The document compares and contrasts trusts, societies, section 25 companies, and private limited companies across various areas such as permitted scope of activities, ownership, setting up process, compliance requirements, management control, and tax implications. Some key highlights: - Trusts can be created for any lawful purpose while societies can only be created for specific charitable/educational purposes. Section 25 companies and private limited companies can be set up for profit/non-profit activities. - Trusts and societies have trustees/members as owners, while companies have shareholders as owners. - Setting up a trust is simpler than other forms which require registrations with regulatory authorities. - Compliance requirements are less for trusts which do not

1. Areas of
Comparison
Trust
Society
Section 25 Company
Private Limited Company
Permitted Scope
of Activities
A trust may be created for any
lawful purpose. Generally it is
created for charitable,
educational or socially
beneficial activities .
A society can be created only
for literary, scientific, or
charitable purpose or for the
promotion of science,
literature, or the fine arts for
instruction, the diffusion of
useful knowledge, the diffusion
of political education, the
foundation or maintenance of
libraries or reading rooms for
members or public.
A section 25 company can be
registered as a limited company for
promoting commerce, art, science,
religion, charity or any other
useful purpose.
A Private Company can be
incorporated for any profit making
activity.
The responsibilities and
obligations of Settlor and
Trustee need to be clearly
defined in the Trust Deed.
The Company needs to apply its
profits if any or other income in
promoting its objects. The Company
cannot distribute any dividend to its
members.
Ownership
Trustees
Members
Shareholders
Shareholders
Setting up
Process
For Public Trust, registration
required with Deputy Charity
Commissioner of the region.
The process takes between two
to three months.
7 or more persons subscribe
their names to Memorandum of
Association and file the same
and certified copies of the same
with the Registrar of Joint Stock
Companies and the fees.
A section 25 company needs
registration under Indian Companies
Act with the Regional Director.
A private limited company needs
registration under Companies Act
with the Registrar of Companies
The incorporation process takes
approximately four to five weeks.
The incorporation process takes
between three to four months.
For Private discretionary trust
no resitrationsis required, such
trust can be created by
execution of Trust Deed.
Liability
Unlimited
Limited
Limited
Limited
Overseas
Borrowings
Not Permissible as per ECB
Not Permissible as per ECB
Not Permissible as per ECB
Permissible
guidelines
Compliance
Requirements
Trust does not have any
statutorily defined guidelines to
be followed for its day to day
operations
List of the names, addresses
and occupations of the
governors, council, directors,
committee, or other governing
body must be filed annually with
the registrar of joint Stock
Companies to be filed every
year either on or before 14th
days after the AGM or in the
month of January.
Annual accounts and annual return
of the company to be filed annually
with RoC
Maintenance of various secretarial
records including inter-alia minutes
books for board meeting, general
meeting and registers of various
directors, allotment of shares and
regular filing with RoC.
Same as applicable in Section 25
company.
subject
to
ECB

2. Areas of
Comparison
Trust
Society
Section 25 Company
Private Limited Company
Alteration of
Objects
Difficulty in modifying objects
and impossible in the event of
original settlers being
unavailable or unwilling.
Objects can be modified with
the approval of 3/5ths of the
members
Objects can be modified anytime
subject to approval of Central Govt
Can be modified in accordance
with procedure prescribed.
Management
Control
Trustees as appointed under the
Trust deed.
Governing Council as elected
by the society members.
Directors as appointed by the
shareholders.
Directors as appointed by the
shareholders.
Operational
Control
Trustees in line with the Trust
Deed
Governing councils /
directors / committee
Directors in line with the MOA and
AOA
Directors in line with the MOA
and AOA
Members
Participation
Trustees have the final say
As per the MOA of the
society.
All the rights of the shareholders as
per the Companies Act and MOA,
ordinary resolution, special
resolution etc.
All the rights of the shareholders
as per the Companies Act and
MOA, ordinary resolution,
special resolution etc.
Termination
The trust can be dissolved by
Settlor
Can be dissolved by 3/5th of
the members.
Winding up is a cumbersome and
time consuming process which can
take anywhere between 10-12
months
Same as applicable in Section
25 company.
Funding
(Foreign
Contribution
Regulation
Act)
If grants are received directly by
the Trust from overseas,
approval of Ministry of Home
Affairs under Foreign
Contribution Regulation Act is
required which is a time
consuming process and can
take up to four to six months.
In case of a foreign trustee,
credibility of the foreign trustee
needs to be established before
the regulator.
If grants are received directly
by the Society from
overseas, approval of
Ministry of Home Affairs
under Foreign Contribution
Regulation Act is required
which is a time consuming
process and can take up to
four to six months.
If grants are received directly by the
Company from overseas, approval
of Ministry of Home Affairs under
Foreign Contribution Regulation Act
is required which is a time
consuming process and can take up
to four to six months.
Subject to Foreign Exchange
laws
Repatriation of
funds
Profits to be utilized for the
furtherance of the trust
objectives and for beneficiaries
and any form of repatriation
would require RBI approval.
Funds to be utilized for the
furtherance of society's
objectives only and in case of
dissolution to be transferred
to other society –
Repatriation not possible.
Prohibition on distribution of
dividend – so repatriation not
possible
Funds are freely repatriable in
form of dividends or on
liquidation subject to provisions
of Companies Act and payment
of applicable taxes.

3. Areas of
Comparison
Trust
Society
Section 25 Company
Private Limited Company
Exchange
Control/ FDI
policy
Where an Indian trust has either
a foreign trustee or a foreign
beneficiary, provisions of
exchange control regulations will
apply
N/A
Ownership of stock in the company
would be governed by the FDI policy
of the Government of India
Same as applicable in Section 25
company.
In case of foreign trustee
In case the trust has foreign
trustee certain assets which are
statutorily required to be
registered, such as immovable
properties, would be registered in
name of trustee. This shall entail
prior approval of Reserve Bank of
India (RBI), which will not be
possible as a non resident in not
permitted to own immovable
property in India.
In case of foreign beneficiary
In case of a foreign beneficiary
prior RBI approval would need to
be obtained on account of the
ability to make remittances in
future and distribution on
dissolution of the trust. In our
experience, obtaining such an
approval is again extremely
difficult
In summary, if a trust structure is
to be set up, there should be no
foreign beneficiary. In case there
are foreign trustees, then the
trust cannot own immovable
property.
As per the FDI policy, the following
activities fall under automatic route,
i.e. no Government approval is
required
-educational research
-publishing of books (not magazines
& periodicals)
-tendering scholarships
-education (AICTE and University
Grants Commission (UGC)
guidelines, prohibit a company form
of entity for setting up a college,
university or educational institute.

4. Areas of
Comparison
Trust
Society
Section 25 Company
Private Limited Company
Transfer of
Ownership
Not permissible
Permissible with appointment
of new members and
resigning of old members
and approved by 3/5ths
members resolution
By transfer of shares
By transfer of shares
Tax
Implications in
hands of entity
running the
institution
Tax exemption can be sought
u/s 10(23C) of IT Act after
obtaining requisite approvals
Same as Trust
Same as Trust
Profits earned from running the
institution would be taxable as in
hands of the company @
33.99%
[Exemption available to
university or educational
institution existing solely for
educational purposes and not
for purposes of profit]
Tax exemption not available as
activities would be construed as
‘for purposes of profit’
Entity to obtain approval for
eligibility u/s 80G of IT Act.
Tax
Implications in
hands of entity
providing
funds
50% of the amount of donations
eligible for deduction u/s 80G of
the IT Act
Same as Trust
50% of the amount of donations
eligible for deduction u/s 80G of the
IT Act unless contributions in the
nature of ‘share capital’