How Are Section 8 Companies Different From Trust And Societies?
Some organizations devote their funds to the welfare of society. Collectively they are known as non-profit organizations. These include schools, hospitals, religious institutions, and NGOs. The most common form of NGOs in India includes Trusts, Societies, and Section 8 companies.
Trust: Trust is the oldest form of charitable organizations. They can be constituted in the form of a private or a public institution, which generally looks for the benefit of the individual members or the trustees. A private trust in India is usually governed under the Indian trust act 1882, while no separate legislation has been provided for registration of the public trust.
To form a Trust, one has to get a trust deed created of the organization specifying all necessary details of the trust including members, an investment made, policies agreed, etc. which can be modified at any time with the consent of all members. While, this is the simplest form of non-profit organization, as it does not require any regulatory complications for the filing of annual accounts or governance.
Society: Societies have been developed in the modern era. In common, they can be constituted with a minimum of 7 persons or more. In India, societies are governed under the Societies Registration Act 1860, which specifies for the filing of various statutory documents like MOA, AOA and declarations of the members to ROC to run it legally as a society.
A society at intervals, have to file necessary documents and audited accounts to the registrar. However, it is nowhere mandatory for a society to get registered under the act but to avail virtue of legal principles and the right to hold sessions in a court, it is necessary to get the society registered under the act. A Society can be considered as the best form of non- profit organization for people having state level objectives.
Section 8 Companies: Section 8 companies have limited functionalities as compared to a trust or society working as a non-profit organization. Section 8 Companies are limited companies established under the Companies Act, 2013. These are constituted in a form of non-profit organization which does not undertake any business for earning any profits or dividend income payable to its members.
Formation of a Section 8 company is governed under the Companies Act, 2013, it can be easily constituted with a minimum of two members either working as shareholders or directors of the company or both.
The following table illustrates the difference between Trust, Society and Section 8 Company:-
| Difference | Trust | Society | Section 8 Company |
| Governing law | Indian Trust Act,1882 | Societies registration act, 1860 (Generally governed under state laws)
|
Indian Companies Act,2013 |
| Judicial Authority | Registered under judicial control of Deputy Registrar/Charity Commissioner
|
Registrar of Societies ( Distinct for each respective state )
|
Registrar of Companies/ Regional Director |
| Governing Document | Trust Deed | Memorandum of Association & Article of Association | MOA and AOA |
| Minimum Members | At least two members to register as a public charitable trust. | Minimum of 7 members required. | Minimum of 2 directors and 2 shareholders, shareholders can also represent as directors. |
| Management | Generally managed by a board of trustees. | Managed by Council of members or a Managing Committee | Managed by the Board of Directors (BoD). |
| Compliance Filling | No need to file an annual return. | Annual return and related information to be filed with the registrar | Have to file accounts annually with Registrar of Companies |
| Cost of Registration | Low | Medium | High |
| Registration as NGO (as per section 12A & 80G of Income-tax Act ,1931) | At par with society & Section 8 Company | At par with Trust & Section 8 Company | At par with Society & Trust |
| Grant of Subsidies and benefits | Less preferred | Moderately preferred | Most preferred |
Out of all, Section 8 companies are much more complaint as compared to Trust and Societies. While the cost of registration and the maintenance charges in the formation of a trust or society is very low as compared to a Section 8 company, but these are generally neglected during grant of numerous government schemes.
Thus, Section 8 companies are generally preferred to be registered as the most beneficial form of organization to avail subsidies of government.
There is a huge difference between registration of the private company, public company and a Section 8 company. Hence, it is recommended to go for the assistance of a professional compliance expert for registration of a Section 8 company. CS-india.com holding a team of financial experts, to reduce your overall compliance efforts & pace up the entire registration process for you.
For registration or assistance required on Section 8 Companies you can email us at info@csindia.com