Make your voice heard: Proposed Amendments to the NPO act

Those of us who work in the sector estimate that we have seen (and been involved with some parts of) about four or five processes of development of amendments to the NPO Act but none of these has seen the light of day, as new brooms have swept (not clean, that phrase is not appropriate) but they have swept previous work away and begun again.  Now we have a Nonprofit Organisations Amendment Bill, 2018 (!), published for comment on 1 October 2021 (but only really released on 4 October) and which calls for public comment within 30 days. (October ends on a weekend, so we advise lodging your comments by close of business on Friday 29 October).  As the draft Bill was not yet, at time of writing this, available for download on the DSD site please follow this link to the Bill on the very useful PMG site - to download, read and form your opinions.

As no explanatory Memorandum has yet been made available on the Bill,  some of the proposed  provisions are somewhat mysterious. Some clumsy drafting makes interpreting and responding a  bit tougher, and then there is the missing ending to a crucial amendment, which seems to have fallen into a crack between pages 8 and 9 of the Gazetted version.   

Organisations may respond individually or in groups. We suggest that you do both: lodge individual comments and also send your comments and proposals through to others who may be collating joint proposals.  We are beginning work on collating a joint response from a group of lawyers and accountants who work for non profits. If you would like our assistance with your individual or joint submissions, please do let us know.

Brief notes - some of the proposed changes in the Bill:

Not allowing any organisation whose name is confusingly similar to that of any other organisation or person to register, unless they have verifiable legal rights to the name or consent to use it

The NPO register is currently full of organisations with identical or confusingly similar names as there is no checking name mechanism for voluntary associations and trusts and they can just choose their name subject to the common law prohibition on ‘passing off’ (using a similar name to an established brand to benefit by association or confusion). 

This amendment seeks to avoid confusion and improve credibility by policing the use of similar names.

The practical problem with imposing this requirement during the registration process, is that there does not at this stage appear to be an advance check/reserve name process proposed  (as there is at CIPC). This could lead to delays with organisations having to amend their founding documents and  begin again.  (It does seem that it is intended that registration of an NPC name with CIPC or letters of authority in the name of a trust will constitute ‘legal right to that name’.)

Requiring that minimum organisational structures in place before registration include the offices of chair, secretary, treasurer and their deputies.

A deputy chair is a good idea, but vice treasurers and vice secretaries are not as common and this requirement would effectively mean that the board of an organisation must have at least six persons on it (when three has up till now been the effective minimum).

Mandatory registration for ‘foreign non-profit organisations that intend to operate business/es within the Republic’

The language of the proposed section around this is confusingly drafted and the intention (especially in the absence of an explanatory memorandum) is unclear.  What mischief is aimed at?  What does ‘operate’ mean? 

The Companies Act already has a provision requiring local registration with CIPC of any foreign non-profit that does more than have meetings, a bank account and property in South Africa:  As soon as a foreign non-profit needs to employ locals or as soon as they for longer than six months ‘engage in nonprofit activities’ in South Africa, they have to register with CIPC.  Perhaps the drafters of this Bill are not familiar with the provisions of Section 23 of the Companies Act? We will certainly raise this issue.

The rather curious requirement to disclose, on application, ‘whether a member or office-bearer has been previously found guilty of an offence relating to the embezzlement of money of any non-profit organisation and the status of the conviction’

First, the likelihood of those who knowingly admit such persons to their boards disclosing this on application seems extremely slim.  If there is a way for the information to be checked and verified, then this checking should be taking place automatically, without the proposed requirement to disclose.  And if there is no way to check and verify, then it is, we think, useless to require the disclosure.

The removal of the deadline for filing of annual reports ‘within nine months after the end of its financial year’

We understand that the intention behind this amendment was to allow for the annual reports which are filed to be differentiated based upon the size (turnover?) of the organisation, so that smaller organisations are not inappropriately burdened. However, the effect of the proposed deletion is that the deadlines for reports are deleted and the only reference to annual reports is now found in the regulations to the Act. Some tweaking is clearly required.

This is not an exhaustive list of the proposed changes, nor is it our final commentary on them, as we have still to digest, consult and collate responses.

 For more, visit NGO Law

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Nicole Copley | NGO Law

Nicole has consulted to the NGO sector since 1993. She is an admitted attorney (non-practising), has her Masters in the tax exemption laws and is a Master Tax Practitioner. Nicole developed her drafting skills while working as a business lawyer, and she has a pragmatic problem-solving approach to all the work she does. Her depth and breadth of experience over many years and her work with government and a wide range of clients, give her useful perspective and insight. Nicole also lectures and trains on various topics of importance to the NGO sector. She is author of ‘NGO Matters: A practical legal guide to starting up’, and publisher of the series of NGO Matters handbooks.

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