A society is a legally recognized non-profit entity that is set up mainly for religious, educational, charitable, or social purposes. It is common for societies to be founded with the objective of providing services indefinitely, but sometimes situations arise in which dissolution is necessary. The dissolution of a society is the formal process whereby a registered society legally ceases to exist. For instance, the society might have done its job so well that there’s no need for it to exist anymore, it might have stayed inactive for a very long time, caught up in internal conflicts, been financially troubled, or its members have just decided to go for it. The Societies Registration Act, 1860, provides for this process of winding up of the society, and any relevant changes at the State level are hereby recognised. Besides, dissolution has to be done in a legal way and following proper procedures so as to be transparent and to make sure the assets are correctly shared.
Grounds for Dissolution
There can be several reasons for the dissolution of a society. One common reason is when a society has achieved its purposes, and there is no further need for it to continue its work. There can even be several other reasons, such as wrangles within the society, non-functioning, lack of financial resources, or members’ desire for dissolution. Sometimes, a court may order the dissolution of a company if it is found to be running in violation of the law or becoming defunct. Most importantly, the reason for your dissolution should be both real and valid.
Dissolution by Members Voluntarily
A voluntary resolution by the members of the company is the most common way to wind up a society. Section 13 of the Societies Registration Act states that a society can be dissolved when three-fifths of the total members vote in favor of dissolution through the passing of a special resolution. The resolution must be made in an extraordinary general meeting that is convened specifically for the purpose of discussing the dissolution.
The resolution should cite the reasons for dissolution and how liabilities shall be resolved, and any excess assets disposed of. However, the society’s surplus property cannot be shared among its members even after all debts have been settled. If there is a dispute among the members or the governing body relating to dissolution, or if the society becomes inactive or is found to be working against public interest, the matter may be taken to the Principal Court of the district. The court, on being contended, may adopt an order for dissolution.
The notice of the meeting should set out the agenda for the dissolution and it must be circulated beforehand according to the methods listed in the society’s bylaws. Once the resolution has been passed, the society is needed to notify the Registrar of Societies by sending a copy of the resolution, along with any separate documents such as the report and statement of accounts.
Dissolution by Court Order or Government
In specific cases, the Registrar or a competent civil court may decree the dissolution of a society. This usually occurs when the society is inactive for a prolonged period, engages in activities contrary to public interest, infringes the terms of registration, or misuses funds. A court-decreed dissolution petition may be submitted by the Registrar, other affected parties or members. Based on the finding of adequate grounds and legal merit, the court may grant a dissolution order for the society, along with a directive for the handling of its assets.
In addition to dissolution through court intervention or voluntary dissolution, a society can be dissolved by the Central or State Government when the reasons are adequate to warrant such action. Normally, this power is exercised when society indulges in actions that are detrimental to the public interest, law, or policy, or when it becomes inactive or non-compliant with the goals for which it was created.
Dissolution by Registrar of Societies
Under special circumstances, the Registrar of Societies may initiate the dissolution process for a registered society. Normally, the power is used against a society when it is not a beneficial instrument for the accomplishment of the purposes of the society, breaking the law, or not adhering to the requirements of the Societies Registration Act, 1860 or respective State amendments.
Grounds for Dissolution by the Registrar
The Registrar has the power to dissolve a society if it discovers that any of the examples of situations described arise:
- The society is found to be involved in illegal activities.
- The number of members has decreased below the required minimum of seven.
- The society is declared insolvent, i.e., incapable of paying its liabilities and debts.
- The society has failed to achieve the purposes it set out in its Memorandum of Association.
- The society has stopped functioning for a definite, uninterrupted period.
- The society’s registered office is not present in the state of registration anymore.
- The society has contravened the provisions of the Societies Registration Act, 1860, or any other prevalent law.
- The society is found to be acting contrary to government or state policy.
Procedure Followed by the Registrar
Upon identifying any of the above grounds, the Registrar starts an inquiry into the functioning of the society. A show-cause notice is issued to the society, requiring it to explain why it should not be dissolved. The notice must be dispatched to society’s registered address and usually outlines a time duration within which the society must respond. If:
- The society declines to respond, or
- The explanation presented is found to be unsatisfactory,
Then the Registrar may reach the relevant civil court seeking an order for dissolution of the society.
If the Registrar is satisfied, the Registrar will officially erase the society’s name from the register, thus completing the legal closure. A certificate of dissolution may be given, and the society will be regarded as having ceased to exist from that time onwards. Any eventual use of its property, name, or authority will be deemed illegal unless expressly transferred to a different entity.
Resolution of Debts and Liabilities
Once a society dissolves have been approved; the society must set about resolving all its debts. This includes resolving the overdue loans, taking care of the tax liabilities, paying the salaries of the employees, and addressing any legal claims. The managing committee remains responsible for these settlements and must ensure that the society clears all dues before any sharing of excess property or assets.
A liquidation committee or designated office bearers may be assigned this responsibility, and they must act under the supervision of the court or the Registrar, based on how the dissolution was initiated.
Sharing of Assets
One of the most important steps in the dissolution process is deciding what to do with the remaining assets of the society after all liabilities and debts have been settled.
Truly, Section 14 of the Societies Registration Act elucidates that any surplus property of a dissolved society is not allowed to be split among the members of the society. Rather, it has to be transferred to another society, non-profit entity, or trust with similar goals.
This transfer must be accepted by a majority of the members, with the court’s guidance. Should the members fail to agree on the recipient entity, the matter is taken to court, and the decision ensures that the assets are used for a public purpose.
Bottom Line
Dissolution of a society is an orderly, formal, and legally supervised process that ensures a proper winding-up of the entity. The closure of the society may be either voluntary by the members or involuntary by the court. Such dissolution has to be handled in accordance with the law, with transparency, and with fairness. It is only right that non-profits ethically stick to the standards of dissolving liability and distributing leftover assets for public benefit. States like Bihar and Uttar Pradesh have even opened up the possibility of allowing the surplus to be transferred to the government for flexibility. utilization in aligned public purposes. When properly implemented, the dissolution process not only protects the interests of stakeholders but also conserves the integrity of charitable and social service institutions in India.
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