NON-PROFIT ORGANISATIONS IN SOUTH AFRICA

Introduction Recognised under South African Law for more than a century Role in society has now become very important Diverse in their activities and cover many fields of interest (e.g. the promotion of charity, religion, health, science, literature, education, social welfare, wildlife protection, the arts, sports, community interests and interests of workers and professions Decision on whether or not to incorporate 2

Benefits of incorporation Possibility to be tax exempt ability to legally solicit funds separate juristic personality limited personal liability for its members continued corporate existence beyond the involvement of its founder members increased public recognition. 3

Incorporation under the Companies Act, 1973 Two types of companies - a company having a share capital and a company limited by guarantee An NPO registers under section 21 as an “incorporated association not for gain” At least seven subscribers required Main object must be the promotion of religion, arts, sciences, education, charity, recreation, or any other cultural or social activity or communal or group interest 4

Incorporation (continued) It must apply its profits or other income in promoting that main object It must prohibit the payment of any dividend to its members In order to comply its memorandum must contain both these conditions as well as a provision that upon its winding up, deregistration or dissolution, the remaining assets of the association after the satisfaction of all its liabilities shall be given or transferred to some other association or institution having objects similar to its main object Deemed to be public companies & may not convert New Companies Act, 2008, will change position marginally 5

Additional or Alternative Registration : Nonprofit Organisations Act, 1997 NPO’s may also voluntarily register under the Nonprofit Organisations Act, 1997 The following organisations can apply for registration: –Non- Governmental Organisations; –Community Based Organisations; –Faith Based Organisations; –Organisations that have registered as Section 21 Companies under the Companies Act, 1973; –Trusts that have registered with Master of the High Court under the Trust Property Control Act, 1988; and –Any other Voluntary Association that is not-for-profit. 6

Additional or Alternative Registration: Purpose Creating an enabling environment for NPO’s to flourish; Establishing an administrative and regulatory framework within which NPO’s can conduct their affairs; Setting and maintaining adequate standards of governance, accountability and transparency; Creating an environment within which the public may have access to information concerning registered NPO’s. 7

Additional or Alternative Registration: Benefits The improvement of the credibility of the sector as NPOs account to a public office; Bringing non profit organisations into a formal system; Assistance in finding ways of getting benefits like tax incentives and funding opportunities. 8

Regulatory environment for NPO’s Companies Act, 1973: Minimal intervention and duties relate only to maintenance of basic prescribed company information, filing of annual financial statements and annual returns. Nonprofit Organisations Act, 1997 This Act is aimed solely at NPO’s and regulation mainly takes the form of – –disclosure of financial statements –lodgement of detailed annual reports containing prescribed information –adherence to prescribed Codes of good practice issued by DSD (NPO Directorate) 9

Inspections No inspections under the Companies Act although the power is there Nonprofit Organisations Act, 1997, specifically aimed at regulating NPO’s through DSD and intervention by the dti would not likely take place No site visits are done by the dti Under new Companies Act powers of investigation are hugely extended and position would in collaboration with DSD be reviewed 10

Registration of Foreign NPO’s in South Africa Foreign NPO’s are obliged to register under the Companies Act as external companies as soon as they have established a place of business in SA Alternatively, a branch of a company or other association of persons, incorporated outside the Republic or having its head office in a foreign country, may incorporate a branch in SA under section 21A of the Companies Act 11

Dissolution of NPO’s and liability of members/directors The winding up of all NPO’s that have juristic personality is done under the provisions of the Companies Act under supervision of the Master of the High Court. The liability of members and directors of a section 21 company is limited to the extent of the guarantee provided for in the memorandum. 12

Statistical information There are currently 9737 registered section 21 companies in SA Not all are active but failure to submit annual returns in time eliminates the dead wood No difficulties are experienced with the registration process and it is dealt with as just another new company application. There is no screening process regarding the proposed activities of the NPO The current average turn-around time for registration is 5 days 13

Public access to register of section 21 companies. The register of companies kept under the Companies Act is open to inspection by any person. It is also available on the CIPRO website, at no cost. Please note that only limited information is available free of charge and that further information, e.g. copies of memorandum, directors’ information, etc. may be obtained at a fee. 14

Companies Act, 2008 Comprehensive company law review started 2004 Bill passed in 2008 and will become operative during 2010 New provisions will contain basic principle of NPO’s but minor legislative changes will take place: –Objects must now be promoting public benefit or cultural, social, communal or group interests –Three or founder members will be required –Expression NPC (Non Profit Company) to form part of name –Board to have minimum of 3 directors –Foreign non profit companies may register as external non profit companies –Schedule 1 of Act deals with NPC’s 15

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