Trust is known to be an agreement between parties in which one party owns the ownership of the property for the benefit of the other party. Trust is governed by the Indian Trust Act 1882. It is observed to be the oldest form of Charitable Organization. It is either private or public. Its major role is to provide benefit to a section of people.
Section 8 Company is an non- profit organization which is formed with a commercial, social and charitable or any other likely objective and tends to apply its profit for encouraging such objectives.
Section 8 Companies are governed by Companies Act 2013. These companies are formed for the purpose of promoting charitable object concerning to art, commerce, science, health and many more. All the benefits and subject to all the obligations of Limited Companies are enjoyed by such companies.
What is the difference between Section 8 Company and Trust?
Section 8 of the company act states provisions related to the formation of a company with charitable objects and of that sort.
Whereas trust is governed by the public trust act. A trust is basically a legal entity in which a trustor (first party) through which the second party holds the rights to manage the interests of the property or assets.
There are basically three reasons of forming a Section 8 Company: – to attain charitable objectives, to apply the income and the profits derived from the companies to attain such objectives and to not to pay the dividends to its members.
Trust is also a charitable organization which is of two kinds: – public and private . and there is no regulatory requirement for the public filing of accounts.
The basic differences are:
- The trust is basically governed by Indian Trust Act, 1882 whereas the company under section 8 is governed by the Indian company’s act, 2015.
- The main registrable document of a trust is the trust deed whereas the main registrable document for a Section 8 Company is its MOA (Memorandum of association) and AOA(Articles of Association).
- Under the trust, the jurisdiction falls on the charity commissioner or the deputy registrar of that area whereas in the latter the jurisdiction falls under the regional director or registrar of the state.
- A minimum of 2 members is required under a Trust whereas a minimum of 2 under the private company and 7 for the public company is required.
- The trust deed has to be made on a nonjudicial stamp paper which may vary from state to state whereas no stamp duty is required in the latter
- The public charitable trusts are irrevocable or cannot be dissolved whereas the company under section 8 may be dissolved at any time.
- Mode of the succession of the board of directors is by appointment or election whereas it is managed by the board of manager in the latter.
- The legal title vests in the name of the trustees only whereas the rights of legal title vests in the hands of the company.
- Under the trusts, there is no obligation of filing annual returns whereas there is a requirement of the return of annual accounts with the ROC and has to be filed necessarily.
- In case the trust becomes inactive due to mere negligence, the commissioner may take steps to revive the company and if it is still not able to revive the trust then it may apply a legal doctrine stating to amend the objects of the trust whereas under a Section 8 Company, after the dissolution of the company and after its settlement, the remaining property and assets must be transferred or given to some other company under Section 8 Company.
- The time period involved to form a trust involves 10-15 days whereas the time is taken to form a Section 8 Company can take anywhere between 60-75 days
Note :-
The cost factor involved in trusts are critically low as compared to a company under section 8 of the company’s act.
The transparency in working is very low in trusts as compared to a Section 8 Company.
The grant of subsidies to trust is very less as compared to the company under section 8.
Created & Posted by (Twinkle)
Accountant at TAXAJ
TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you with a One-Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visits TAXAJ
TAXAJ Corporate Services LLP
Address: 1/11, 1st Floor, Sulahkul Vihar, Old Palam Road, Dwarka, Delhi-110078