A NGOs (Non-Governmental Organization) also known as NPOs (Non-Profit Organizations) are organizations formed for non-profit or selfless purpose, these organizations are generally formed for promotion of arts, science, commerce, sports, social welfare, religion, charity, environmental protection any such other objects.
An NGO can be formed either as a:
1. Section 8 Company, or
2. Trust, or
3. Society.
Detailed analysis of these three forms of formation of NGO is detailed and tabulated below:
| Basis | SECTION 8 COMPANY | TRUST | SOCIETY |
| Meaning | It is Company registered under Companies Act, 2013 With object to promote social, charitable, or any other such objective and to apply the profits for promoting such objectives. |
It is, in essence, an arrangement between parties whereby one party holds ownership over property on behalf of another person. It is considered to be the oldest form of charitable organisations. |
It is formed when a collection of people come together for a common charitable purpose. But it is not limited to charitable purposes but may extend to multiple other fields. |
| Registration | Section 8 Company is formed as a Private or Public Company without using the words “Limited” or “Private Limited” as suffix to its name. |
As NGO/ NPO | As NGO/ NPO |
| Governing law |
Companies Act, 2013. | The Indian Trusts Act, 1882 for Private Trusts and General Law for Public Trusts except in state of Gujarat, Maharashtra having separate Public Trust Acts. | The Societies Registration Act, 1860 |
| Registering authority | Registrar of Companies (ROC) or Regional Director. | Deputy Registrar of the relevant area. | Registrar or Deputy Registrar of Societies of the State. |
| Minimum Persons | Minimum 2 persons are required | Minimum 3 persons are required | Minimum 7 persons are required |
| Area of Operation | The whole of India. | The whole of India. | State-wise,but can operate in the whole of India after taking All India Registration by becoming National Level Society. |
| Constitutional Document | Memorandum and Articles of Association. | Trust deed | Memorandum of Association and Rules & Regulations. |
| Legal title of the property | Held in the name of the company. | Vests in the hands of trustees. | Held in the name of society. |
| Grant of subsidy by the Government | Mostly preferred. | Not much preferred. | Not much preferred. |
| Registration under the Income Tax Act, 1961 | Yes, allowed. | Yes, allowed. | Yes, allowed. |
| Preference in case of FCRA registration (Foreign Contribution Regulation Act) | Mostly preferred. | Not much preferred. | Not much preferred. |
| Transparency in working details |
High, because of online availability | Not much | Not much |
| Annual compliance requirement | Filing of annual accounts and annual return of Section 8 | There is some annual compliance requirement depending on whether |
Annual filing of a list of names, addresses, and occupations of members of the |
| company, to Registrar of Companies (ROC). | the trust is Private trust or Public Trust. | Managing Committee of the society, to the Registrar of Societies. |
|
| Management | Managed by directors of the company. | Trusts are governed by their trustees or by board of trustees. |
Managed by a governing council or managing committee. |
| Online Facility |
Online facility is available. Compliances, like annual filing, appointment & removal of directors, shifting of registered office, change in object clause & others can be done online at MCA portal. It is very easy, time saving and transparent process. |
Online filing facility in not available. Compliances are more complicated & time consuming. |
Online filing facility is not available. Everything has to be submitted in the office of Registrar of Societies in hard copy. Compliances are more complicated & time consuming |
| Change in management | Easy | Easy | Complex |
| Change in office address | Easy | Difficult | Difficult |
| Cost factor | Medium | Low | Medium. |
| Time involved in registration | 15-25 days | 20-25 days | 15-20 days |
| Dissolution | Upon dissolution and after settlement of all debts and liabilities, the funds and property of the company may not be distributed among the members of the company. Rather, the remaining funds and property must be given or transferred to some other section 8 Company, preferably one having similar objects as the dissolved entity |
If trust becomes inactive due to negligence of the trustees, the Charity Commissioner may take steps to revive the trust or apply the doctrine of cy-pres, meaning “as near as possible,” may be applied to change theobjects of the trust. Thus, the grantors can feel fairly secure that the charitable nature of a trust will be honoured, even if the original, specific purposes of the trust cannot be carried out. |
Upon dissolution, and after settlement of all
debts and liabilities, |
Conclusion:
Out of all formations, Section 8 company are more cooperative comparative to Trust and Society. Trust and Societies are generally neglected during the grant of various government schemes.
Benefits of Section 8 Company over Trust and Society:
- Online compliances
- Transparency
- Prioritized for Government subsidies
- Eligible for FCRA registration
Section 8 companies are usually preferred to be registered as the most beneficial form of organisation to avail subsidies by the government. However, the form of constitution of NGO also depends upon the purpose for which NGO is to be formed.
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