What’s the difference between section 25
and section 8 of the company’s act?
- Section 8 of the Companies Act, 2013, replaces Section 25 of the
earlier Companies Act, 1956.
- Key Differences Between Section 25 and Section 8 of the Companies
Act
Section 25 (1956) Section 8 (2013)
Legal Framework
Section 25 companies were Section 8 companies are
governed by the Companies specifically designed for non-profit
Act, 1956, which has since purposes with a broader scope for
been repealed. (Taken off) charitable activities.
Objective
Section 8 companies,
It was restrictive in nature and not however, are designed to be
so adaptable more adaptable in achieving
these objectives.
Dividend Distribution
Both Section 25 and Section 8 companies are prohibited from
distributing dividends to their members.
Any income generated must be reinvested to further their
charitable objectives.
Can a trust be transferred under section 8 of the company’s act?
- A trust cannot be directly transferred under Section 8 of the
Companies Act in India. However, a trust can be converted into a
Section 8 company, which involves a legal process to comply with
the requirements of the Companies Act. This conversion allows the
trust to operate as a non-profit entity with certain advantages.
Conversion of Trust to Section 8 Company
- Legal Framework: A trust can be converted into a Section 8
company under the Companies Act, 2013. This process involves
adhering to specific legal requirements and obtaining necessary
approvals.
- Membership Transfer: Upon conversion, the members of the trust
become shareholders of the Section 8 company.
- Non-Profit Status: The Section 8 company retains its non-profit
status, enabling it to continue its charitable activities
- Asset Transfer: The assets of the trust can be transferred to the
newly formed Section 8 company, but this may require compliance
with tax regulations and obtaining permissions from relevant
authorities.
-
Merger or Takeover of Trusts (Not explicitly governed under the
Indian Trusts Act, 1882)
There is no specific section in the Indian Trusts Act, 1882 that
provides for the "acquisition" of a trust
-But the law permits trust restructuring or amalgamation through
court or registrar approval, particularly under these routes:
A. For Public Charitable Trusts: These are governed by state
specific Public Trust ACT like Bombay Public Trust Act)
• You can approach the Charity Commissioner for approval to:
• Transfer assets from one trust to another.
• Merge two trusts with similar objectives
(Relevant Section (if in Maharashtra/Gujarat):
(Section 50 and 50-A of the Bombay Public Trusts Act, 1950 –
allows application to the Charity Commissioner for restructuring,
amalgamation, or transfer of property from one trust to another)
B. By Court Petition (All India):
If no specific state law applies, file a petition under:
• Section 34 of the Indian Trusts Act, 1882 – to seek
court direction on management, transfer of assets, or changes to
trust structure.
Procedure for Acquiring/Amalgamating
Another Trust ( optional)
- Procedure for Acquiring/Amalgamating Another Trust
1. Review Both Trust Deeds: Ensure that objectives are
compatible and merger/transfer is not barred.
2. Consent of Trustees and Beneficiaries: Get resolutions from
both trust boards (if applicable).
3. Draft Merger or Asset Transfer Agreement: Clearly outline
intent, assets, management, and continuity of objectives.
4. Seek Approval from Relevant Authority:
• Charity Commissioner (if public trust in Maharashtra/Gujarat).
• Civil Court under Section 34 or CPC Section 92 for others.
5. Execute Supplementary Trust Deeds: Amend trust deeds if
necessary.
6. Register Changes: With the Registrar of Trusts and update
PAN, bank, property, and FCRA (if foreign donations involved).
