Formation of employee welfare trust

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2014 We are a private limited company and want to form Employee welfare trust. Please tell us the procedure to be followed, registration formalities, format of trust deed and its bylaws.
Contribution will be made by emploees only which will be deducted from the salary

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2024 Forming an Employee Welfare Trust (EWT) involves several steps, including drafting a trust deed, registering the trust (if required), and establishing guidelines for its operation. Here’s a comprehensive guide on how to proceed:

### Procedure to Form an Employee Welfare Trust:

1. **Drafting the Trust Deed:**
- **Objectives:** Define the objectives and purpose of the trust, which typically include welfare activities for employees such as healthcare, education support, retirement benefits, etc.
- **Bylaws:** Include provisions on how the trust will be managed, the rights and obligations of trustees, rules for contributions and benefits, procedures for decision-making, etc.
- **Legal Language:** Ensure the trust deed is drafted in legal language and consult with a lawyer to ensure compliance with applicable laws.

2. **Trustee Selection:**
- **Appointment:** Identify and appoint trustees who will manage the affairs of the trust. Trustees can include senior management personnel, representatives elected by employees, or external professionals.

3. **Contribution Mechanism:**
- **Employee Contributions:** Decide on the contribution mechanism, which in your case will be deductions from employees’ salaries. Clearly outline the percentage or amount to be deducted, frequency of deductions, and the process for managing these contributions.

4. **Registration of the Trust:**
- **Optional Registration:** Depending on the jurisdiction and the nature of activities planned, registration of the trust may be optional or mandatory.
- **Procedure:** If registration is required, submit the trust deed along with the application form and prescribed fees to the relevant authority (Registrar of Trusts or local government office).

5. **Opening Bank Account:**
- **Bank Account:** Open a bank account in the name of the trust using the trust deed, PAN card, and other necessary documents.
- **Operational Account:** Ensure the account is used exclusively for the trust’s activities, and set up procedures for fund management and disbursements.

6. **Tax and Compliance:**
- **Tax Exemption:** Obtain necessary approvals for tax exemptions if the trust is intended to be tax-exempt under applicable laws.
- **Compliance:** Ensure compliance with all tax laws, labor laws, and any other regulatory requirements applicable to trusts in your jurisdiction.

7. **Communication and Implementation:**
- **Employee Awareness:** Communicate the establishment of the trust and its objectives to all employees. Provide them with details about their contributions, benefits they are entitled to, and how they can avail themselves of these benefits.

### Format of Trust Deed and Bylaws:

- **Trust Deed:** The trust deed should typically include:
- Name and address of the trust
- Objectives and purposes of the trust
- Management structure (appointment, roles, and responsibilities of trustees)
- Rules for contributions and benefits
- Procedures for amendment of the trust deed
- Dissolution provisions

- **Bylaws:** Bylaws supplement the trust deed and include detailed rules and regulations governing the trust’s day-to-day operations, fund management, decision-making processes, etc.

### Legal Assistance:

Given the complexity and legal implications of forming an Employee Welfare Trust, it’s advisable to seek legal advice from a qualified lawyer specializing in trusts and employee benefits. They can provide tailored guidance based on your company’s specific requirements and ensure compliance with all applicable laws and regulations.

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