Which one should you choose: A Trust, Society or Section 8 Company?

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What is NGO?

As the name suggests, Non-Governmental Organization (NGO) is an organization or association which is registered with the government of India and it mainly works for the betterment and upliftment of the society i.e. for charitable purposes. The NGOs have a clear and certain object and cause which it supports and undertakes throughout its life, whether it can be cultural, religious, educational, social or any other charitable object. The main object of NGOs is  societal benefit and non profit-making and this why they are also known as Non-Profit-Organizations.

 

Essence of NGOs in India

  1. The NGOs are registered with the Government in order to become a legal entity depending subject to the type of NGO.
  2. It is formed or registered with a definite purpose as discussed above.
  3. They are formed by the voluntary groups, which consist like-minded people and they have common object to serve the society and nation.
  4. Even though NGOs are formed for social benefit but it has either little or even no governmental interference.
  5. Generally, NGOs set their own rules, policies and regulations subject to their object or purposes.
  6. Their main object is non profit making rather is to empower or serve the society, thus they are non profit making organizations.
  7. Moreover, NGOs generate, produce, create and manage funds by way of either contributions or donations from the general public.

 

How does NGOs can be registered in India?

As discussed above, NGOs are also required to be registered with the respective government or department in order to become a legal entity/person. NGO is basically an umbrella term and it includes all those organizations whose main object is charity or society upliftment.

The Indian Laws permits 3 types of NGOs that are Trust, Society or Section 8 Company, all of these organizations are formed with charitable purpose; this is why the government gives various benefits to them. These organizations need to take respective registrations under their respective governing laws in following ways –

  1. Trust needs to take Trust Registration under the Trust Act, 1882
  2. Society needs to take Society Registration under the Society Act, 1860
  3. Section 8 Company needs to incorporate Section 8 Company under the Companies Act, 2013

 

What is Trust Registration in India?

The trust is required to be registered under the Indian Trust Act, 1882. The trust is basically a legal arrangement by which the trust’s owner that is Grantor transfers the trust property for the benefit of another person or persons known as Trustee/Trustees, here the legal document which regulates the trust is referred as Trust Deed.

Trust is considered as the most convenient form for starting a NGO as trust can be created for various purposes. This is why there are 3 types of trusts –

Private Trust –

The trust is required to be registered under the Indian Trust Act, 1882. The trust is basically a legal arrangement by which the trust’s owner that is Grantor transfers the trust property for the benefit of another person or persons known as Trustee/Trustees, here the legal document which regulates the trust is referred as Trust Deed. Since the purpose of this trust is to benefit the near and dear ones or closed ones like heirs, son or family relatives etc., this is why it is known as Private Trust.

Public Trust

Unlike Private Trusts, Public trust is created for the benefit of general public thus the trust property is used for the benefit of society or general public.

Public-cum-Private Trust

As the name suggests, this type of trust provides serves the dual purpose which means that the trust assets or income can be used for the benefit of both public and private purposes.

 

What is Society Registration in India?

A Society is an association of several individuals who come together with the mutual object of Society advancement or public welfare or charitable purposes such as religion, sports, culture, education or art etc. The society is required to get registration under the Society Act, 1882 and thus it is governed according to this act only.

The Society needs to have minimum 7 members and they need to make Memorandum of Association stating the main object and members details of the society and Article of Association stating the rules, regulations and procedure to be used for the governance of society.

 

What is Section 8 Company Registration in India?

A Section 8 company is also a NGO. It is basically a Company formed with minimum 2 shareholders and 2 directors but it is formed solely for the charitable purposes unlike private limited companies. It is registered under section 8 of the companies act, 2013 and this is why it is referred as Section 8 Company. It is preferred by those who want to enjoy all the benefits of private limited company in the format of NGO.  It does need to pay any stamp duty during incorporation and moreover government gives numerous tax exemptions.

 

Conclusion

We hope now you must know the concept of NGO and that Section 8 Company is also a NGO in the company format.

In case you have any further queries/clarifications related to NGO Registration then contact your Trustworthy Advisors Manthan Experts to guide you through the Dormant Company just by dialing at +91-9643-969-969 or mail at info@manthanexperts.com.

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