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A society is an association of persons united together by mutual consent to deliberate, determine and act jointly for some common purpose. Societies are usually registered for promotion of charitable activities like education, art, religion, culture, music, sports, etc., In India,

The Societies Registration Act, 1860 lays down the procedure for society registration and operation in India. The Act has been adopted by most of the State Governments with/without modifications as considered by the respective State Governments. According to Section 20 of the Societies Registration Act, 1860, societies can be formed for the following purposes: (i) Charitable societies,

(ii) the military orphan funds or societies established at the several presidencies of India,

(iii) societies established for the promotion of science, literature, or the fine arts for instruction, the diffusion of useful knowledge,

(iv) The diffusion of political education,

(v) the foundation or maintenance of libraries or reading-rooms for general use among the members or open to the public

(vi) public museums and galleries of paintings and other works of art, collections of natural history, mechanical and philosophical inventions, instruments, or designs. Besides these purposes, the respective State Governments may provide for any other objects by their legislations.

Advantages of Society

• The process of formation and registration is simple.

• Record-keeping requirements are minimum and compliance with regulations is easy.

• Cost of compliance is low.

• Least possibility of interference by the regulator.

• Exemption from tax due to charitable nature of operations.

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.

• Since such institutions are of charitable nature, it is an inappropriate form of a commercial venture;

• The concept of equity investment or ownership is virtually absent; Hence, it is not attractive for commercial investors interested in microfinance;

• Commercial investors regard the investments in such entities as risky mainly on account of their lack of professionalism and managerial practices and political leanings( in some cases) and are, therefore, reluctant to provide large scale funding to such bodies;

• 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 are considered unincorporated bodies. Hence, legally speaking, they are not allowed to collect savings from their clients; and

• It is vulnerable to the implication under the Money Lenders Acts s (prevention of usurious interest rates) of various State Governments.

Consequences of Registration / Non-Registration of a Society

The Societies Registration Act, 1860 lays down procedure for registration of societies for various bonafide purposes. The registration gives the society a legal status and is essential for :

• obtaining registration and approvals under Income Tax Act;

• lawful vesting of property in the societies;

• provides authenticity and recognition to the society before all authorities and the world at large; and

• for opening bank accounts and transaction of business.

When the society is registered, it and its members become bound to the same extent, as if each member had signed the memorandum. Once registered under the Societies Registration Act, the society must restrict its activities to the objects contained in its Memorandum. A society registered under the Act enjoys the status of a legal entity apart from the members constituting it. A society so registered is a legal entity/person similar to an individual but with no physical existence. As such it can acquire and hold property and can sue and be sued in its own name. The society should be registered under the Act to acquire the status of juridical person. In the absence of registration, all the trustees in charge of the fund have alone a legal status and the society has no legal status, and, therefore, it cannot sue and be sued. If a society is not registered, it may exist in fact and theory, but not in the eyes of law. If benefits are to be claimed, the registration of society under the Act us required. An unregistered society cannot claim benefits under the Income-tax act.


Gayatri Dhote

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