Societies Registration Act 1860

Purpose of the Act is to provide for registration of literary, scientific and charitable societies.

Societies Registration Act is a Central Act. However, ‘unincorporated literary, scientific,

religious and other societies and associations’ is a State Subject (Entry 32 of List II of Seventh
Schedule to Constitution, i.e. State List). Thus, normally, there should have been only State Laws
on this subject. However, Societies Registration Act was passed in 1860, i.e. much before
bifurcation of power between State and Centre was specified. Though the Act is still in force, it
has been specifically repealed in many States and those States have their own Acts. Thus,
practically, the Central Act is mainly of academic interest.

Societies to which the Act applies – Following societies can be registered under the Act - *
Charitable societies * Military orphan funds or societies * Societies established for promotion of
science, literature, or for fine arts * Societies established for instruction and diffusion of useful
knowledge, diffusion of political education * Societies established for maintenance of libraries or
reading rooms for general public * Societies established for Public museums and galleries for
paintings or other works of art, collections of natural history, mechanical and philosophical
inventions, instruments or designs [section 20]

REGISTRATION – Any seven or more persons associated for literary, scientific or charitable
purpose can register a trust by subscribing their names to memorandum of association. [section
1]. [The Act envisages filing the memorandum with Registrar of Joint Stock Companies.
Practically, the memorandum will have to be filed with Registrar appointed under corresponding
State Act]. - - The memorandum of association shall contain name and objects of society and
names and addresses of governors/council/ directors or other governing body. - - Copy of rules
and regulations of society will also have to be filed along with memorandum. [section 2].

ANNUAL LIST OF MANAGING BODY TO BE FILED – Annual list of managing body

should be filed within 14 days after AGM. [section4]. If there is no provision of AGM, then list
should be filed in January every year. [section 4]. - - The governing body may be termed as
governors, council, directors, committee, trustees or other body to whom by rules and regulations
of society, the management of the affairs of society is entrusted. [section 16].

SOCIETY IS NOT A BODY CORPORATE – Society is not a body corporate. This is evident
from following – (a) Entry 32 in List II of Schedule to Constitution itself uses the words
‘unincorporated’ (b) As per section 4, property of society vests in governing body, if not vested
in trustees. Thus, property does not vest in society as such. (c) Section 6 states that suit by or
against society can be only in name of President, Chairman, Principal Secretary or Trustees, as
determined by rules of society. Thus, suit cannot be in name of society as such.

OFFICE BEARERS NOT PERSONALLY LIABLE – Section 8 makes it clear that though suit
against society is instituted in name of some person, he is not personally liable, but property of
society will be liable.
MEMBERS OF SOCIETY – A member is a person who is admitted according to rules and
regulations of society and who pays subscription, or signed the roll or list of members, and who
has not resigned from membership. [section 15]. A member can be sued as stranger for arrear in
subscription or if he injures or destroys property of society. [section 10]. Member guilty of
offence of stealing, embezzlement or wilful destruction of society property can be punished as
stranger, i.e. not a member. [section 11].

ALTERATION, EXTENSION OF PURPOSES, AMLAGAMATION OR DISSOLUTION –

Society can alter, extend or abridge is purposes, or amalgamate with other society after approval
of general meeting of members. [section 12]. Society can be dissolved if three-fifths of members
determine to do so. [section 13]. Upon dissolution, balance amount should be given to other
society and not to any member. [section 14].

Indian Trusts Act 1882

Trust and trustees is a concurrent subject [Entry 10 of List III of Seventh Schedule to
Constitution]. - - Thus, the Act will apply all over India except when specifically amended /
altered by any State Government.

The Indian Trusts Act was passed in 1882 to define law relating to private trusts and trustees.

A trust is not a 'legal person'. Property of trust is held in name of trustee for benefit of
beneficiary.

WHAT IS A TRUST - A trust is 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. [section 3 para 1]. The person who reposes
the confidence is called 'author of trust' (testator), the person who accepts the confidence is
called 'trustee' and the person for whose benefit the confidence is accepted is 'beneficiary'. The
subject matter of trust is called 'trust property' or ‘trust-money. The ‘beneficial interest’ or
‘interest of the beneficiary’ is his right against the trustee as the owner of trust-property. The
instrument by which trust is declared is called as ‘instrument of trust’. [section 3 para 2].

Thus, when a property is held by one person as trustee for the benefit of another, it can be
regarded as a trust. Trusts are governed by Indian Trust Act, as may be modified by State
Governments.

A trust can be created for any lawful purpose. [section 4]. A trust can be created by deed, will or
even word of mouth. However, trust of immovable property can be created only by non-
testamentary instrument signed by author of trust and is registered, or by will of author. [section
5]. Thus, ‘will’ is not required to be registered, even if it pertains to immovable property.
DUTIES OF TRUSTEES - Trustee is not bound to accept the trust. [section 10]. However, once
accepted, he cannot renounce it except permission of civil court or beneficiary (if he is major) or
by virtue of special power in the instrument of trust. [section 46]. - Once trustee accepts trust, he
is bound to fulfil the purpose of trust and to obey directions given at the time of creation of the
trust. It can be modified with consent of beneficiary. [section 11]. His duties are - * Inform
himself of state of trust property (section12) * Protect title to trust property (section 13) * Not to
set up title adverse to beneficiary (section 14) * Take care of property as a man of ordinary
prudence would deal with such property as own property (section 15) Conversion of perishable
property to permanent and immediately profitable character (section 16) * To be impartial
(section 17) * To prevent waste (section 18) * Keep proper accounts and information (section
19) and * Invest trust-money in prescribed securities and not others (section 20). - - Trustee is
liable for breach of trust. [section 23]. ‘Breach of trust’ means a breach of duty imposed on a
trustee, as such, by any law for the time being in force. [section 3 para 3].

RIGHTS AND POWERS OF TRUSTEE – Trustee has following powers - * Rights to title deed
(section 31) * Right to reimbursement of expenses (section 32) * Right to indemnify from gainer
by breach of trust (section 33) * Right to apply to court for opinion on management of trust
property (section 34) * Right to settlement of accounts (section 35) * All acts necessary and
reasonable and proper for trust property or protection of beneficiary (section 36). * Power to
covey property when he is authorised to sell (section 39) * Power to vary investments (from one
security to another (section 40) * Power to apply property of minors for their maintenance
(section 41) * Power to give receipts (section 42) * Power to compound or compromise (section
43).

RIGHTS AND LIABILITIES OF BENEFICIARY – The beneficiary has * rights to rent and
profits (section 55) * Right to specific execution of intention of author of trust (section 56) *
Right to inspect and take copies of instrument of trust, accounts etc. (section 57) * Right to
transfer beneficial interest (section 58) * Right to sue for execution of trust (section 59) * Right
to proper trustees (section 60) * Right to compel trustee to perform an act of duty * Follow trust
property into hands of third persson and into which it has been converted (section 63). - - A
beneficiary is liable if he joins in breach of trust. [section 68].

REVOCATION OF TRUST - A trust created by will can be revoked at the pleasure of testator.
A trust created otherwise by will can be revoked (a) by consent of all beneficiaries if they are
competent to contract (b) In exercise of power of revocation expressly reserved by author of
trust, if the trust has been declared by a non-testatory instrument or by word of mouth or (c) At
pleasure of author of trust, if the trust is for payment of debts and the author of trust has not
communicated to the creditors. [section 78].

NGO Registration Methods - 1

1. Trust 2. Society, and 3. Non profit Company

In India non profit / public charitable organisations can be registered as trusts, societies, or a
private limited non profit company, under section-25 companies. Non-profit organisations in
India (a) exist independently of the state; (b) are self-governed by a board of trustees or
‘managing committee’/ governing council, comprising individuals who generally serve in a
fiduciary capacity; (c) produce benefits for others, generally outside the membership of the
organisation; and (d), are ‘non-profit-making’, in as much as they are prohibited from
distributing a monetary residual to their own members.

Section 2(15) of the Income Tax Act – which is applicable uniformly throughout the Republic
of India – defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and
the advancement of any other object of general public utility’. A purpose that relates exclusively
to religious teaching or worship is not considered as charitable. Thus, in ascertaining whether a
purpose is public or private, one has to see if the class to be benefited, or from which the
beneficiaries are to be selected, constitute a substantial body of the public. A public charitable
purpose has to benefit a sufficiently large section of the public as distinguished from specified
individuals. Organisations which lack the public element – such as trusts for the benefit of
workmen or employees of a company, however numerous – have not been held to be charitable.
As long as the beneficiaries of the organisation comprise an uncertain and fluctuating body of the
public answering a particular description, the fact that the beneficiaries may belong to a certain
religious faith, or a sect of persons of a certain religious persuasion, would not affect the
organisation’s ‘public’ character.

Whether a trust, society or section-25 company, the Income Tax Act gives all categories equal
treatment, in terms of exempting their income and granting 80G certificates, whereby donors to
non-profit organisations may claim a rebate against donations made. Foreign contributions to
non-profits are governed by FC(R)A regulations and the Home Ministry.
CAF would like to clarify that this material provides only broad guidelines and it is
recommended that legal and or financial experts be consulted before taking any important legal
or financial decision or arriving at any conclusion.

Formation and Registration of a Non -Profit organisations in India

1) Trust
2) Society
3) Section-25 Company
Additional Licensing/ Registration

I. Trusts
A public charitable trust is usually floated when there is property involved, especially in terms of
land and building.

Legislation : Different states in India have different Trusts Acts in force, which govern the trusts
in the state; in the absence of a Trusts Act in any particular state or territory the general
principles of the Indian Trusts Act 1882 are applied.

Main Instrument : The main instrument of any public charitable trust is the trust deed, wherein
the aims and objects and mode of management (of the trust) should be enshrined. In every trust
deed, the minimum and maximum number of trustees has to be specified. The trust deed should
clearly spell out the aims and objects of the trust, how the trust should be managed, how other
trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s
and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial
stamp paper, the value of which would depend on the valuation of the trust property.
Trustees : A trust needs a minimum of two trustees; there is no upper limit to the number of
trustees. The Board of Management comprises the trustees.

Application for Registration :

The application for registration should be made to the official having jurisdiction over the region
in which the trust is sought to be registered.

After providing details (in the form) regarding designation by which the public trust shall be
known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp of
Rs.2/- to the form and pay a very nominal registration fee which may range from Rs.3/- to
Rs.25/-, depending on the value of the trust property.

The application form should be signed by the applicant before the regional officer or
superintendent of the regional office of the charity commissioner or a notary. The application
form should be submitted, together with a copy of the trust deed.

Two other documents which should be submitted at the time of making an application for
registration are affidavit and consent letter.

II. Society
According to section 20 of the Societies Registration Act, 1860, the following societies can be
registered under the Act: ‘charitable societies, military orphan funds or societies established at
the several presidencies of India, societies established for the promotion of science, literature, or
the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political
education, the foundation or maintenance of libraries or reading rooms for general use among the
members or open to the public, or public museums and galleries of paintings and other works of
art, collection of natural history, mechanical and philosophical inventions, instruments or
designs.’

Legislation : Societies are registered under the Societies Registration Act, 1860, which is a
federal act. In certain states, which have a charity commissioner, the society must not only be
registered under the Societies Registration Act, but also, additionally, under the Bombay Public
Trusts Act.
Main Instrument : The main instrument of any society is the memorandum of association and
rules and regulations (no stamp paper required), wherein the aims and objects and mode of
management (of the society) should be enshrined.

Trustees : A Society needs a minimum of seven managing committee members; there is no

upper limit to the number managing committee members. The Board of Management is in the
form of a governing body or council or a managing or executive committee

Application for Registration :

Registration can be done either at the state level (i.e., in the office of the Registrar of Societies)
or at the district level (in the office of the District Magistrate or the local office of the Registrar
of Societies).(2)
The procedure varies from state to state. However generally the application should be submitted
together with: (a) memorandum of association and rules and regulations; (b) consent letters of all
the members of the managing committee; (c) authority letter duly signed by all the members of
the managing committee; (d) an affidavit sworn by the president or secretary of the society on
non-judicial stamp paper of Rs.20-/, together with a court fee stamp; and (e) a declaration by the
members of the managing committee that the funds of the society will be used only for the
purpose of furthering the aims and objects of the society.

All the aforesaid documents which are required for the application for registration should be
submitted in duplicate, together with the required registration fee. Unlike the trust deed, the
memorandum of association and rules and regulations need not be executed on stamp paper.

III. Section-25 Company

According to section 25(1)(a) and (b) of the Indian Companies Act, 1956, a section-25 company
can be established ‘for promoting commerce, art, science, religion, charity or any other useful
object’, provided the profits, if any, or other income is applied for promoting only the objects of
the company and no dividend is paid to its members.

Legislation : Section-25 companies are registered under section-25 of the Indian Companies
Act. 1956.

Main Instrument : For a section-25 company, the main instrument is a Memorandum and
articles of association (no stamp paper required)

Trustees : A section-25 Company needs a minimum of three trustees; there is no upper limit to
the number of trustees. The Board of Management is in the form of a Board of directors or
managing committee.

Application for Registration :

1.An application has to be made for availability of name to the registrar of companies, which
must be made in the prescribed form no. 1A, together with a fee of Rs.500/-. It is advisable to
suggest a choice of three other names by which the company will be called, in case the first name
which is proposed is not found acceptable by the registrar.

2.Once the availability of name is confirmed, an application should be made in writing to the
regional director of the company law board. The application should be accompanied by the
following documents:
Three printed or typewritten copies of the memorandum and articles of association of the
proposed company, duly signed by all the promoters with full name, address and occupation.

A declaration by an advocate or a chartered accountant that the memorandum and articles of

association have been drawn up in conformity with the provisions of the Act and that all the
requirements of the Act and the rules made thereunder have been duly complied with, in respect
of registration or matters incidental or supplementary thereto.
Three copies of a list of the names, addresses and occupations of the promoters (and where a
firm is a promoter, of each partner in the firm), as well as of the members of the proposed board
of directors, together with the names of companies, associations and other institutions in which
such promoters, partners and members of the proposed board of directors are directors or hold
responsible positions, if any, with description of the positions so held.

A statement showing in detail the assets (with the estimated values thereof) and the liabilities of
the association, as on the date of the application or within seven days of that date.
An estimate of the future annual income and expenditure of the proposed company, specifying
the sources of the income and the objects of the expenditure.

A statement giving a brief description of the work, if any, already done by the association and of
the work proposed to be done by it after registration, in pursuance of section-25.

A statement specifying briefly the grounds on which the application is made.

A declaration by each of the persons making the application that he/she is of sound mind, not an
undischarged insolvent, not convicted by a court for any offence and does not stand disqualified
under section 203 of the Companies Act 1956, for appointment as a director.

3.The applicants must also furnish to the registrar of companies (of the state in which the
registered office of the proposed company is to be, or is situate) a copy of the application and
each of the other documents that had been filed before the regional director of the company law
board.

4.The applicants should also, within a week from the date of making the application to the
regional director of the company law board, publish a notice in the prescribed manner at least
once in a newspaper in a principal language of the district in which the registered office of the
proposed company is to be situated or is situated and circulating in that district, and at least once
in an English newspaper circulating in that district.

5.The regional director may, after considering the objections, if any, received within 30 days
from the date of publication of the notice in the newspapers, and after consulting any authority,
department or ministry, as he may, in his discretion, decide, determine whether the licence
should or should not be granted.

6.The regional director may also direct the company to insert in its memorandum, or in its
articles, or in both, such conditions of the licence as may be specified by him in this behalf.

IV. Special Licensing

In addition to registration, a non-profit engaged in certain activities might also require special
license/permission. Some of these include (but are not limited to):

A place of work in a restricted area (like a tribal area or a border area requires a special permit –
the Inner Line Permit – usually issues either by the Ministry of Home Affairs or by the relevant
local authority (i.e., district magistrate).
To open an office and employ people, the NGO should be registered under the Shop and
Establishment Act.

To employ foreign staff, an Indian non-profit needs to be registered as a trust/society/company,

have FCRA registration and also obtain a No Objection Certificate. The intended employee also
needs a work visa.

A foreign non-profit setting up an office in India and wanting staff from abroad needs to be
registered as a trust/society/company, needs permission from the Reserve Bank of India and also
a No Objection Certificate from the Ministry of External Affairs.

Comparision among Trust, Society and Non profit Company

Trust Society Section-25 Comapny

Statute/Legislation Relevant State Trust Societies Registration Indian Companies Act, 1956
Act or Bombay Act, 1860
Public Trusts Act,
1950
Jurisdiction Deputy Registrar of societies Registrar of companies
Registrar/Charity (charity commissioner in
commissioner Maharashtra).
Registration As trust As Society As a company u/s 25 of the
In Maharashtra, both as a Indian Companies Act.
society and as a trust
Registration Trust deed Memorandum of Memorandum and articles of
Document association and rules and association. and regulations
regulations
Stamp Duty Trust deed to be No stamp paper required No stamp paper required for
executed on non- for memorandum of memorandum and articles of
judicial stamp paper, association and rules and association.
vary from state to regulations.
state
Members Required Minimum – two Minimum – seven Minimum three trustees. No
trustees. No upper managing committee upper limit.
limit. members. No upper limit.
Board of Trustees / Board of Governing body or Board of directors/
Management Trustees council/managing or Managing committee
executive committee
Mode of Succession Appointment or Appointment or Election Election by members of the
on Board of Election by members of the general body
Management general body