Legal Requirements when starting a Social Venture in India
NGO is committed not to make any profit from the business activities it is engaged with and all profit is to be utilized for improving the lives of people engaged. Whereas a social enterprise is a model where the focus is increasing profits from business activities but without a negative impact on society and for increasing good social, behavioral, economic, and environmental impacts.
The Law Provisions: NGOs are registered under the Indian Trust Act, 1992; Societies registration act 1860 or state derivative of it if they're in-state; or under Sec 8 of companies act, 2013. Whereas social enterprise can be registered as another section also i.e. as producer company or service provider company etc.
Why registration? A registered entity naturally gains the legal status and becomes accountable for the funds received in more ethical, social, and legal terms.
Registration of an NGO is necessary to seek tax exemption from the Income Tax Authority.
Modes of registration: as stated above there are three popular modes of registration as under:
1. Trust: It is a legal entity created by the “trustor” or “settlor” who transfers the assets to the second party or “trustee” for the benefit of the third party or “beneficiary”. Trusts are formed to help and support the deprived sections of society. Any group of individuals can register a trust and in India, as such there are no specific laws to govern the public trust, however, some states like Maharashtra and Tamil Nadu have their own Public Trust Act.
2. Societies: A society is an entity that can be created by a group of individuals united in their cause for promoting science, arts, literature, social welfare, and useful information. In addition, societies work for creating military orphan funds, maintaining public museums and libraries. Societies are governed by the Societies Registration Act, 1860. They must be registered with the respective state Registrar of Societies to be eligible for tax exemption.
3. Section 8 Companies: A Section 8 company is similar to trust and society. The objectives of a Section 8 Company are to promote arts, science, commerce, sports, social welfare, religion, charity, and environmental protection. They are registered under the Companies Act, 2013 for charitable purposes. They have better credibility among government bodies, donors, and other stakeholders.
The Process of Registration: In India, anybody is free to do social activities without forming an association or organization. But when an individual wants to create a group that involves volunteers, activities, and resources, it becomes important to have proper management in place. To run such companies, trusts, and Societies in the correct manner, a certain set of rules need to be followed.
Essential documents for online Trust registration: A bill of electricity or water stating the address that needs to be registered. The identity proof of at least two members of the company. The proof can be Voter ID, Driving License, Passport, Aadhar Card.
Once the payment for the registration is done, it takes about 8 to 10 days for online registration to be completed under the Indian Trust Act — 1882. Before the deed becomes valid throughout the country, the settler has to deliver a presentation at the Registrar’s office.
Society Registration or under the section 8: Details like name of the society address proof of the office, identity proof of all members which may be driving License, copy of Passport, Voter ID, or Aadhar card with 2 copies of the draft Memorandum of Association and By-laws of the society shall be required.
Contributed By- Siddhart Jangid, Content Writer @ Mitti Ke Rang
At Mitti Ke Rang, we started with a COVID-19 community support fundraising, as an emergency response to provide a safety net to families. This will help them survive in the lockdown period. We aim to directly support these families by providing a minimum wage, through transferring the same into their accounts or partner with local NGO, Organisation, Fellow, or a Volunteer and support them with groceries.
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