INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
10.2 Common Charitable Structures A charitable organisation is usually formed by way of a trust, a society under the Societies Registration Act, 1860 or a company limited by guarantee under Sec - tion 8 of the Companies Act, 2013. The advantages and disadvantages of the forms are as follows. Trusts A trust is created when the author or the settlor of the trust sets apart some property for a charitable purpose so that the income can be devoted to fulfill - ing the said charitable purpose. Various states have enacted separate legislation to govern the adminis - tration of charitable trusts, such as the Maharashtra Public Trusts Act, 1950. Where no such separate state legislation exists, a public trust can be set up by reg - istration of the trust deed with the registrar under the Registration Act, 1908. The advantage of forming a trust is that control can lie with a few persons chosen as trustees who can be nominated for any period extending up to their life - time. However, neither the objects of the trust nor the powers of the trustees can be changed without the approval of certain authorities such as the Office of the Charity Commissioner or the court of the competent jurisdiction. Societies A society is essentially an association of seven or more persons united together to achieve an identified common purpose (under the relevant regulations). For a society to be considered as a charitable organisa - tion, the object of the society must conform to the definition of “charitable purpose” under the ITA. While the Societies Registration Act, 1860 is the cen - tral legislation governing societies, various states have enacted independent legislation or amended the central legislation to ensure the proper function - ing of societies. Thus, a society can be registered in any district of India with the Registrar of Societies in that particular area. Forming a society as a charitable organisation may be more suitable where there are numerous donors or where the control and manage - ment is sought to be more broad-based with greater participation.
The advantage of a society as a charitable organisa - tion is that the objects and the powers can be easily changed by way of special resolutions and provides for democratic participation from a larger number of people. However, there may be a lack of stability in a large organised charity in the form of a society as it is not possible to have office-bearers for life, and there are greater chances of interference from state authorities on compliance in societies. Section 8 Companies Section 8 of the Companies Act, 2013 provides for the formation of a company with the objective to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environ - ment or any such other objects. Any profit or income must be applied only for the promotion of the objects of the company, and members are not entitled to receive any dividend. A company is more stable than a society but less rigid than a trust, as it is possible to amend the objects and powers by amending the charter documents accord - ing to the Companies Act, 2013. However, a charitable organisation in the form of a company must comply with all formalities under company law. However, a charitable organisation in the form of a company must comply with all the formalities under company law for its registration, management and so on.
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