A society may be defined as a company or an association of persons united together by mutual consent to deliberate, determine and act jointly for same common purpose. Minimum seven persons, eligible to enter into a contract, can form society. When an NGO is constituted as a society, it is required to be registered under the Societies Registration Act, 1860.
Societies are governed by the Societies Registration Act 1860, which is an all-India Act. Many states, however, have variants on the Act.
Societies are similar in character to trusts, although there a few essential differences. While only two individuals are required to form a trust, a minimum of seven individuals are required to form a society. The applicants must register the society with the state Registrar of Societies having jurisdiction in order to be eligible to apply for tax-exempt status. A registration application includes the society's memorandum of association and rules and regulations. In general, Indian citizens serve as members of the managing committee or governing council of societies, although there is no prohibition in the Societies Registration Act against non-natural legal persons or foreigners serving in this capacity.
According to section 20 of the Act, the types of societies that may be registered under the Act include, but are not limited to, the following:
The chief advantage of forming a society are that it gives a corporate appearance to the organization, and provides greater flexibility as it is easier to amend the memorandum and bye laws of the society than in case of trust, terms of which are strictly manifested in the trust deed.
- Charitable societies;
- Societies established for the promotion of science, literature, or the fine arts,
- For education; and
- Public art museums and galleries, and certain other types of museums.
The governance of societies also differs from that of trusts; societies are usually managed by a governing council or managing committee, whereas trusts are governed by their trustees.
Individuals or institutions or both may be members of a society. The general body of members delegates the management of day-to-day affairs to the managing committee, which is usually elected by the membership. Members of the general body of the society have voting rights and can demand the submission of accounts and the annual report of the society for inspection. Members of the managing committee may hold office for such period of time as may be specified under the bylaws of the society.Societies, unlike trusts, must file annually, with the Register of Societies, a list of the names, addresses and occupations of their managing committee members. Furthermore, in a society, all property is held in the name of the society, whereas all of the property of a trust legally vests in the trustees.
Unlike trusts, societies may be dissolved. Dissolution must be approved by at least three-fifths of the society's members. Upon dissolution, and after settlement of all debts and liabilities, the funds and property of the society may not be distributed among the members of the society. Rather, the remaining funds and property must be given or transferred to some other society, preferably one with similar objects as the dissolved entity.
However, formation of a society requires more procedural formalities than in case of a trust.
Procedures of Formation: A Society for its inception requires:-
I. Memorandum of Association, and
II. Rules and Regulations
For the purpose of registration, following documents are required to be filed with the registrar of Societies:
a) Covering letter requesting for registration stating in the body of the letter various documents annexed to it. The letter is to be signed by all the subscribers to the memorandum or by a person duly authorised by all of them to sign on their behalf.
b) Memorandum of Association, in duplicate neatly typed and pages serially numbered.
c) Rules and Regulations/Bye-Laws, in duplicate, certified by at least three members of the governing body.
d) An affidavit of the president/Secretary of the society, on a non-judicial stamp paper of prescribed value, stating the relationship between the subscribers, duly attested by an oath commissioner, notary public or 1st class magistrate.
e) Documentary proof such as house tax receipt, rent receipt in respect of premises shown as registered office of the society or no objection certificate from the landlord of the premises.
f) An authority duly signed by all members of the managing committee.
g) A declaration by the members of the managing committee that the funds of the society shall be used only for the purpose of furthering the aims and objects of the society.