I need assistance and guidance at Mumbai for formation of Private trust for family members Also need assistance to form a LLP or firm which will manage corpus for charity.
20 August 2012
As per section 7 of the Indian Trusts Act, a trust can be formed –
by every person competent to contract, and
by or on behalf of a minor, with the permission of a principal civil court of original jurisdiction.
but subject in each case to the law for the time being in force as to the circumstances and extent in and to which the Author of the Trust may dispose of the Trust property.
A person competent to contract is defined in section 11 of the Indian Contract Act as a person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Thus, generally speaking, any person competent to contract and competent to deal with property can form a trust.
Besides individuals, a body of individuals or an artificial person such as an association of persons, an institution, a limited company, a Hindu undivided family through it's karta, can also form a trust.
It may, however, be noted that the Indian Trusts Act does not apply to public trusts which can be formed by any person under general law. Under the Hindu Law, any Hindu can create a Hindu endowment and under the Muslim law, any Muslim can create a public wakf. Public Trusts are essentially of charitable or religious nature, and can be constituted by any person.
Instrument of trust – i.e., trust deed The instrument by which the trust is declared is called instrument of Trust, and is generally known as Trust Deed.
It is well settled that no formal document is necessary to create a Trust as held in Radha Soami Satsung vs. CIT- (1992) 193 ITR 321 (SC). But for many practical purposes a written instrument becomes necessary under following cases –
When the trust is created by a will irrespective of whether the trust is public or private or it relates to movable or immovable property. This is because as per Indian Succession Act, a will has to be in writing
When the trust is created in relation to an immovable property of the value of Rs.100 and upwards, in case of a private trust. In case of public trusts, a written trust deed is not mandatory, even in respect of immovable property, but is optional.
Where the trust/association is being formed as a society or company, the instrument of trust; i.e., the memorandum of association, and Rules and Regulations has to be in writing.
A written trust-deed is always desirable, even if not required statutorily, due to following benefits :
a written trust deed is a prima facie evidence of existence of a trust ;
it facilitates devolution of trust property to the trust;
it clearly specifies the trust-objectives which enables one to ascertain whether the trust is charitable or otherwise;
it is essential for registration of conveyance of immovable property in name of the Trust;
it is essential for obtaining registration under the Income-tax Act and claiming exemption from tax;
it helps to control, regulate and manage the working and operations of the trust;
it lays down the procedure for appointment and removal of the trustee(s), his/their powers, rights and duties; and
it prescribes the course of action to be followed under any eventuality including dissolution of the trust.
Types of Instrument of Trust
Trust deed, where a trust is declared intervivos; i.e., by settling property under Trust.
A will, where a trust is declared under a will;
A memorandum of association along with rules and regulations, when the association/institution is being formed as a society under the Societies Registration Act, 1860.
A memorandum and articles of association where the association /institution is desired to be formed as a Company.
Procedure for registration The following documents are required to be filed for registration of a Charitable Trust.
Covering Letter
Application Form in Form –Schedule II under rule 6 duly notarised
Court fee stamp of Rs. 2/- to be affixed on application form
Certified copy of the Trust Deed
Consent letter of Trustees. (Blank Form enclosed)
The office of the Charity Commissioner maintains a register containing all details of the Trust; viz., Reg.No., name and address of the Trust, names of all the Trustees (Past & Present), mode of succession of Trusteeship objects of the Trust, particulars of documents creating a Trust, description of movable and immovable properties, particulars of encumbrances on trust property etc. This register is known as P.T.Register. A certified copy of the P.T. Registrar in Schedule-I (vide Rule 5) can be obtained by applying in simple application with Rs.10/- Court fee stamp by paying prescribed fees for the same. It is advisable for all the trusts to have a certified copy of P.T. Register entry.
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