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For starting a new school – Trust/Society/Section 8 Company to be set up?

For starting a new school – Trust/Society/Section 8 Company to be set up?

Before we proceed we need to know what is a Trust/Society/Section 8 Company, in short these are non-proprietary organizations, which means that they are set up to provide service to the community and not with a profit motive. In India, educational institutions are mandatorily established by a Trust or Society or a Section 8 company. This rule applies to all K-12 schools established within the territory of India.

Now we will understand one by one:

Trust – A trust is a legal set up to entrust a person or a group of persons with the property for the use or benefit of some other person or group of person

Society – 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.

Section 8 Companies – It is a company established with the purpose 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 and whereby they apply any profits into furthering the objective.

Distinguishing points between a trust and a society are as follows:

Trust Society Section 8 Company
an agreement between parties, whereby one party holds an asset for the benefit of another party a collection of persons, who come together for the initiating any literary, scientific or charitable purpose non-profit enterprise associated with a commercial venture, also established for furtherance of goals similar to a trust or society
Minimum two members are required to set up Minimum seven members are required to set up (5 for Jammu and Kashmir and Telangana) Minimum two members are required to set up
Document issued is trust deed Documents issued are MOA and rules & regulations Documents issued are MOA and AOA (articles of association)
It comprises of trustees It comprises of governing bodies which includes, the committee, trustees, council, directors, governors etc. It comprises of Board of directors
It is governed under Indian Trusts Act 1982 It governs under the Indian Societies Act, 1860 It governs under Companies Act 2013
Members of one family can become the trustees of a trust Multiple members of one family are not allowed to be the governing bodies Multiple members of one family not allowed
There are no mandatory yearly compliance to be met by a trust The society must file the list of names, occupations and address of the managing committee members of the society to the Registrar annually The company must file the annual returns and accounts with the ROC.
Cost factor – Low Cost factor – medium Cost factor – high
Legal rights of the property is held by the trustees Legal rights of the property is held in the name of society Legal rights of the property is held in the name of company

Our promoters can proceed accordingly after understanding the differentiation between all three and check which one will suit the mission and vision of the project.

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