Differences between a society and a trust in Pakistan

In Pakistan, non-profit organizations can be registered under different legal structures depending on their objectives, scope, and administrative preferences. Among the most common options are societies and trusts. While both structures serve charitable, educational, religious, and social welfare objectives, there are significant legal, structural, and operational differences between the two. This article provides a comprehensive comparison of societies and trusts in Pakistan, outlining their legal basis, registration processes, governance mechanisms, compliance obligations, and suitable use cases.

Legal Frameworks
Understanding the statutory laws governing societies and trusts is essential for choosing the right structure.

Societies
Societies in Pakistan are registered under the Societies Registration Act, 1860. This colonial-era law continues to apply across provinces with minor amendments. It allows the registration of associations formed for literary, scientific, educational, religious, or charitable purposes.

Trusts
Trusts are governed by the Trusts Act, 1882. This law provides a framework for creating a legal obligation in which the trustee holds and manages property for the benefit of beneficiaries, often for charitable or religious purposes.

Purpose and Objectives
Both societies and trusts aim to serve non-profit objectives, but they differ in terms of how these objectives are pursued.

Society

• Formed for collective public benefit such as education, health, community development, literature, science, and religion

• Involves a membership-based structure

• Activities are typically broader and require regular community engagement

Trust

• Established to manage specific assets or property for the benefit of individuals or the public

• May focus on a single cause like a school, hospital, or mosque

• Common in situations where a donor wants to ensure long-term use of property for a defined purpose

Formation Requirements

Society

• Requires a minimum of seven members to be registered

• Members must agree on a Memorandum of Association (MoA) and Rules & Regulations

• Governed by a managing or executive committee

• Registered with the Registrar of Societies at the provincial level

Trust

• Can be created by a single individual (settlor)

• Requires at least two trustees, but no upper limit

• Governed by a Trust Deed that outlines objectives and responsibilities

• Registered with the Sub-Registrar of Assurances or Deputy Commissioner’s office

Ownership of Property

Society

• Property is collectively owned by the society as a legal entity

• Requires resolution by the managing committee to acquire or dispose of property

• May lease, buy, or sell assets in the name of the society

Trust

• Property is legally owned by the trust but managed by trustees

• Cannot be sold or transferred for personal benefit

• Trust property is often protected from personal liabilities of trustees

Governing Structure

Society

• Democratic and participatory

• Members elect a governing body, usually called the executive committee or board

• Officers include a president, secretary, and treasurer

• Decisions made collectively in annual or general meetings

Trust

• Trustee-centric structure

• Trustees may be appointed for life or a specific term

• Settlor often retains the right to appoint new trustees

• No election process or member voting

Decision-Making Process

Society

• Major decisions are taken by majority vote

• Regular meetings and elections are held

• Resolutions passed by the executive committee bind the society

Trust

• Decisions are made by trustees as per the terms of the trust deed

• Majority rule may apply, or specific decision-making powers may be assigned to individual trustees

• Settlor may include clauses limiting or guiding decision-making

Accountability and Transparency

Society

• Must maintain membership registers, meeting minutes, and audited financial reports

• Required to submit annual returns and updates to the Registrar of Societies

• Members have the right to inspect records and question the executive body

Trust

• Trustees are legally accountable to the beneficiaries and must act in good faith

• Must maintain records of income, expenditures, and trust property

• Audit requirements depend on the size and purpose of the trust, but are generally encouraged

Taxation and Legal Status

Society

• Considered a non-profit entity

• Must obtain a National Tax Number (NTN) from the Federal Board of Revenue (FBR)

• Can apply for tax exemption under Section 2(36) and Section 100C of the Income Tax Ordinance, 2001

• Eligible for foreign funding upon EAD registration

Trust

• Also considered a non-profit entity if the trust deed outlines charitable objectives

• Required to register with FBR and obtain NTN

• May apply for tax exemption under similar clauses as societies

• Trusts with religious or educational objectives often benefit from tax relief

Registration Timeline and Process

Society

• Name search and approval

• Drafting of MoA and Rules

• Submission to the Registrar of Societies

• Processing time: 2 to 6 weeks

• Certificate of Registration issued upon approval

Trust

• Drafting of Trust Deed on stamp paper

• Execution before witnesses

• Submission to Sub-Registrar or DC Office

• Processing time: 1 to 3 weeks

• Trust deed is registered and stamped

Compliance Requirements

Society

• Must submit annual list of managing committee members

• Required to hold Annual General Meetings (AGMs)

• Some provinces may require renewal or revalidation periodically

• Subject to audit by external agencies or government departments if public funds are involved

Trust

• Must operate within the terms of the deed

• Trustees are personally accountable for misuse of funds

• Not subject to AGM requirements

• Tax returns and financial records must be maintained if exempt status is to be preserved

Suitability for Different Activities

Society

• Ideal for community development projects, education initiatives, professional associations, and advocacy groups

• Suitable for democratic structures requiring member involvement

Trust

• Ideal for managing assets or property for religious, health, or educational purposes

• Suitable where a donor wants control over asset usage and limited public involvement

Foreign Funding Eligibility

Society

• Eligible to receive foreign funding after registration with Economic Affairs Division (EAD)

• Must comply with FATF regulations and provide financial disclosures

• Required to file quarterly and annual reports on fund utilization

Trust

• Also eligible for foreign funding subject to EAD approval

• Must open a separate foreign currency account

• Need to comply with donor-specific regulations and reporting obligations

Termination and Winding Up

Society

• May be dissolved by a vote of three-fifths of the members

• Assets must be transferred to another registered society with similar objectives

• Registrar may cancel registration for violations

Trust

• Trust can be dissolved only if provided in the deed or through court intervention

• Assets are distributed as per the terms of the deed or beneficiaries’ rights

• Irrevocable trusts cannot be unilaterally terminated by the trustees

Key Differences Summary Table

How Sterling.pk Helps You Choose and Register
At Sterling.pk, we guide individuals, philanthropists, and organizations in selecting the best legal form for their mission. Whether you plan to register a society or a trust, our expert consultants:

• Draft accurate legal documents including MoA, Rules, or Trust Deeds

• File registration with the appropriate authority

• Help you obtain an NTN and tax exemptions

• Assist in opening compliant bank accounts

• Provide annual compliance and audit support

With our assistance, you can build a legally compliant, transparent, and impactful non-profit structure in Pakistan.

Conclusion
Choosing between a society and a trust depends on your goals, governance preference, and nature of activities. Societies are ideal for collaborative, membership-driven initiatives, while trusts are better suited for asset-based or donor-controlled arrangements. Both entities play a crucial role in Pakistan’s non-profit ecosystem, but understanding their differences is essential for ensuring legal compliance and organizational effectiveness. With proper guidance and execution, your organization can be positioned for long-term impact and public trust.