lawyer.co.za Lees in AfrikaansRead in isiZuluRead in SetswanaRead in isiXhosa

banner 1 english

 

juta-online-shop-banner

Back to Legal Topics

NGO LAW - FAQ's

There are over 86 000 NGO’s, also referred to as Non-Profit Organisations (NPO’s) that perform an invaluable service to the citizens of South Africa. NPO's are governed by the Non-Profit Organisation's Act,1997.

According to the South African NGO Network (Sangonet) an estimated 36 000 of the country’s then 122 000 NGO’s and NPO’s had to be deregistered in 2013, thanks to growing financial shortages , huge pressure on fundraising, and non-compliance with legal requirements. Most organizations have the best intentions but lack the skills and experience to run their operations like a business – NGO’s need not rely solely on donors but need to be able to generate their own funding through their own initiatives.

NPO’s are private, non-government organisations with self governing boards accountable to their members, who provide some public service or have some public purpose that goes beyond serving the personal interests of the members of the NPO (such as the promotion of social welfare, economic development, religion, charity, education or research.)

NPO’s who require legal assistance may apply to the relevant provincial law society according to where the NGO is situated. The law societies will assess your application and forward them to Attorneys and Law Firms who have expertise in your area of concern. Attorneys do the work on a pro bono basis as part of community service.

Please note: just because your NPO applies does not mean that you will be automatically assisted. As a general guide, it will depend on the nature of the legal assistance required, whether the NPO is formally constituted, and has audited financial statements to enable the law society to determine whether the NPO can afford to pay its own legal fees. Indigent people who cannot afford an attorney can also apply and will have to pass a means test.

Contact the provincial law society where you require an attorney:

Gauteng, North-West, Mpumalanga and Limpopo

Contact:  Marissa Beyers at (012) 3385800
www.northernlaw.co.za

Free State

Law Society of the Free State
Contact: Alida Obbes at (051) 4473237

www.fs-law.co.za

Kwazulu-Natal

Kwazulu-Natal Law Society
Contact:  Pearl Mfusi at (033) 345 1304

www.lawsoc.co.za

Western, Eastern and Northern Cape

Cape Law Society
Contact: Alfred Hona at (021) 443 7600

www.capelawsoc.law.za

Also read our Q and A: What if I cannot afford the services of an Attorney? (here)  

  1. What are the legal structures that civil organizations can choose from?
  2. Which structure should an organisation choose?
  3. What are the advantages of a legal structure which is registered with a government registry?
  4. What are some of the provisions contained in The Nonprofit Organisations Act 71 of 1997?
  5. Do NPO’s have tax exempt status?

 

1. What are the legal structures that civil organisations can choose from?

 

These are some of the legal structure that NPO’S can choose from:

  • Voluntary Associations, which are governed by the common law
  • Communal Property Associations, which are governed by the Communal Property Association Act 28/1996

VA’s, Trusts, and Section 21 companies are the most common legal structures for NPOS’s.

Top of Page

 

2. Which structure should an organisation choose?

 

This would depend on the size, capacity and complexity of your organisation.-the most common structure for small, newly established NPO’S is the VA, while trusts and Section 21 companies are appropriate for larger, well established NPO’s with big budgets, lots of programmes and staff members. Also, sometimes people or organisations that your organisation will interact with such as funders or government departments may prefer a particular structure.

  • Voluntary Associations-are suitable for small community based organisations that do not need to own or mange large sums of money or valuable property and equipment to carry out their activities. You create a VA by entering into an agreement with three or more people to form an organisation so that you can work together to form a non profit objective. The agreement does not have to be in writing and until recently there was no government registry with which you could register.The Non-profit Organisations Act 71 of 1997now provides for such a facility toVoluntary Associationsthat are ‘universitas’ or incorporated organisations under common law. The NPO act prescribes certain minimum formation requirements and annual reporting for qualification as a ‘universitas’ or incorporated body. VA’s are governed by the common law which means that the VA’s objectives must be lawful and not primarily for profit or gain for its members. VA’s were not particularly attractive to funders prior to the NPO act because of the lack of government regulation and statutory controls. Funders and other entities with which these organisations had to deal with required extended transparency and accountability.
  • Trusts-a trust is  an arrangement, set out in a written document (called the trust deed) in which an owner or founder hands over property and/ funds to a group of people (trustees) who administer the assets for the benefit of other people (called beneficiaries) for a stated objective. You require the services of a notary (an attorney with the additional qualification of notary) to write and attest your trust deed, which is registered with the Master of the High Court, who may ask the trustees to provide security for the proper performance of their duties. The trust deed is the founding document of the trust. Certain clauses will be required if you want tax exemption and the NPO Act will require certain other clauses if you want to register as an NPO. Trusts are very flexible and can suit many NPO’s. The requirements for public disclosure are limited. To form a trust, you will need to consult with an attorney.
  • Section 21 Companies-Section 21 of the Companies Act 61/1973 allows for a ‘not-for- profit company’ or ‘association not incorporated for gain’. Section 21 companies resemble business oriented (for profit) companies in their legal structure, but do not have a share capital and cannot distribute shares or pay dividends to their members. Instead they are ‘limited by guarantee’, meaning that if the company fails, its members undertake to pay a stated amount to its creditors. Section 21 companies are registered with the Registrar of Companies in terms of the Company Act and have a two-tiered governance structure consisting of the members and directors. The annual reporting requirements for companies are complex and extensive and not always suitable for small community-based organisations. To form a Section 21 company you will need to consult with an attorney.

    Top of Page

 

3. What are the advantages of a legal structure which is registered with a government department?

 

Not all legal structures have to register with a government registry, for exampleVA’s and partnerships don’t, while trusts and section 21 companies do.

To be registered your NPO will need certain minimum establishment and ongoing reporting requirements. The NPO Act also contains mandatory requirements for the registration of an NPO including clauses in the constitution that:

  • Record the non profit purpose and character of NPO’s
  • Clarify the legal status of NGO’s by recording that the NPO is a body corporate that has an independent legal personality.
  • Always appear in the founding of all NPO’s anyway, because they are essential to the basic functioning of an organisation.

Section 11 of the NPO Act allows the Minister of Welfare to prescribe benefits or allowances for registered NPO’s. These will not apply to NPO’s that do not register with the department. In fact it is likely that NPO’s who receive any money or other benefits from government, such as a tax benefit, will be required to register.

 

Top of Page

 

4. What are some of the provisions contained in the Nonprofit Organisations Act 71/1997?

 

The Non-Profit Organisations Act act repeals the Fund-raising Act 107 of 1978 ( with the exception of its chapter 2 which deals with disaster and relief funds) and came into effect on 1 September 1998.

The act defines a NPO as a trust, company or other associations of people:

  • established for a public purpose
  • of which the income and property are not distributable its members or office bearers except as reasonable compensation for services rendered.

The objectives of the Act are to:

  • Create an enabling environment for NPO’s
  • Set and maintain adequate standards of governance, accountability and transparency.

Top of Page

 

5. Do NGO’s have tax exempt status?

 

Tax exempt status-means exemption from income and other taxes

Donor deductable status –means that people who make donations to your organisation receive a tax deduction

Your organisations eligibility for tax exempt and donor deductible status depends on your organisations’ purpose, objectives and activities, rather than your choice of legal status. The law requires that all NPO’s which apply for exemption includes a list of clauses which bolster and reinforce their essential non-profit distributing clauses.

Top of Page