Do you want to start an NGO?
For many NGO is easy money, for some it is just service to society only; that is how they perceive about the NGO. If served well for the objectives for which they are formed, the end result is socially acceptable, it improves the particular spectrum of activity, for the benefit of society at large.
So any one planning to start an NGO should first firm up his mind set for working on the objectives planned. How and in what form is an issue; for that one should clearly understand as to how to start NGO, and of which format. The expertise of specialists could be sought; and in the process of the fear of getting the organization closed, often within the first three years of its formation can be curbed.
Suitable format means whether it is Trust or Society or Section 8 Company . In my opinion it is most important because your team should be formed as per your individual capacity to manage various resources such as human resources, finance etc . So it is better to understand the merits and demerits of each form of NGO before forming the NGO.
Different Format of NGO:
There are three formats of NGO :
- Trust under Indian Trust Act ,1882
- Society under society registration act ,1860
- Section 8 Company under Indian Companies Act ,2013
(all as amended from time to time)
In terms of objective, all three forms are equal , formed for charitable or religious purpose .Difference is procedure of formation and its maintenance .
Some of the issues which the promoter/initiator may have relate to the relationship with other Members in the team. Some of them want they should be president or chairman for their life term; some need veto power so that they will be final authority for that NGO; some want to include only family members so that they will not lose control over the NGO; some want to include maximum number of people to join their NGO and make it a people movement; some want Byelaw should be flexible enough to invite investors, and the wish list goes on.
They would like to have the terms of formation, suiting to their individual wishes; but then these thought processes have to be within over all frame work of the Acts mentioned above. The Expert would advise to meet the expectations of not only the organization but also the top movers behind the same; but within the ambit of law, so that one may not fall prey before the Law.
Let us analyse the difference in details :
In the case of Trust , the byelaws can be designed in such a way that the settler and first trustees can retain their hold over the NGO till their life end, because there is no election.
In case of Society , there will be election every three years or as the case may be as mentioned in bye laws and the promoter can retain his hold over the NGO only if he has support of majority members .
In case of Section 8 , he can retain his hold over the company by having majority share .
- Relatives as Governing Board Member
In case of society , the President has to give undertaking to the Registrar of Societies that there is no relatives in the Governing Body.
In case of Trust or Section 8 company there is no such requirement ; so they have the option to have majority in the governing body by including their relatives.
However, please note that including relatives in governing body of Trust or Section 8 company , is viewed as negative point by the Income Tax dept. when it apply for registration under section 80G or 12 A of income tax act or when you apply for funding from government depts. . So it is better to avoid relatives in the governing body of NGO .
Democratic setup :
If you are strong believer of democracy , wants to develop a mass organization and no fear of election it is better to start a society . Normally Trust are run as one man show but society is team work .
But if you need investment for developing Assets from others , they also expect definite percentage of ownership . This type of demarcation in ownership is not possible in case of Trust or Society . In such situation Section 8 company is the best option.
Availability of Name :
In the case of Trust there is no restriction in selecting the name of Trust . But in case of Society and Section 8 Company , the name has to be approved by concerned authority ie, Registrar of Societies in case of society and Registrar of Companies in case of Section 8 Company.
Minimum Number of Members:
In the case of Trust just with Two Members one can start an all india Trust . In case of Society you need 7 members if it is a state level society and 8 members from 8 different states for all india Society(applicable to delhi, other states may have different conditions). In case of Section 8 Company you need just two members to start an all india level NGO.
It is observed that Trust is the preferred format , if it is asset building just like school ,hospital etc because most of the promoters don’t want to lose control over the organization they established. wherever it is mass programme without much asset building , society is a better choice .Similarly if you are looking for investors for your project , it is better to start a section 8 company .
I have narrated some of the points here for your decision making . So pl take a decision after considering all the points based on your vision and capacity to execute .
We are here to serve you; for any clarification, assistance, contact us over phone or mail: we would revert soon, with solution.
CMA Krishna Dasan A