In India, several types of organisations are formed with the goal of delivering services to their members rather than making a lot of money. Trust and Society are two such groups in India. When a group of people get together for a common charitable objective, a society is created. A trust registration is a legal framework in which one person owns property for the benefit of another. The major difference between Trust and Society is the cause for their formation.
In this article, we will discuss the difference between trust and society in India.
Definition Of Trust And Society
The fundamental concepts of Trust and Society must be understood before delving into the primary difference between trust and society registration in India.
Society:
A society is an assemblage of individuals united by a shared objective, which could encompass endeavours linked to benevolent, educational, literary, or scientific pursuits. The procedure for registering a society is relatively simple as this requires the participation of a minimum of seven members to endorse the Memorandum of Association and then subsequent submission to the Registrar.
Trust:
In a trust, a first-party establishes the Trust as a legal entity. In this case, the first party authorises the assets to be transferred to the second party for the benefit of the third party. The first party here denotes the Trust author or Trustor, while the second is the Trustee. The Trustor entrusts the properties to the Trustee on behalf of the beneficiary (third party). The subject object of the trust is known as Trust Property, and the instrument detailing the terms and conditions is known as the Trust Deed.
Advantages of a Trust and Society
The advantages of a trust and society are necessary to know in order to understand the difference between trust and society in India.
Advantages of a Trust are:
1. Easy Set-up:
The process of creating a trust does not demand a significant number of participants; even two individuals can suffice to establish a trust entity.
2. Privacy and Control:
Trust structures allow for the maintenance of privacy and control over trust assets, substantially reducing the likelihood of fund misuse.
3. Assets Utilisation:
Facilitates the gradual release of assets over a specified duration, offering flexibility in asset utilisation.
4. Cost-saving:
Trusts can effectively alleviate the tax burden, serving as a prudent option for achieving cost-saving objectives.
5. Time-saving:
The absence of complex procedural requirements for reconfiguring board arrangements contributes to time-saving. Additionally, prior member invitations are not obligatory.
Advantages of a Society are:
1. Beyond Charity:
Societies encompass a broader spectrum of purposes, extending to political, educational, fundraising, and promotional endeavors, transcending charitable confines.
2. Shared Profits and Liabilities:
Liabilities and profits are distributed among society members, fostering a shared responsibility.
3. Seamless Formation:
The establishment of a society is a straightforward process, facilitated by the shared objective of its members. A voluntary consensus of ten adult members suffices for its formation.
4. Going Concern:
Similar to business entities, societies persist even in the face of unforeseen events like the retirement or demise of a member, following the going concern principle.
5. Democracy:
Societies adhere to democratic governance, enabling decision-making through voting procedures.
Major Difference Between Trust and Society in India
There is a significant difference between trust and society registration in the context of the Indian legal framework based on the following given aspects of distinction.
Below is a comprehensive comparison table detailing the difference between trust and society registrations in India:
| Particulars | Society | Trust |
| Meaning | A society is formed by a group for a common charitable purpose, potentially extending to various other domains. | A trust is the earliest form of charitable organisation, involving one party holding property on behalf of another. |
| Registering Authority | Registrar of Company | Registrar/Deputy Registrar of Societies or Charity Commissioner of the respective State. |
| Governing Legislation | Societies Registration Act, 1960 | Indian Trust Act, 1882 |
| Objectives | Objectives must be specific. | Objectives can be general. |
| Document of Constitution | Memorandum of Association (MoA) and Rules & Regulations. | Trust Deed. |
| Minimum Members Required | Minimum 7 members | Minimum 2 Trustees. |
| Registration under the IT Act, 1961 | Allowed | Allowed |
| Transparency | Low | Low |
| Annual Compliances | The Society must annually provide the Registrar with the committee members’ details. | No mandatory yearly compliances for a Trust. |
| Nature of Control | Decisions through voting, potential power struggles. | Settler (single control). |
| Amendments | Relatively complex; changes required in both Rules & Regulations and MoA. | Easily done through a supplementary Trust Deed. |
| Family Members | Registrar objects to family members in the Governing Body. | Family members can be Trustees. |
| Winding-up | Can be wound up if 3/5th of members wish. | Trust is usually irrevocable and cannot be dissolved. |
| Geographical area of activities | Requires separate All India level Registration (8 members from different states). | All India (not specified in Trust Deed). |
| Tenure of Officer Holders | Fixed tenure, re-election possible. | Trustees hold office for life. |
| Issue of Name Approval | Possible if no other NGO with the same name exists within the Registrar’s jurisdiction. | Name approval not required under Emblem Act. |
| Transfer of Membership/Directorship/Trusteeship | Membership not transferable under the Act. | No provision for transferring Trusteeship under Indian Trust Act. |
| Eligibility for Foreign Directors/Members/Trustees | Foreigner eligibility depends on government and territorial regulations. | No restrictions on foreigners as Trust members, subject to government rules. |
| Eligibility for College/School Formation | Eligible for College/School formation in all states, including Rajasthan. | Eligible for College/School formation, except in certain states like Rajasthan. |
Final Thoughts
The difference between Trust and Society rests upon their distinct purposes and operational characteristics. While Societies unite individuals for broader objectives beyond charity, Trusts serve as legal entities facilitating controlled asset management. The advantages of Trusts encompass easy setup, privacy, asset flexibility, cost-saving, and time efficiency. On the other hand, Societies offer diverse objectives, shared responsibilities, straightforward formation, continuity despite changes, and democratic decision-making.
Understanding the differences between trust and society is crucial for individuals and groups aiming to establish entities in India that align with their specific goals. By recognising the unique advantages and implications of Trusts and Societies, one can make informed choices that best suit their intended activities, fostering effective service delivery and positive social impact within the Indian legal framework.
For more information on the difference between trust and society, connect with our experts at StartupFino.
