What entity should I have for running the school?
A Trust OR
A Society OR
A Company Under Section – 8
When it comes to managing a school in India, you have to create a non-profit organizations, including trusts, societies, and Section 8 companies. Each of these has distinct characteristics and legal frameworks. The major differences are given here as under:
1. Trust
Governing Law:
It is governed by the Indian Trusts Act, 1882 (for private trusts) or relevant state acts (for public trusts).
Formation:
A Trust deed to be executed, which is a legal document that defines the objectives, terms, and conditions of the trust.
Management:
Managed by trustees appointed in the trust deed.
Trustees are responsible to manage the trust’s assets and affairs in accordance with the trust deed.
Registration:
Registration is done with the local registrar of trusts.
Not mandatory for private trusts but essential for public charitable trusts.
Regulatory Requirements:
Less stringent regulations compared to societies and Section 8 companies.
Trusts are subject to fewer reporting and compliance requirements.
2. Society
Governing Law:
Governed by the Societies Registration Act, 1860 (Central Act) or respective state acts.
Formation:
Formed by at least seven individuals who come together for a common purpose.
Requires a memorandum of association and rules and regulations.
Management:
Managed by a governing body or managing committee elected by the members.
Members have voting rights, and decisions are made collectively.
Registration:
Registered with the Registrar of Societies.
Mandatory for legal recognition and to avail tax exemptions.
Regulatory Requirements:
Societies must maintain regular records of meetings, accounts, and submit annual reports to the Registrar of Societies.
More stringent regulatory requirements compared to trusts.
3. Section 8 Company
Governing Law:
Governed by the Companies Act, 2013.
Formation:
Formed with the primary objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or protection of the environment.
Requires at least two directors and two shareholders.
Management:
Managed by a board of directors.
Directors have all the responsibilities and must act in the best interest of the company.
Registration:
Incorporated by obtaining a license from the Registrar of Companies (RoC).
Requires detailed documentation, including memorandum and articles of association.
Regulatory Requirements:
Subject to stringent regulatory and compliance requirements, similar to other companies.
Must maintain proper books of accounts, conduct annual audits, and file annual returns with the RoC.
Key Differences:
Legal Framework:
Trusts are governed by trust laws, societies by the Societies Registration Act, and Section 8 companies by the Companies Act.
Formation and Structure:
Trusts are created by a trust deed with trustees; societies are formed by a group of individuals with a governing body; Section 8 companies are incorporated entities with directors and shareholders.
Management:
Trusts are managed by trustees, societies by a managing committee, and Section 8 companies by a board of directors.
Regulatory Compliance:
Trusts have the least stringent regulatory requirements, societies have moderate requirements, and Section 8 companies have the most stringent requirements.
Flexibility:
Trusts offer more flexibility in management, while societies and Section 8 companies have more structured and regulated management processes.
One must choose the appropriate form for managing an educational institution depends on various factors, including the level of regulatory compliance one is willing to undertake, the desired governance structure, and the long-term objectives of the institution.
Wishing you good luck for the new educational venture.
