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,
the funds and property of the society may not be distributed among the members of the society.  Rather,    the
remaining funds and property   must     be
given or transferred to some   other    society, preferably   one    with
similar objects as the dissolved entity.

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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Qualification: CS
Company: PARMEET KAUR AND ASSOCIATES
Location: HAPUR, Uttar Pradesh, India
Member Since: 10 Jul 2020 | Total Posts: 13

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