| Description | Society | Trust | Association not for Profit(Company) |
| Relevant Act for registration/incorporation | The Societies Registration Act, 1860. | Only the Trust Deed is registered under the Registration Act,1908. | Companies Act,2013. |
| Ease of formation | Relatively simple, it make take 1-2 months. | Very simple, it may take a week. | Relatively complicated, it may be registered in a month. |
| Authority for registration | Registrar of Societies of the concerned State, | Sub-Registrar at the District level | Registrar of Companies of the concerned state. |
| Approval of Name | Separate application not required. Name is generally granted if available. | Not required | Application for name approval has to be made in form. There are strict guidelines for approval of name. |
| Minimum No. of subscribers/trustees required | 7(Seven) | 2(Two) | 2(Two).There can even be a sole trustee. However, for public trust, the statutory authorities, particularly the Charity Commissioner Mumbai, generally insist on minimum 3 trustees. |
| General Cost of Registration | Up to Rs. 10000/- | Up to Rs. 10000/- | Up to Rs. 2500/- |
| Governing Structure | Two tier structure General Body;Board of Directors | Single tier structure the trustees are the ultimate authority. | Two tier structure General Body;Board of Directors |
| Voting Rights | All members have equal rights. | All trustees have equal rights. | The voting rights may vary on the basis of shareholding. The voting right can be based on individual votes also. |
| Types of activities allowed | Any kind of charitable and public utility activity can be undertaken. | Any kind of charitable and public utility activity can be undertaken. | Any kind of charitable and public utility activity can be undertaken. |
| Annual Documents to be filed | The Act requires a list of managing body to be filed every year. But different states have different requirement for filing additional document every year. Normally the annual audited accounts, Director’s report and the list of governing body member has to be filed every year. | No documents are required to be filed. | Annual return and audited accounts are required to be filed every year with ROC. |
| General and Board/Governing Body meetings | General and Board/Governing Body meetings are required to be held as prescribed in the byelaw of the society. | No provision are laid in this regard. Adequate clauses should be framed in the trust deed itself. | Specific provisions have been laid down. At least 1 Annual General Meeting and 2 Board meetings are required to be held every year. |
| Transfer of Membership | Membership is not transferable. | Membership is not transferable. | Membership can be transferred. Restrictions on transfer can also be placed. |
| Payment to functionaries | Permitted as the general body may decide. | Provision should be available in the trust deed for any such payment. | Permitted as the general body may decide. |
| Compliances expenditure | The compliances are minimal. Consequently, compliance expenditure is also negligible. | No statutory compliance expenditure. | Annual returns, Balance Sheet, Director KYC and ACTIVE KYC are filed along with certain government fees. However, the quantum of expenditure is not significant. |
| Area of Operation | Can operate throughout India even if registered in one particular State. No separate registration is required for operating in another State. | Can operate throughout India. | Can operate through out India as the registration is granted by the Central Government. |
| Income Tax Registration | Compulsory | Compulsory | Compulsory |
| FCRA Registration or Prior Permission | Compulsory for receiving foreign funds. | Compulsory for receiving foreign funds. | Compulsory for receiving foreign funds. |
| Labour and other relevant law | To be complied with as per applicability. | To be complied with as per applicability. | To be complied with as per applicability. |
| Foreigner as a member/trustee | Possible | Possible | Possible |
| Risk of having a foreigner on board | Difficulties may be faced in getting FCRA registration. No other threat perceived. | Difficulties may be faced in getting FCRA registration. No other threat perceived. | Difficulties may be faced in getting FCRA registration. No other threat perceived. |
| Audit | If the total income exceeds the minimum threshold limit. | If the total receipt exceeds the minimum threshold limit. | Mandatory irrespective of income. |
CHOOSING BETWEEN A TRUST, SOCIETY OR A COMPANY
As discussed earlier, under the laws applicable to Indian NGOs/NPOs, there arethree forms of registration, for creating a legally valid NGOs/NPOs, which are as under:
- Registration as society under the Societies Registration Act, 1860
- Registration as a company not for profit under the Companies Act,2013
- Registration as a trust under the Indian Registration Act, 1908.
Choosing a particular form of Registration
There is very little to choose between the three modes of registration available in India, though each one of them comes with its distinct characteristics, advantages and disadvantages. The comparative advantages or disadvantages are not alarming enough to recommend any particular form of registration. Registration as a company would be a more professional and organized way of working, entailing more paperwork and compliances. On the other hand, registration as a trust would be the simplest way with minimal paperwork and procedural hassles. Registration as a society will come in between. Probably that is why it is the most popular form of registration. See the comparative table for three forms of registration for NGOs/NPOs in India provided above.
Registration from Control Point of View
The control of an organisation depends directly on the number of members or the voting power.
In the case of a society, minimum 7 members are required to register. Thereis a two-tier structure comprising the general body and the governing body.It is a fairly open structure with all the members having equal voting rights.
A company also has a structure similar to society but it has certain distinct advantages. For instance, a company can be formed with only two persons and the voting rights are not based on the number of persons. The voting rights are based on the number of shares held. The company form of registration can be used for planning control mechanisms, by exploiting the
Rule of unequal voting powers.
A trust can also be formed with a minimum of two persons. It does nothave a two-tier structure like the company or society. Therefore, trust is arelatively closed structure.
In case of company or society, the general members have thepower toremove a director or a board member but in the case of a trust, it is notpossible.
Above all, the drafting of the Memorandum and Articles of Association,bye-laws or trust deed is most crucial in determining the control and governance aspects of a charitable entity.
Registration from Activities Point of View
There is more or less no difference between these three forms of registrationas far as the activities or the areas of operation are concerned because activities/area of operation and other bye-laws are based on the constitutionof the registered entity and the laws of the state generally do not interfere.
Comparative Initial and Recurring Cost
The costs of registration are minimal for all three forms of registration.The company form of registration involves a long and complicated process,therefore, the cost will be marginally higher. The statutory fees and costs are negligible in all three forms of registration.
Regular annual returns are required to be filed in the case of society as well as a company, but the cost involved again should not be an issue for consideration.
The societies are regulated by the State Government. Therefore, the fee structure and regulations vary from state to state. For instance, in Karnataka, the State Government collects a small portion of the total revenue generated by the societies annually. Therefore, the geographical location and state laws can also influence the mode of registration.
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Dr. Deepak Miglani, Email id.:- [email protected]