NON-PROFIT ORGANISATIONS IN SOUTH AFRICA

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NON-PROFIT ORGANISATIONS IN SOUTH AFRICA
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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

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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.

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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

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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

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Additional or Alternative Registration
Nonprofit Organisations Act, 1997

• NPOs 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.

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Additional or Alternative RegistrationPurpose

• Creating an enabling environment for NPOs to
  flourish
• Establishing an administrative and regulatory
  framework within which NPOs 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 NPOs.

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Additional or Alternative RegistrationBenefits

• 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.

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Regulatory environment for NPOs

• 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 NPOs 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)

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Inspections

• No inspections under the Companies Act although
  the power is there
• Nonprofit Organisations Act, 1997, specifically
  aimed at regulating NPOs 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

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Registration of Foreign NPOsin South Africa

• Foreign NPOs 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

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Dissolution of NPOs and liabilityof
members/directors

• The winding up of all NPOs 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.

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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

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 Public access to register ofsection 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, www.cipro.co.za 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.

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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
  NPOs 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 NPCs

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