Societies Registration Act, 1860
Society, Trust and Section 8 Company: Choosing a Non-Profit Form
Anyone setting up a non-profit in India chooses, in practice, among three legal forms: the society registered under the 1860 Act or a State Act, the public charitable trust, and the company licensed under section 8 of the Companies Act, 2013. All three can pursue charitable, educational, religious and welfare objects, all three can obtain tax exemption, and none may distribute profit. They differ in who controls the body, whether it has legal personality, how easily its objects can change and which authority supervises it.
1. The three forms
Figure 1: Three vehicles for the same purposes
- Society. An association of persons who subscribe a memorandum and rules and register them. Control lies with the members, who elect the governing body. The governing statute is the 1860 Act as amended, or the State's own Act.
- Public trust. A dedication of property by a settlor for public charitable or religious purposes, held and managed by trustees under the trust deed. The Indian Trusts Act, 1882 expressly does not affect public charitable endowments, which are governed by general principles, section 92 of the Code of Civil Procedure, and in several States a public trusts statute such as the Maharashtra Public Trusts Act, 1950.
- Section 8 company. A company registered with a licence allowing it to omit "Limited" from its name, on undertakings to apply income to its objects and pay no dividend. It is governed by a board of directors and the Companies Act, 2013.
Companies Act, 2013, Section 8(1), clauses (a) to (c) (a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object; (b) intends to apply its profits, if any, or other income in promoting its objects; and (c) intends to prohibit the payment of any dividend to its members, |
2. Legal personality
📖 Illachi Devi v. Jain Society, Protection of Orphans India, (2003) 8 SCC 413 Facts: A testator left part of his estate to an orphanage run by a society registered under the 1860 Act. The society applied for letters of administration with the will annexed, and the heirs objected that the Indian Succession Act did not permit a grant to such a body. Held: A society registered under the Act is not a company for the purposes of the succession law and cannot take the grant. Relying on the Tibbia College case, the Court held that registration confers privileges but "there is really no incorporation", and that a registered society is not a juristic person. The matter was remitted so that an office-bearer nominated by the society could take the grant and carry out the will. Ratio: A registered society acts through its governing body and the officer its rules designate; it does not have the separate legal personality of a company, though a bequest to it is not for that reason defeated. |
A trust stands further from personality: it is an obligation attached to property, and the trustees contract, hold title and litigate. A section 8 company is a body corporate like any other company, with perpetual succession and the capacity to own property and sue in its own name.
3. Side by side
The following table sets the three forms against the questions a founder, a funder or an examiner will ask.
Feature | Society | Public trust | Section 8 company |
|---|---|---|---|
Formed by | Seven or more persons registering memorandum and rules | Settlor's deed or declaration; registration under State law where required | Incorporation with a licence under section 8 |
Controlled by | Members through an elected governing body | Trustees, often self-perpetuating under the deed | Members and a board of directors |
Legal personality | Not a body corporate | None; trustees hold and act | Body corporate |
Changing objects | Section 12: three-fifths vote and confirmation | Only as the deed permits, else by court or charity authority | Special resolution and prior Government approval |
Dissolution | Section 13; surplus to another society under section 14 | Rarely; property applied cy-pres by court | Winding up; surplus to a similar body as the Act directs |
Supervisor | Registrar of Societies under State law | Charity Commissioner or civil court | Registrar of Companies |
Compliance load | Light under the 1860 Act; heavier under State Acts | Light, except under State trusts statutes | Highest: filings, audit, board processes |
Figure 2: Personality, property and suits
4. Choosing between them
- Democratic membership bodies such as professional, cultural and sports associations usually choose the society, since members elect and can remove the governing body.
- Family or founder led philanthropy that wants control to stay with chosen persons often prefers a trust, where the deed fixes the trustees and their succession.
- Large, grant dependent or contracting organisations, including those working with corporate social responsibility funds and international donors, increasingly choose the section 8 company for its personality, transparency and familiar governance.
- All three can be registered for tax exemption and for receiving foreign contribution, subject to the same conditions on application of income, so tax is rarely the deciding factor.
Figure 3: A founder's route to the right form
⚠ Key point The choice turns on control and personality: members control a society, trustees a trust, directors a company; only the company is a body corporate. Everything else, from alteration to regulation, follows from those two features. |
5. Quick Revision
✦ Three forms in five lines Society: members, memorandum and rules; not a body corporate (Illachi Devi). Trust: settlor's dedication, trustees in control, no personality. Section 8 company: licensed, no dividend, body corporate. Change: section 12 for societies; deed or court for trusts; special resolution with approval for companies. Supervisor: Registrar of Societies; Charity Commissioner or court; Registrar of Companies. |
- All three forms bar distribution of profit.
- Only the section 8 company has corporate personality.
- A society is member controlled and comparatively easy to alter.
- A trust preserves the settlor's purpose through trustees.
- In Maharashtra and Gujarat a charitable society is also a public trust.
6. Frequently Asked Questions
Can a society convert into a section 8 company?
The 1860 Act provides no conversion procedure of its own, but section 366 of the Companies Act, 2013 allows certain existing entities, societies among them, to register as companies, and a society with charitable objects can seek a section 8 licence in the process, subject to the conditions in the rules and the consent of its members. Many societies instead incorporate a new section 8 company with similar objects and transfer their undertaking to it, using an amalgamation or transfer approved by members under section 12, or on dissolution the transfer of surplus property to a body with similar objects under section 14. Whichever route is used, the State law of registration must be checked, and no step may let members take any benefit from the society's property.
Is a society that holds property on trust a trust or a society?
It can be both in different senses. The society remains an association registered under the Act, but property given to it for specified charitable purposes is impressed with those purposes and must be applied to them. Where a State's public trusts law defines public trust to include a charitable or religious society, as the Maharashtra and Gujarat laws do, the society must also register with the Charity Commissioner and comply with that law. Elsewhere, the general law of charitable trusts and section 92 of the Code of Civil Procedure may reach property held for public charitable purposes, whoever holds it.
Why do donors sometimes insist on a section 8 company?
Because the company form offers features donors and their auditors value: a single legal person to contract with, statutory audit, board accountability, public filings on the companies registry and familiar remedies for mismanagement. A society's governance depends heavily on its own rules and on the State law, which varies, and its lack of corporate personality can complicate contracts, property transactions and litigation. These are practical, not legal, preferences: a well governed society is fully eligible for tax registration and foreign contribution registration, and many of India's largest institutions remain societies.
7. Related Topics and Provisions
- History and object of the 1860 Act
- Societies eligible for registration: section 20
- Legal personality of a registered society
- Property of a society: section 5
- Tax treatment of registered societies
- Foreign contribution and registered societies