Societies Registration Act, 1860 is a central act for registering not-for-profit organizations. Almost all the states in India have adopted (with modifications, if any) the central Act for creating state level authorities for registering and supervising various types of not-for-profit entities. According to the act, any seven persons who subscribe to a Memorandum of Association (MOA) can register a society. The Memorandum should include the names of the society, its objectives, the names, addresses and occupations of those members subscribing to it as well as the first governing body to be constituted on registration. The MOA should be accompanied by the Rules and Regulations- this should include details such as the procedure for enrolling and removing various categories of members, procedure of forming the governing body, conduct of meetings, election and removal of office bearers, procedure for conducting annual general body meetings, etc. The membership of the society may be kept open (or by invitation) to anybody who subscribes to its aims and objectives, for which a fee may be charged. Although the society can sue and can be sued, the liability of the members is limited, as no judgment can be enforced against the members’ private assets. The society has a perpetual existence and common seal, and can sue or be sued in the name of the office bearer as prescribed under its rules (sec.6). This enables its effective participation in public life
In order to ensure compliance with the purpose and byelaws or memorandum of association, democratic process is provided by allowing the general body meeting of members to decide the composition of the governing body and control their acts through deliberations in the meeting (sec.12&15). Alteration, extension, or abridgement of purpose of the association or any decision on amalgamation can be effected when the proposition of such measure made by the governing body is approved by the votes of three-fifths of the members present in the special meeting convened for this purpose with due notice (sec.12). For dissolution of the society also, similar approval is required (sec.13). All the documents filed by the society with the Registrar are open to inspection by any person (sec.17). This enables transparency and democratic control. Members guilty of offences against the property of the society are punishable with imprisonment or fine (sec.10).
While the Central Act has abstained from providing for extensive governmental control, except routine matters of filing annual statements, many of the state legislations have gone for widespread governmental controls to deal with abuses, malfeasance and nonfeasance of societies. The legal measures include: state’s power of enquiry, investigation and surcharge: cancellation of registration and consequent dissolution of societies; super session of governing body; appointment of administrator; dissolution; and removal of defunct societies. The policies of state legislations vary from one to another in adopting these measures. Under section 25 of the Karnataka Act and section 32 of the Madhya Pradesh Act, the Registrar on his own motion, and on the application of the majority of the members of the governing body or of not less than one-third of the members of the society, can hold or authorize an enquiry into the constitution, working and financial condition of the society.
What are the Advantages of Society?
- Simple process of registration.
- Simple record-keeping and even simpler regulations.
- Low possibility of interference by the regulator.
- Exemption from tax due to charitable nature of operations.
What are the Disadvantages of 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. Organisations 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.
Documents required for Society
- Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies)
- Memorandum of association and rules and regulations
- Consent letters of all the members of the managing committee
- Authority letter duly signed by all the members of the managing committee
- An affidavit sworn by the president or secretary of the society on non-judicial stamp paper of Rs.20-/, together with a court fee stamp
- A declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.