The Minister of Social Development, Ms Lindiwe Zulu, has on 03 November 2020 launched the Know Your NPO Status Campaign, which outlined ‘the process of deregistration of noncompliant NPOs’. The Department of Social Development (the Department) stated that: “As of September 2020, 233 180 NPOs were registered with the Department and only 30% of the registered NPOs were compliant.” This, according to the Department is: ‘a disturbing picture'.
Large-scale non-compliance of the NPO Act has evidently been present for more than a decade. The above picture (taken a few months prior to the initial de-registration campaign during 2011) depicts many non-compliant notices meant for registered NPOs. Between December 2012 and January 2013 more than 55 000 registered NPOs were either deregistered or marked as non-compliant. During February 2013 the Department reinstated the de-registered NPOs after a public outcry and, at the time, granted a six-month grace period for NPOs to submit outstanding narrative and financial reports. This turned out to be an eight-year grace period.
In this article we summarise the deregistration process below and explore the key compliance requirements contained within the NPO Act.
According to the Department, the Campaign consists of four phases which will commence during April 2021. In summary, the deregistration process will be implemented as follows:
Registered NPOs must inform the Director of NPOs within one month of:
Please visit http://nonprofitlawyer.co.za/Resources-for-Free/ for resources to assist with the above compliance obligations.
The Director of NPOs is obligated under section 20(a)(iii) to send a compliance notice in the prescribed form to a registered NPO if it has not complied with its obligations in terms of the NPO Act. Section 21 provides that: If a registered NPO which has received a notice in terms of section 20 does not comply timeously with the notice or makes material false representations in any document or a narrative, financial or other report submitted to the director, the director must: cancel its certificate of registration and its registration; notify the NPO in writing of the cancellation and the reasons for it and the date on which the registration was cancelled. Both sections 20 and 21 are mandatory in nature - not discretionary.
The Minister must, in terms of section 9(1) of the NPO Act, appoint persons so as to maintain a panel of arbitrators consisting of at least seven persons and designate one member of the panel to act as chairperson. The appointment of the panel must be preceded with a notice calling for nominees and stating the criteria for nominations. A registered NPO may refer the decision of the Director of NPOs to cancel its registration for arbitration to the Directorate for NPOs for consideration by an Arbitration Tribunal.
The NPO Act requires that an updated register must be kept of registered NPOs and those whose registrations have been cancelled. The Campaign will perhaps offer an opportunity to restore the integrity of the compromised NPO register, but this also means that the Director of NPOs and the Minister must comply with the NPO Act.
Source: Ricardo Wyngaard Attorneys - The NPO Lawyer; NPO Legal Issues; Volume 54, Feb/March 2021.
Important Note: The information contained in this article is general in nature and should not be interpreted or relied upon as legal advice. The information may not be applicable to specific circumstances. Professional assistance should be obtained before acting on any of the information provided. NPOs are essentially offered timeous public notice to submit their reports and ensure compliance with the NPO Act.
Ricardo Wyngaard (Ricardo Wyngaard Attorneys) is passionate about the non-profit sector and has been focusing on non-profit law since 1999. He is a lawyer by profession who has obtained his LLB degree at the University of the Western Cape in South Africa and his LLM degree at the University of Illinois in the USA. He has authored a number of articles and booklets on non-profit law and governance. http://www.nonprofitlawyer.co.za