What Is The Difference Between Section 8 Company And Trust?

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.