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How to proceed with Trust Registration

Many times we might have come across the term “Trust” and “Trust Registration in our day to day life.  One fine day when you are having a good time with your family, suddenly you will hear the doorbell ringing. When you open the door a smiling group of ladies approach and say that they are coming from XYZ Trust and so on. So at that point of time, most of us just flash out a 50 rupee, 100 rupees or a currency of higher denomination to the ladies waiting outside for which we get a receipt for the amount paid. You must have also noticed a Trust name along with the amount and your name written on the receipt.

But have you ever tried to find out how this Trust is formed, or what is this Trust all about and so on? Most of us tend to ignore and do not give much attention to this concept. Did you ever imagine how difficult it is to form a trust or to register a trust, its rules, regulations, bylaws and so many other procedures related to it?

So let us have a preview like what a Trust is all about, its meaning, significance, and the procedures involved. According to the Indian Trust Act, a ‘trust’ is created when the person of the trust indicates with reasonable certainty by any words or acts:

  1. An intention on his/her part to create thereby a trust
  2. The purpose of the trust
  3. The beneficiary
  4. The trust property transferred to the trustee

To explain in simple ways, trust is the transfer of the property by the owner to someone else for the benefit of a third person, along with or, without himself or, a declaration by the owner to hold the property, not for him/her and another.

Trusts can be classified into 2 types:

  1. Public trust
  2. Private trust

A public trust is where beneficiaries include general public at large or a sizeable portion of it. It is also known as Non- Governmental Organization (NGO). It can be further subdivided into

  • Public charitable trust
  • Public religious trust

A private trust is the one whose beneficiaries are individuals or families. A private trust can be sub-categorized into;

  • Private specific trust- In this case beneficiaries and shares both are determined.
  • Where both or either of the beneficiaries and their shares are undetermined.

However, in some cases, a trust can be a blend of both public as well as a private. Such trusts are better known as Public-cum-Private Trusts. In case of such trusts, a part of their income is used to promote public welfare while the other part goes to an individual.

One need to follow the steps described below for trust registration.

  • Choose a name that is appropriate for your trust. This is the first basic step to be followed. While selecting a name take care the proposed name should not resemble any form of patronage by the Indian government or any state government. Moreover, it should not be under the restricted list of names as per the provisions of Emblems and Names Act, 1950. However, there is no restriction in using names that are already registered as a Trust in the registrar office. One can file a complaint with the higher authorities in case the registrar refuses to register your Trust under a given name.
  • Determine the Settler and the Trustees of the proposed Trust. There should be at least 2 Trustees and there is no limit on the maximum number. To become a Trustee no formal education qualification is required. A Trustee must be an Indian resident.
  • Prepare a Memorandum of Association and rules & regulations of your trust. This is better known as ‘Trust Deed’. This is very important because it serves as a legal evidence of your Trust’s existence. Some of the various clauses that a Trust Deed should contain are:
  1. Name clause
  2. Settler and Trustee clause
  • Registered Office clause
  1. Object clause and beneficiaries
  2. General Body Member clause
  • Prepare all the required documents at the time of submission. Trusts are unalterable unless mentioned in the trust deed. This means trust cannot be wound up.

Bylaws of the Trust:

Make it a point to mention each and every rule applicable to the trust. This also includes the section of the income tax act. To open a bank account clearly mention all the procedures and the conditions that should be followed. Proper procedures regarding changes, removal or addition of the trustees must be clearly notified. Without the inclusion of bylaws, the trust deed is incomplete. One might face issues in future without a proper trust deed.

The trust deed shall be prepared on a stamp paper whose value should be of the value of trust’s property. Consent of all the members is required whether in writing or orally for the purpose of the trust deed. After submitting the necessary papers one can visit the registrar’s office in a week’s time to receive the copy of the certificate of the trust deed.

There are certain requirements to register the Trust Deed which are as stated below:

  • Trust Deed has to be prepared on a stamp paper as per the requisite value.
  • 2 passport size photograph and self-attested copy of the identity proof of the settler.
  • Trust Deed should have the signature of the settler on all the pages.
  • Proof of the registered office address of the Trust must be attached with the Trust Deed.
  • Settler or Trustees can add more than one address as the Trust’s office address. This address shall be added as an additional administrative office in case they wish to open another branch of their trust.
  • Value of the Trust’s property must be mentioned in the Trust Deed. The property can be any movable or immovable asset.
  • The Trust Deed must contain all the objectives and goals of the Trust with respect to social welfare, child welfare, old age homes, protection of environment etc.
  • The Registrar will return the original registered copy of the Trust Deed and will retain the copy of the same.

Before going ahead with Trust registration one must have information about the fundamental concept behind a trust and a few terms related to it. Many individuals commit the mistake of duplicating the Trust deed which is a major blunder. It is best suggested to consult an expert when it comes to Trust registration.

Trust registration is the transferring of property and rights from a single owner to a number of people called as trustees in legal accordance. Trust Registration in India is not only for NGO, temples but also for education and sporting activities.

This blog is an attempt to clear all your queries and doubts with respect to trust registration. Hope this is useful.

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