Section 8 of the company act states provisions related to 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 man age the interests of the property or assets.
There are basically three reasons of forming a Section 8 Company: objectives,- to attain 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 organisation which are of two kinds: – public and private . and there is no regulatory requirement for the public filing of accounts.
The basic differences are:
• The trust are basically governed by In
dian 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 are required under a Trust whereas a minimum of 2 under private company and 7 for public company is required.
• The trust deed has to be made on a non judicial 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 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 taken to form a
Section 8 Company
can take anywhere between 60-75 days.
• 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 are very less as compared to the company under section 8.
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