Highlights of Expert Group Report on Societies Registration Act 1860

Introduction: An Expert Group was constituted by Ministry of Corporate Affairs to study the legislative and regulatory architecture of the Societies Registration Act, 1860 and to understand and gauge the ground level situation of societies operating in India at present. 

The Group realized that that there are two different types of societies pertaining in India, one whose functions are restricted to only one state only and others, whose activities are spread in more than one state and it has drafted a Bill in respect of societies having multi- state operations which is called a Multi-State Societies Registration Bill, 2012 (MSSRB, 2011). A model law governing the registration of societies having operation limited to one state will also be prescribed soon but the said law will have to adopted and enacted by each State separately.

It is to be further noted that at present there is no exclusive law governing the functioning of multi-state based societies. The Expert Group has drafted the bill governing the functioning of Multi-State Societies. The Bill seeks to regulate the working of Mulit State Societies by providing discloser & reporting requirements and more powers to Central Government.

Moreover the current Societies Registration Act is very weak and doesn’t provide for effective regulation of working of the Societies. Though the Societies are required to submit document to Registrar of Firm from time to time but Societies hardly do the same. Moreover since Societies are not required to disclose their accounts therefore they are not subject to public scrutiny and lack transparency.

As per the expert committee report there are more than 30 Lakh societies that are registered in India, assuming the numbers, the new law will create a drastic impact on the working of all these. 

Highlights of the Bill are as follows: 

• The Bill contains 63 clauses , 8 chapters and 2 Schedules. 
• The Bill proposes to provide an enabling framework for the registration and functioning of the multi-state societies. The definition of what constitutes a ‘multi-state society’ would be determined by the objective and nature of their activities as per the provision of the Proposed Bill 
• One of the important definitions, on the sidelines of which the Bill has been drafted is “Inter-State Activity”. Since this Bill has been specially drafted for the Multi-state operations based societies, this definition assumes more importance. It means any activity carried out by a society directly or indirectly for cash, or for deferred payment or for commission, remuneration or other valuable consideration from the place other than place of origin, including overseas transaction and also includes certain other transactions also. More importantly societies who receive foreign contribution or donation/grants /funds from NRI in excess of amount prescribed will also be treated as Inter State Activity 
• "Multi-State Society" means any multi-state society registered under this Act or any society carrying on inter-state activity 
• After the enactment of this Act and no matter what is contained in any other Act, no Multi-State Society can carry any inter-state activity without being registered under this Act. Existing multi state societies registered under the Societies Registration Act should, either register under this Act or stop carrying such activities within the prescribed time. Failure to obtain registration is an offence punishable under the proposed Bill. 
• A multi-state society registered under this Act shall be deemed to be body corporate as on date Societies are not treated as Body Corporate.
• Under the existing Act, the application for registration has to be made before Registrar of Joint-stock Companies, whereas the Bill requires the application to be made before Registrar of Multi-State Societies, as notified by the Ministry of Corporate Affairs (MCA). Detailed application will have to submitted for registration of Societies on an electronic platform.
• Compliances have been increased, intimation is required to be given to Registrar is case of certain events and an annual report of its inter-state activities is also required to be submitted with it. 
• Every such society will now have to maintain books of accounts, on all receipts and expenditure, sales and purchases of goods and assets and liabilities of the society.
• Power have been given to Central Government to cancel the registration of Societies under certain circumstance , this was not there earlier.
• Mode of dissolution of Multi-State Societies has been prescribed in detail. It provides for two modes of dissolution for a multi-state society viz, a) voluntary; and b) compulsory. Voluntary dissolution may be ordered, if, a registered multi-state society makes an application to Central Government., signed by not less than three-fifths of the members of that multi-state society.
• Compulsory dissolution may occur if the Central Government. has reason to believe that the society is being used for unlawful purposes or for purposes prejudicial to national security, peace, welfare or public order, or if the registration of any multi-state society has been procured by fraud or misrepresentation, or if the society is being used for the purposes incompatible with its objects or if the society becomes dormant.
• Central Government has the power to order mandatory winding of the society under certain circumstances.
• Majority of the officers and members of the Board of every multi-state society shall be citizens of India, which is a new requirement.
• Now members of the society can inspect its books and accounts, which was not allowed earlier. 
• The bill provides elaborate provisions for Inspection, Inquiry and Investigation into the affairs of the society by the Central Government, which were not there earlier. 
• Now Central Government may also require the society to furnish such information or documents, as it considers necessary, on scrutiny of any document filed by such society or any information received by the Government or in public interest. It will be the duty of the society and of its officers to coordinate in this respect. It may even authorize an inspector to make an inspection. , currently there is no such provision.
• Power has also been given to Central Government to order search and seizure of records and information of any society , which was not earlier.
• Penalties have been provided in case of furnishing false information, statement or destruction of records.
• Central Government has also given the power to takeover the affairs of Society under prescribed conditions.
• Members of Governing body of a Society has to obtain a Governing Body Identification Number on the line of Director Identification Number for Directors in case of Companies.
• The Bill also provides elaborate provisions for registration of foreign societies having place of business in India, which is not allowed currently. A foreign society is defined as a society or other association of individuals incorporated outside India within the meaning of Foreign Exchange Management Act, 1999.
• A new concept of Improvement Notice has been introduced. It provides that if a society has furnished false or misleading documents for obtaining registration or has failed to comply with the provisions of this act, in that case an ‘Improvement Notice’ will be served on it. Failure to comply with such notice will result in suspension of registration. Finally if a multi-state society fails to comply with the notice even during the period of suspension, then its registration will be cancelled.
• Similar to Companies & LLP, public can also inspect the records of the Multi State Societies maintained with the Registrar.
• Provision has been made to regulate the interest of the members in the contracts executed or entered into by the Societies.
• The Bill will also provide the formats in which the Financial Statement of the Society have to be prepared.

Note:

MCA has invited public comments on Multi-State Societies Registration Bill, 2012 . All those desirous of submitting views/suggestions may send their written views and suggestions on the Bill to Ministry of Corporate Affairs on e-mail at renuka.kumar@mca.gov.in and alok samantarai@mca.gov.in. The person/interested party may also sent their comments/suggestions by post addressed to Smt. Renuka Kumar, Joint Secretary, Ministry of Corporate Affairs, Room No. 504, 5th Floor, ‘A’Wing, shastri Bhawan, New Delhi or Shri Alok Samantarai, Joint Director, Ministry of Corporate Affairs, Room No. 527, 5th Floor, ‘A’ Wing, shastri Bhawan, New Delhi by 15th of September, 2012.

Analysed and Prepared by:
Mr. Ankit Singhi
ankit@indiacp.com
+91 99 10888952
+91 11 40622208