NGO REGISTRATION IN PAKISTAN
A charitable institution or NGO is established for the benefit of society. It may make a profit, but this profit should be utilized for expansion of that institute. The members, trustees or other particular persons who regulate or influence the organization may not use the profit of the Non profit institute for their personal benefits.
Why should one make Non Profit Organizations
Some of the benefits of establishing and registering a charitable institute / Non-Profit Organization under Pakistani law are as under:
(a) Tax Exemption for all activities under Income Tax Ordinance 2001 and Income Tax Rules 2002.
(b) Tax Relaxation for the donors against donations made to such an institute/NPO.
(c) Some of the various laws that deal with the issue confer the status of artificial legal person to the organization and hence the assets owned by such an organization shall be held in perpetuity and recognition as a bona fide foundation. Read More
Trust Registration in Pakistan – Introduction & Procedure
By: Muhammad Abdul Hannan
Partner, Synergy Business Consulting
The below article aims to highlight important elements regarding registration of Trusts and registration of NGOs under Trust Act, 1882 in Pakistan.
A trust is established under the Trusts Act, 1882. For this type of trust, the three conditions of a creator, trustee and beneficiary being present, are unconditional requirements. A private trust would fail for uncertainty if the objectives are not clearly stated. A public charitable trust is a trust which is established for the benefit of the society or at least a certain section of society. There are no particular laws relating to public trusts. However, the rules in the Trust Act of 1882 can be applied to the public and charitable trusts. In the case of public charitable trusts, the conditions governing private trusts are equally important. However, if the objectives are not clear, unlike the private trusts, these trusts would be sustained as long as there is an intention of charity.
Some of the essentials for a public trust to come into being are the following criteria:
- There must be some trust property, whether in cash or capital assets (land or buildings)
- The objectives of the trust must be charitable or for the benefit of society
Therefore, a Trust, in order to be valid, must fulfil these conditions or ‘certainties.’ This is strictly speaking not true of public charitable trusts. The certainty as to the intention to declare a binding trust and the certainty as to the property to be bound by the trust are as strictly insisted upon in charitable trusts as in private trusts. A private trust would fail for uncertainty if the objects to be benefited are not clearly specified; but a public charitable trust would be sustained even though the object is not specified provided there is a general intention of charity.
A trust may be created for any lawful purpose, which can be revoked. The Trust Act provides legal cover for private acts of public charity, and allows the creators of the trust tremendous flexibility in their operations. The Trust Act is applicable to all the areas of Pakistan, and can benefit any group.
The procedure for the creation of a trust is rather basic. A public and charitable trust can be created merely by a declaration to that effect on a non-judicial stamp paper of a value (which differs across provinces) stated in the Stamp Act. Registration is optional. The legal status of a trust is that some property is pledged to the benefit of a prescribed group of people. Only the actual declaration of this intent (the trust deed) is registered.
There is no membership in a trust. Even if the trustees are inferred to mean the management, there is no lower or upper limit on the number of trustees. These details would depend on the terms on which the trust has been drawn up.
The application for registration of a public trust must contain the following:
- Particulars of documents creating the trust.
- Particulars of the trustees and the beneficiaries.
- Details of what the trust property is going to be. There is no minimum value of property for starting a trust. If the property is an immovable property then the transfer deed shall be on a stamp paper on the value of the property and it shall be registered.
- Preparation of the trust deed, that is, i.e. declaration of having created a public charitable trust.
A trust is a “’gift’ of property to a person or institution providing benefit to both parties,” and may be either a public trust, which benefits the public at large, or a private trust, which benefits individuals. Private trusts for public charity are governed by the Trusts Act, 1882.
There is no law specifically governing public charitable trusts. However, a public charitable trust may register under one of the other registration acts.
The advantages to registering as a trust under the Trusts Act include:
- A high level of control over the administration and management of the NGO – there is a succession in place and there are no members;
- Very little to no interference from the outside;
- A simple registration procedure;
- Irrevocability; and
- Eligibility for income tax exemption.
There are also no meeting or account maintenance requirements for a trust.
- Definition of Trust
Section 3 of the Trust Act, 1882 define Trust as under;
A “trust” is an obligation annexed to the ownership of property, and rising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.
- Elements of the Trust:
- Author of the trust:
The person who reposes or declares the confidence is called the “author of the trust”:
The person who accepts the confidence is called the “trustee”:
The person whose benefit the confidence is accepted is called the “beneficiary”:
- Trust Property or Trust Money
The subject-matter of the trust is called “trust-property” or “trust-money”
- Beneficial Interest
The “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property
- Instrument of the Trust
The instrument, if any, by which the trust is declared is called the “instrument of the trust”:
- Creation of The Trusts
1. Lawful purpose
A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is
(a) forbidden by law, or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law, or
(c) is fraudulent, or
(d) involves or implies injury to the person or property of another, or
(e) the Court regards it as immoral or opposed to public policy.
Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void.
2. Trust of immovable property
No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee.
3. Trust of movable property
No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.
5. Trust Deed
Subject to the provisions of Section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.
6. Who may create trusts
A trust may be created (a) By every person competent to contract1 , and (b) With the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor;
7. Subject of trust
The Subject-matter of a trust must be property transferable to the beneficiary.
8. Who may be beneficiary?
Every person capable of holding property may be a beneficiary.
9. Who may be trustee?
Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract. No one is bound to accept a trust.
10. Trustee to execute trust
The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction. Noting in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries.
11. Declaration of Trust
A trust can also be created by the author himself declaring that he would hold the property, not as owner, but as a trustee for the benefit of some person or persons including himself and in that case the transfer of property is not necessary as one need not transfer his property but in such a case the declaration of trust is by the owner and he alone should be the trustee. Such a declaration would, however, require registration under the Registration Act.
12. Types of Trust-Private and Public:
A Trust may be Private and Public: When the purpose of the trust is to benefit an individual or a group of individuals or his or their descendants for any legal person and who is capable of holding property, it is a private trust.
When the purpose of the trust is to the benefit the public or any section of the public, it is public trust.
13. Process of Creation of Trust in Pakistan
A trust of immovable property can be created by two ways. One by a non-testamentary document and another by a testamentary document such as a will. In other words, a trust regarding a immoveable property cannot be created orally but it must be by a document duly registered. A trust of a moveable property can be created either by a document or delivering the property to the trustee with necessary oral directions. If the directions are given in writing it would amount to a trust by a non-testamentary document which may or may not be registered.
14. Dissolution under the Trusts Act:
A trust is extinguished if:
- The purpose for which it was created is completed;
- The purpose becomes unlawful;
- The fulfillment of the purpose becomes impossible; or
- The trust is revoked
For further guidance and registration of Trust, you may contact Synergy Business Consulting.
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