Procedure of Formation

Trust: "Trust" is defined as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another, or of another and the owner.
A Trust may be created by any language sufficient to know the intention and no technical words are necessary. A trust deed, generally, incorporates the following:

  • The name(s) of the author(s)/settlor(s) of the trust.
  • The name(s) of the trustee(s).
  • The name(s) if any, of the beneficiary/ies or whether it shall be the public at large.
  • The name by which the trust shall be known.
  • The name where its principal and/or other offices shall be situated.
  • The property that shall devolve upon the trustee(s) under the trust for the benefit of the beneficiary/ies.
  • An intention to divest the trust property upon the trustee(s).
  • The objects of the trust.
  • The procedure for appointment, removal or replacement of a trustee, their rights, duties and powers etc.
  • The rights and duties of the beneficiary/ies.
  • The mode and method of determination of the trust.

A charitable trust is not required to obtain registration under the Indian Registration Act.

Society: A society can be defined as an association of persons united together by mutual consent to deliberate, determine and act jointly for the same common purpose. Minimum seven persons, eligible to enter into a contract, can form society. When an NGO is constituted as a society, it is required to be registered under the Societies Registration Act, 1860.

The primary advantages of forming a society are that it gives a corporate appearance to the organization, and provides greater flexibility as it is easier to amend the memorandum and bye laws of the society than in the case of trust, terms of which are strictly manifested in the trust deed. However, formation of a society needs more procedural formalities than in the case of a trust.

A Society for its inception requires:-
I. Memorandum of Association, and
II. Rules and Regulations

For the purpose of registration, the following documents are required to be filed with the registrar of Societies:
  • Covering letter requesting for registration, stating in the body of the letter various documents annexed to it. The letter is to be signed by all the subscribers to the memorandum or by a person duly authorized by all of them to sign on their behalf.
  • Memorandum of Association, in duplicate neatly typed and pages serially numbered.
  • Rules and Regulations/Bye-Laws, in duplicate, certified by at least three members of the governing body.
  • An affidavit of the president/Secretary of the society, on a non-judicial stamp paper of prescribed value, stating the relationship between the subscribers, duly attested by an oath commissioner, notary public or 1st class magistrate.
  • Documentary proof such as house tax receipt, rent receipt in respect of premises shown as registered office of the society or no objection certificate from the landlord of the premises.
  • An authority duly signed by all members of the managing committee.
  • A declaration by the members of the managing committee that the funds of the society shall be used only for the purpose of furthering the aims and objects of the society.

Company: Under Section 25 of the company's act, an association formed or to be formed:
  • a) For the purposes of promoting commerce, art, science, religion, charity or any other useful object
  • b) With intention to apply its profits or other income for promoting its objects, and
  • c) Which prohibits payment of any dividend to its members,

A Company is permitted to be incorporated without addition of the word "Limited" or "Private Limited". Procedure for applying for the registration is same as applicable in the case of all companies.

If the registrar is satisfied that all formalities have been complied with appropriately, he will issue a certificate of incorporation from which date the company comes into existence.

Note: An association already registered as a company, may also apply for a license u/s 25.

Procedure of company formation in India

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