A public charitable trust is a type of not-for-profit organization created and managed for the purpose of providing a benefit to the public. Unlike private trusts, these organizations are subject to public scrutiny and must comply with legal rules, including filing financial disclosure forms. The public’s business is conducted in an open and transparent manner and is guided by a board of trustees. Public charitable trusts may also be formed for the purpose of providing educational or scientific programs, preserving natural land and resources, providing social services, and engaging in humanitarian activities. Trust formation in India requires compliance with the Rules made by the Indian Government, in particular, those framed under the Indian Trusts Act, 1882.
The trustees of the trust must be legally competent and their number should not be less than two.
The trust must have a defined document i.e. the trust deed/instrument/settlement that lays down the details of the trust.
Register the deed with the local Registrar or Sub-Registrar of Assurances (to protect the interests of the beneficiaries of the trust)
Ensure compliance with all applicable law, rules, and regulations.
Some points to be noted before drafting a trust deed:
1. The deed should mention the name and address of the settlor and the name and address of the trust.
2. The deed should specify the date of establishment of the trust, the purpose of the trust and the period of its duration (if any).
3. It should state the income of the trust, the manner in which the income shall be applied and the mode of investment of the trust income.
4. The persons who can be beneficiaries under the trust and the value of the corpus should be clearly specified in the deed.
5. The deed should provide for the appointment and removal of trustees, powers of the trustees, rights and liabilities of trustees.
6. It should also include provisions for auditing and accounts and resolutions of general meetings of the trustees.
7. The deed should comply with the provisions of the Indian Trusts Act, 1882, and the Income-tax Act, 1961.
8. The trust deed should define the purpose of the trust. It should be very clear as to what the trust aims to achieve, who will benefit and in what way.
9. The trust deed should set out the powers and duties of the trustees and list any restrictions on those powers and duties.
10. The trust deed should address how additions to the trust will be handled and how any removal of trust property will be dealt with.
11. The trust deed should address under what circumstances the trust might be terminated, how it will be administered, and how disputes will be resolved.
12. The trust deed should address how the trust property will be managed, how the funds will be invested, and how the trustees will be compensated for their services.
13. The trust deed should also address how distributions to the beneficiaries will be handled, such as when and in what form the beneficiary will receive the benefit.
14. The trust deed should also set out the provision to appoint successor trustees.
15. The rules drafted in the trust deed should incorporate preventive measures against mismanagement of trust assets.
16. The disposal of assets and winding up the trust must be clearly mentioned in the deed.
17. The trust deed clearly mentioned that it is irrevocable trust, if it will be revocable then you will not get the certificate of 12A and 80G registration.
18. The trust deed should be signed and witnessed in order to be correctly executed.
Finally, it is advisable to seek professional advice when drafting the trust deed in order to ensure that it meets all legal and tax requirements.
Author Bio
