Rules and trust deeds of charitable trusts
The Charitable Trusts Act 1957 requires every charitable trust to provide the Registrar of Incorporated Societies with a copy of the documents that show the general purposes of the trustees or society. In the case of a society applying for incorporation as a charitable trust, they must also provide a copy of the document that sets out the constitution of the society.
• The terms 'trust deed' and 'rules' are used to describe the 'constitutional document' that sets out how the board is to operate and how the trust property is to be administered.
• It is common for trustees as a board to be governed by a trust deed and societies as boards to be governed by a constitution or a set of rules. These documents need to be registered with the Registrar of Incorporated Societies.
• There must be a clear intention to devote property to a charitable purpose. The property must be clearly defined and the purpose must be of a public nature. That is, for the benefit of the community or a section of the community.
• The purpose of the trust must either comply with the meaning of the term 'charitable' as defined in the Charitable Trusts Act 1957 or be religious or educational in character.
• The Charitable Trusts Act 1957 does not prescribe the format or what needs to be included in a trust deed or a set of rules.
WHAT IS CONTAINED IN A TRUST DEED OR SET OF RULES?
A trust deed or set of rules should contain the following information (you may need to include additional paragraphs depending on your circumstances):
• The name of the board.
• The purpose of the trust.
• The make-up of the board, including the number of trustees or board members and how they are appointed, how long they serve and how they can be removed.
• How the property of the trust is to be controlled and managed by the board.
• The powers and duties of the trustees.
• How the funds and property of the trust will be applied.
• How meetings of the board are to be held including quorum numbers and notice of meetings.
• How the financial affairs are to be managed such as the banking of money and the preparation of financial accounts.
• The use of a common seal.
• How the trust deed or rules of the organisation may be altered.
• How the distribution of surplus assets on winding up or dissolution will occur.
HOW TO DRAFT A TRUST DEED OR SET OF RULES
It is always important that legal documents are properly prepared. If they are unclear or ambiguous, problems could arise later that could be expensive to solve, as the documents will need to be varied or possibly have to be referred to the High Court.
It is therefore important that intending applicants discuss what is proposed with their solicitor, as there is a lot of law on what is in fact 'charitable' and there are restrictions on the names that can be given to a Board.
It would be helpful to a solicitor if you prepare a summary with:
• what is intended
• who is to benefit
• what the initial trust property will be and
• the names and addresses of all the people involved.
Involving your solicitor at the start will help to ensure that the trust document is clear and easily understood - which in turn means the application for incorporation will be in order and that the future administration of the board will run as smoothly as possible.
Deeds of trust are likely to have a lot of administrative detail aside from expressing the charitable purpose, including
• how trustees are appointed and removed
• how many there are to be
• how they are to make decisions etc.
The Charitable Trusts Act 1957 does not prescribe the format or content for trusts or rules.
If a trust document does not have these details, as would happen with a trust created by a will for example, the trustees would have to decide on their procedures at their first meeting. At the first meeting of a board, it would have to make a number of decisions including making a resolution to open a bank account and adopting the common seal among other matters.
When drafting a trust deed or set of rules it can be very helpful to read the deeds or rules of existing organisations with a similar purpose to yours. It is free to search the registered documents of existing incorporated charitable trusts.
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Application for Registration :
The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.
After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp of Rs.2/- to the form and pay a very nominal registration fee which may range from Rs.3/- to Rs.25/-, depending on the value of the trust property.
The application form should be signed by the applicant before the regional officer or superintendent of the regional office of the charity commissioner or a notary. The application form should be submitted, together with a copy of the trust deed.
Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.
According to section 20 of the Societies Registration Act, 1860, the following societies can be registered under the Act: ‘charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.’
Legislation : Societies are registered under the Societies Registration Act, 1860, which is a federal act. In certain states, which have a charity commissioner, the society must not only be registered under the Societies Registration Act, but also, additionally, under the Bombay Public Trusts Act.
Main Instrument : 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.
Trustees : A Society needs a minimum of seven managing committee members; there is no upper limit to the number managing committee members. The Board of Management is in the form of a governing body or council or a managing or executive committee
Application for Registration :
Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).(2)
The procedure varies from state to state. However generally the application should be submitted together with: (a) memorandum of association and rules and regulations; (b) consent letters of all the members of the managing committee; (c) authority letter duly signed by all the members of the managing committee; (d) an affidavit sworn by the president or secretary of the society on non-judicial stamp paper of Rs.20-/, together with a court fee stamp; and (e) a declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.
All the aforesaid documents which are required for the application for registration should be submitted in duplicate, together with the required registration fee. Unlike the trust deed, the memorandum of association and rules and regulations need not be executed on stamp paper.