INTRODUCTION:

Any seven or more persons associated for any literary, scientific, or charitable purpose, or for any such purpose may, by subscribing their names to a memorandum of association, and filing the same with Registrar of Joint-stock Companies can form themselves into a society under the Societies Registration Act, 1860. Charitable societies, the military orphan, societies established for the promotion of science, literature, or the fine arts for instruction, the diffusion of useful knowledge etc . are some of the kinds of societies which can be registered under the Societies Registration Act,1860.

PROCEDURE OF REGISTRATION:

STEP 1: Selection of a name of the society is the first step in an incorporation of a society.  While choosing a name for the society, it is important to remember that as per Societies Registration Act, 1860, similar or identical name of an existing registered society is not permitted. Further the proposed name for the society must not suggest patronage of the government of India or any State government or attract the provisions Emblems and Names Act, 1950.

For Examples: (i) ‘A’ wants to register a society name ‘ Jawahar Lal CGHS ltd.’. ‘B’ opposed it because he has already registered a society identical with this name. If A still goes with it then B has the right to oppose A’s society registration under Societies Registration Act or Trade Marks Act, 1999.

(ii) Srijan applied for the registration of a society with a name bearing ‘Consumer Society of Government of India’. This name is not registrable because this name is depicting the patronage of government of India and hence giving false impression to the people that this society is supported and acknowledged by the Government of India which is strictly prohibited under Schedule attached to Emblems and Names Act.

Step 2: Preparation of Memorandum of Association and Rules & Regulations.

The memorandum of association and rules & regulations of the society must then be signed by each of the founding members, witnessed by an Oath Commissioner, Notary Public, Gazetted Officer, Advocate, Chartered Accountant or Magistrate First Class with their official stamp and complete address.

These two can be the written/typed/printed documents on plain paper. There are minimum of seven people required to form a society. These members have various designations that can be decided among themselves. These members are collectively called the governing body which controls the functioning of the society. All of these members are elected for specific period and can be re-elected through elections in which members of governing body take part.

Memorandum of Association includes various Clauses as follows:

  • Name Clause
  • Registered Office Clause
  • Object Clause
  • General Body Member Clause.

Table containing Names, Address and Occupation of all the Members along with their signatures should be formulated under the memorandum of association.

Rules and Regulations include the following Clauses:

  • Membership Clause
  • Subscription Clause
  • Meeting Clause
  • Committee/ Governing Body Clause
  • Auditor
  • Legal Procedure
  • Dissolution

The above Rules & Regulations (By-Laws) are to be certified by three office bearers at the end of each page. Three Officials may be the Chairman, President and Vice President. It is also experienced that the object clause should be properly & clearly worded so as to cover to help needy and deserving people for education, medical, relief to be given etc. And there are always chances that the registrar of societies will add some words or delete some words from the various object clauses.

A Sample ‘Memorandum of Association’ and ‘Rules and Regulations’ can be found here for your reference.

It is also observed that the Registrar of Societies require the quorum of 3/5 of members for meeting of members for meeting of managing committees, general Body Meeting, and extra ordinary general body meeting and the quorum for Requisition meeting minimum 1/5 members must be present. Similarly in the clause of dissolution of the society, the majority of 3/5 of the members present can take the decision of dissolution.

Step 3: Other documents required:

  • Covering Letter requesting registration of the society, signed by all founding member
  • Certified Copy of Duly Passed Resolution for Registration of Society
  • Minutes of the Meeting.
  • Declaration by the President of the Society.
  • Address Proof

Step 4: Submission of documents and registration

The Memorandum of Association and Rules and Regulations must then be filed with the concerned registrar of societies in the state with the fees of fifty rupees or other fees as specified by State Government time to time. If the Registrar is satisfied with the terms and conditions and the documents filed, he would certify to deem the society to be registered. Generally the time required for registering a society is one month.

 

ADVANTAGES OF INCORPORATING A SOCIETY:

There are several advantages of becoming an incorporated society:

  • A society becomes a separate legal entity once incorporated.
  • An incorporated society can lease, rent, buy and sell property, borrow money and enter contracts in its own name.  No member of the society can have personal rights or interests in any of the assets of the society.
  • An incorporated society will continue as a separate entity even though its membership changes.
  • Members will not be personally liable for the debts, contracts or other obligations of the society unless:
    • The debts or obligations are incurred from activities undertaken to obtain money for pecuniary gain (profit), in which case every member involved will be personally liable for those debts or obligations; or
    • The debts and obligations are incurred through unlawful activities, in which case every member involved will be personally liable for those debts or obligations
  • Because the rules governing the incorporated society must meet the minimum requirements set out in the Incorporated Societies Act 1908, members can be assured that there will be certainty to the way the society is run.
  • An incorporated society may be entitled to an income tax exemption.

DISADVANTAGES OF INCORPORATING A SOCIETY:

  • Tax exemption extended to societies may apply to public trusts only to the extent the Income Tax department accepts their activities as being charitable.
  • As a charitable institutional form, in essence inappropriate for the for-profit, financially sustainable strategic goal of finance operations;
  • No system of equity investment or ownership, thereby, making it less attractive for commercial investors interested in microfinance;
  • Commercial investors generally regard the investments in such entities risky primarily on account of their lack of professionalism and managerial practices and are, therefore, reluctant to commit large volumes of funds to such NGOs;
  • In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organizations registered under the Societies Registration Act and the Trust Act is considered unincorporated bodies. Therefore, according to the law, they are not even allowed to collect savings from their clients; and
  • Also vulnerable to the implication under the money lenders (prevention of usurious interest rates) acts of various state governments.