If you are looking to start a School in India, the first and foremost thing is to form a TRUST, SOCIETY or a SECTION 8 Company. The most important element which one should remember is the entity thus formed has to be Not-For-Profit and Non- Proprietary in nature.
What is Not – For – Profit?
No portion of the profits, other income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons who, at any time are, or have been, members of the company or to any one or more of them or to any persons claiming through any one or more of them.
No remuneration or other benefit in money or money’s worth shall be given by the company to any of its members, whether officers or members of the company or not, except payment of out-of-pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company.
Nothing in this clause shall prevent the payment by the company in good faith of prudent remuneration to any of its officers or servants (not being members) or to any other person (not being member), in return for any services actually rendered to the society/Trust/ Sec 8 company;.
That the school is run as a community service and not as a business and that commercialization does not take place in the school in any shape whatsoever.
Not for Profit 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. 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/Trust/ Sec 8.
The Society / Trust / Section 8 company running the School should not be related to each other via blood line. It means your siblings and parents or children. The majority of the members of Society / Trust / Section 8 should be unrelated to each other.
What is the difference between Trust / Society & Section 8 Company? Which one is better?
What is the procedure for constitution & registration of Trust /Society or a section 8 Compnay?
TRUST DEED: Trusts are registered using a document called TRUST DEED. This document contains all the information about the Trust and is printed/written/typed on plain A4 size papers.
Attach a Rs. 100 Non-Judicial stamp paper (which you can get from a notary). All the Trustees and witnesses will have to give thumb impressions and signatures on these papers. All in all, you will need help of a notary to prepare the papers.
For registering a trust you need minimum two trustees (i.e. one settler and another person). You can decide the maximum number of trustees and this number must be mentioned in the trust deed. All the trustees together are called Board of Trustees. This board collectively governs the trust.
Trustees are usually life-long members or their tenure is specified in the deed. Electoral process is not involved in the appointment of trustees.
Board of Trustees can also have various designations for trustees. Common designations are Chairperson and Managing Trustee.
An approximate declaration of the annual income and expenditure of the Company for next three years mentioning the source of income and modes of expenditure.
The declaration by each of the persons making the application in Form No. INC-15.
At least once in the vernacular newspaper of the district in which the registered office of the Company is situated and also in an English newspaper circulating in the district.
Create MOA (Memorandum of Association) and BYE LAWS: Any seven persons who subscribe to a Memorandum of Association (MOA) can register a society.
The details of the first governing body to be constituted on registration.
Procedure for conducting annual general body meetings, etc.
Membership: 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.
Engage with Registrar of Society: Submit the relevant official documents for registration of the Trust / Society to the Assistant / Deputy Charities Commissioner of the area / district, where the office of the Trust / Society is located.
Telengana D-Block, 4th Floor, Telangana Secretariat, Hyderabad-500022.
Is it mandatory to form a Trust/Society/Section 8 Company?
Yes it is Mandatory to have Trust/Society/Section 8 Company in India.
Who can be members, Trustees, directors of Society / Trust / Section – 8 company? Can the members of the same family become members of the Trust? Can the Blood Relations form a Trust, Society etc?
The husband, wife, son, daughter singly or jointly can be the members of the Trust provided that they do not vest control of the Trust. In other words, if the husband as well as the wife (2trustees), are the members of the Trust, then the Trust should have another 3 to 4 trustees who are not members of the same family, to prevent the husband-wife team vesting the control of the trust. Thus the total membership of the Trust in this case will have to be enlarged to 5 or 6 Trustees, out of which 3 to 4 Trustees should not be from the same family. Likewise, in case a trust is constituted with husband, wife and son / daughter (three trustees), then the Trust will have to have another 4 to 5 trustees, who are not the members of the same family.
My family owns a plot of land with a residential building in a town in Bihar. We have been approached by an individual for opening a school on the plot. We want to enter into a partnership with him for running the school.
Our experience in the field. The individual has experience of establishing a school of 500+ students on the outskirts of the same town. We ourselves have been running a school in our native village for the past eight years.
This is the first ocassion where we are thinking of entering a partnership model.
Please advise on what all should be consider before deciding on the avenue.
Dear Amit, I think we discussed this over the phone. Let me know if you need more sugestions on this.
A foreign investor is eager to invest in a school project in India. But since a school is run by a trust , how can we accomdate him & how will he be able to draw his share of profit ?