are organisations formed for non-profit or selfless purposes; these organisations are basically formed to promote social welfare, social development, and other charitable purposes.
In India, such an organisation may begin as a section 8 company, a trust or a society. Keep in mind that these are not the same. They have different grounds and uses depending upon what you designate to achieve through the organisation’s establishment.
Comprehensive analysis of these three forms of formation of non-governmental organisation is detailed and tabulated below:
|Basis||Section 8 company||Trust||Society|
|Meaning||It is a company registered under the Companies Act, 2013 to promote social, charitable, or any other objective and apply the profits to encouraging such objectives.||It is, in essence, an arrangement between parties whereby one
party holds proprietorship over property on behalf of another person. It is contemplated to be the oldest form of a charitable organisation.
|It is established when a collection of people
come together for a common charitable
purpose. But it’s not limited to charitable purposes but may reach multiple
|Registration||Section 8 company is devised as a private or public company without using the words “Ltd.” or “Pvt. Ltd.” as a suffix to its name.||As NGO/ NPO||As NGO/ NPO|
|Companies Act, 2013.||1. The Indian Trusts Act, 1882 for private trusts.
2. General law for public trusts except in Gujarat and Maharashtra have their own state laws.
|Societies registration Act, 1860|
|Registering authority||Registrar of Companies (ROC) or Regional Director||Deputy registrar of the relevant area/ state||Registrar or deputy registrar of societies of the state|
|Minimum persons||Minimum 2 directors and 2 shareholders. Directors may also be the shareholders.||Minimum 2 trustees||Minimum 7 persons are required (5 for Jammu & Kashmir and Telangana)|
|Constitutional documents||Memorandum of Association (MOA) and Articles of Association.||Trust deed||By laws and rules & regulations of the society|
|Legal title of the property||Held in the name of the company.||Held in the hands of trustees.||Held in the name of society.|
|Grant of subsidy by the government||Mostly preferred||Not much||Not much|
|Registration under the Income Tax Act, 1961||Allowed||Allowed||Allowed|
|Preference in registration FCRA (Foreign Contribution Regulation Act)||Mostly preferred.||Low preference||Low preference|
|Transparency in working
|Annual compliance requirement||The company must file the annual accounts and an annual return, to the Registrar of Companies (ROC).||There is some annual
providing on whether the trust is Pvt. trust or Public Trust.
|Annual filing of a list of names, addresses, and occupations of the managing committee members of the society, to the Registrar of Societies.|
|Managed by directors of the company.||Trusts are managed by their trustees or by the board of trustees.||Directed by a governing council or managing committee.|
|Time involved in registration||25-30 days||15-20 days||01-02 months|
We may conclude from the above scenario that Section 8 Company is more cooperative as compared to Trust and Society. Trust and Societies are generally unconsidered during the grant of various government schemes.
Advantages of section 8 company (NPO) over Society and Trust:
- Prioritised for government subsidies
- Eligible for FCRA registration
Section 8 companies are usually proposed to be registered because of the most beneficial form of organisation to avail subsidies by the government. However, the form of constitution of Non-Governmental Organization (NGO) also depends upon the purpose for which NGO is to be formed.
We assist our clients in dealing with the formation of section 8 company, society or trust and compliances related to it. if you have any questions or would like to know more about society, trust or section 8 company, kindly contact us.