Forming a Trust / Society / Section 8 company

Formation of Section 8 Company, Trust, Society

Formation of Section 8 Company, Trust, Society, Schools India

Q.1 Can an individual start a School without forming a Trust/Society/ Section 8 Company?

The existing norms stipulate that educational Institutions must be run as service to the community. Accordingly, the opening of new schools in the private sector and subsequent affiliation with State Education Board / CBSE /CISCE is permissible only if they are established by a registered Welfare / Charities / Educational Trust or Society. Therefore, any individual/ organization/association/society willing to open a new school, requiring recognition of the State Government and affiliation with any State / Central Board will have to constitute a Non-Proprietary Trust / Society, duly registered under Indian Trust Act-1882 or Society Registration Act – 1860. Now CBSE also permits Companies registered under Sec 8 (Section 25 companies are called as Section 8 companies as per the Companies’ Act 2013) to establish schools. Details are available with LIFE EDUCARE PVT. LTD.

Q.2 What is the procedure for constitution & registration of Trust /Society?

Some of the salient points for the constitution/registration of the Trust / Society are given below: –

  1. a) Finalize the name of Trust / Society and fix the official location for operation of the Trust / Society.
  2. b) Finalize the name of the chairman & another minimum of two members of the Trust or seven in case of Society. The members of the Trust should not be blood-related to each other to ensure the proprietary character of the Trust.
  3. c) Obtain the electricity connection and landline telephone connection and open a bank account in the name of the Trust / Society.
  4. d) Submit the relevant official documents for registration of the Trust / Society to the Assistant / Deputy Charities Commissioner of the area/district, where the office of the Trust / Society is located.
  5. e) If required, seek local assistance from any legal / non-legal person experienced in the registration of the Trust / Society.
  6. f) Apply for Income Tax exemptions under various sections, including 80 G and 12 A.

Q.3 How many minimum members are required to form a Trust/Society?

A Trust can be formed and registered with a minimum of 03 members and a maximum of 21 members. In the case of Society, a minimum of 7 members is required.

Q.4 What is the kind of Trust/Society required for a school project? What are the conditions put by CBSE / ICSE to form a trust?

Any Religious / Welfare / Educational Trust or Society can set-up Institutions for school / professional/medical / engineering education for service to the society, provided this aim has been mentioned in the Trust Deed or Society bye-laws. The Trust should be of a Non- proprietary character so that it does not vest control in a single individual or members of a family.

Q.5 Is it necessary to form a Trust/Society?

Yes, it is absolutely necessary to form a Trust for setting up a School. As per CBSE / CISCE bye-laws, the schools administered and managed by a registered Trust/society are only eligible for affiliation with these Boards. Of late, CBSE also permits Companies registered under Sec 8 (Section 25 companies are called as Section 8 companies as per the Companies’ Act 2013)

Details are available with LIFE EDUCARE PVT. LTD.

Q.6 What is the purpose of forming a Trust/Society rather than running a school by an individual?

As per the rules in force, no part of the income accrued from the school shall be diverted to any individual in the Trust. The Trust / Society has to ensure that the saving after meeting all the recurring expenditure in the school shall be utilized for providing additional facilities/infrastructure in the school. Thus commercialization of education can be avoided if the schools are managed/administered by the registered Trust / Society.

Q.7 i) Can the members of the same family become members of the Trust?

  1. ii) Can the Blood Relations form a Trust?

The husband, wife, son, daughter singly or jointly can be the members of the Trust provided that they do not vest control of the Trust. In other words, if the husband as well as the wife (2trustees), are the members of the Trust, then the Trust should have another 3 to 4 trustees who are not members of the same family, to prevent the husband-wife team vesting the control of the trust. Thus the total membership of the Trust, in this case, will have to be enlarged to 5 or 6 Trustees, out of which 3 to 4 Trustees should not be from the same family. Likewise, in case a trust is constituted with husband, wife and son/daughter (three trustees), then the Trust will have to have another 4 to 5 trustees, who are not the members of the same family.

LIFE EDUCARE helps prospective educational institution form Section 8 companies, Society & Trust. If you are looking to get consultancy to help you kickstart your project, get in touch with us.

 

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