Not for Profit Society – Necessary requirement for opening a School in India – A Note.

To quote from the CBSE Bye – Laws this is what they need from an entity starting a school

“The Trust or Society/Management running the school should be of non-proprietary character.” – Page 6

“Private, unaided schools established by Societies registered under the Societies Registration Act 1860 of the Government of India or under Acts of the State Governments as educational, charitable or religious societies having non-proprietary character or by Trusts.” – Page 10.

So now there are couple of question which arises which we are seeking answers for;

Question 1: Is this the only way to start a school in India? If so, why?

Question 2: What is this “Non Proprietary” character for a society?

Question 3: How do you form a Society?

Question 4: What are the mandatory initial and recurring requirements which are required to be fulfilled so that a society can function smoothly ?

Question  5: What is the format of Non Proprietary Character Affidavit as required by the CBSE?

Let me try to answer these question to the best of my ability in the manner I have learnt over a period of time;

Question 1: Is this the only way to start a school in India? If so, why?

Answer: YES, this is the only way. You can either start a SOCIETY or a TRUST but mandatory requirement is it that they should be of Non Proprietary Character. This is because government is very wary of some unethical private players posturing as educators and exploiting this basic need of every child. By laying this ground rule, Government tries to discourage these forces as much as possible. Though things still might be happening under the garb of Non-Proprietary but blatant practices to an extent are neutralized by this law.

Question 2: What is this “Non Proprietary” character for a society?

Answer: Not for Profit or Non Proprietary means the members of the  managing committee of the society  in No Way can withdraw PROFIT coming out of the business of the society or the trust for their personal gain. The Profit simply explained in business parlance will be BOTTOM LINE. 

Money should be channelized within the ambit of society and its functional areas. Society’s profit should be used only for the development and betterment of the objectives and aims of the society.

Question 3: How do you form a Society ? Are there any Tax Advantages one gets by working as a Not for Profit Society?

Here this article on wikipedia is very helpful, I am copying some important lines from the wiki page – A Non Profit Organisation can be registered in India as a Society, under the Registrar of Societies or as a Trust, by making a Trust deed. 

Whether a trust, society or section-8 company, the Income Tax Act, 1961 gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry.

For an organisation to be termed as Charity it requires Income tax clearances under 12 A Clause of Income Tax Act. Section 2(15) of the Income Tax Act defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable.

The main instrument of any society is the memorandum of association and rules and regulations (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined.

The main instrument of any society is the memorandum of association and article of association.

Memorandum of association is the charter of a society. It is a document depicting and describing the objects of the its existence and its operations. However, article of association includes rules and regulations of the society under which it works.

A Society needs a minimum of seven managing committee members; there is no upper limit to the number of managing committee members. The Board of Management is in the form of a governing body or council or a managing or executive committee. The society has a Chairman, Treasurer, Secretary and ordinary members.  There will be some permanent memebers and some temporary members.

One applied for registration, the Registrar of Society will give the society a Registration Certificate.

 

Question 4: What are the mandatory initial and recurring requirements which are required to be fulfilled so that a society can function smoothly ?

There are three things in mandatory requirements which needs constant attention as long as society is in existence;

1) Audited Balance Sheets – Every society has to mandatory get its books audited by a qualified chartered accountant. The society then has to produce the balance sheet and audited results in front of Registrar of Society every year.

2) Minute Books – Every society has to maintain minutes book detailing various decisions and meetings which take part in course of time. Same shall has to be produced  in front of Registrar of Society every year.

3) Members Fee – Memebers have to give a certain amount as fee charged by the registrar of Society.

 

Question  5: What is the format of Non Proprietary Character Affidavit as required by the CBSE?

The format of this is not prescribed by CBSE, but you have to mention the name of the members of the society and the chairman has to take an oath saying none of them are related (Blood-line wise) to each other. In case some are related same needs to be mentioned in the affidavit. This has to get stamped a first degree magistrate or equal. These documents need to get scanned for online submission. Fill in all the information required, same can be done in piecemeal. Once you are satisfied with all the details. Submit your application. A rough format is attached here, please consult your lawyer before using the same Non Proprietary Format

In case you are wondering should you open a Scoiety or a a Trust.

Difference between Trust & Society

Basis of Difference Trust Society
Statute/Legislation Private trusts are governed by Indian Trust Act, 1882. Public charitable trusts do not have a national level governing law. Societies Registration Act, 1860
Minimum number of members Two Seven
Geographical area of activities All India (no need to mention this in the Trust Deed) A separate registration for All India level is required (8 members from different states required)
Nature of control One man control, i.e. Settler Democratic system. Decisions are made by voting. Power struggle may ensue.
Amendments Can easily be done via a supplementary trust deed Relatively more difficult. Both Memorandum of Association and Rules and Regulations need to be changed
Names Easily available A bit difficult to get the desired name
Bank a/c operation Controlled by one person, Settler Two persons, either President or Secretary and Treasurer
Office holders’ tenure Trustees generally hold office for the whole life Members hold office for a period of time and may stand for re-election
Winding-up Trust is generally irrevocable, Can not be wound-up. Can be wound up if 3/5th of the members so desire
Family members Can become trustees Registrar objects on family members becoming part of the Governing Body
Governed by Board of Trustees Governing Body which should be directors, governors, trustees etc
Main documents
  1. Trust Deed
  1. Memorandum Of Association
  2. Rules and Regulation
Objectives Can be general Have to be specific

This inför has been copied from http://keydifferences.com/difference-between-trust-and-society.html

FAQS

Our society comprises of members of my family. What do I do to make it of “Non Proprietary” nature?

Answer: Off all the members in a society majority i.e more than 50% cannot be related by blood. Also while declaring the members of the society in the affidavit the Chairman will have to declare the relationship among the members who all are related by blood line.

Hi, if you are looking for a Consultant to help you start a School or with any issue like Affiliations, Project Finance, School Management, Project Feasibility Studies, Project Report, Contact Abhiney Singh by filling the form below or calling or through WhatsApp on +91 70002 40006

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Abhiney Singh

Abhiney Singh

Managing Director at Brighton International School
I run a school called Brighton International School (www.brightoninternational.in).
I am also now a partner with a School consulting company which helps budding educators or investors start school or gain access to help related to school. The help could be in the form of Turnkey School Consultation, Detailed Project report, Project Finance, Business Plan consulting, Recruitment planning, Infrastructure consultation, Affiliation Consultation, Teacher’s Training, Academic and Curriculum Planning. I now have a decade of work experience. I strongly believe in improving every day and I have tremendous respect for people who pursue their dreams with undying passion and enthusiasm.
I have worked in Mumbai for about 6 years as a Marketing-Media professional which has helped me in shaping what I am today. I am Chemical Engineer with an MBA in Marketing.
You can know more about me at www.linkedin.com/in/abhineysingh

You can mail me on abhiney@brightoninternational.in or call me on +91 70002 40006. This number is also on watsapp.
Abhiney Singh
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