The Not-for-Profit Organisations Bill

THE NOT-FOR-PROFIT ORGANISATIONS BILL

1. This Bill seeks to complement attempts by government and other relevant stakeholders to create an enabling environment for not-for-profit organisations. It is thus only one component amongst a range of measures that either currently exist or are as yet being developed.
2. In addition, this Bill attempts to bring legislation affecting not-for-profit organisations in line with constitutional guarantees of free association and the general principle of encouraging a vibrant and accountable civil society.

3. The White Paper of the Department of Welfare which was approved by Cabinet in February 1997 advocated the repeal of certain sections of the Fund-raising Act, 1978, and its substitution with legislation which would facilitate the creation of an environment within which not-for-profit organisations may flourish. In addition, the MIN-MEC meeting of December 1996, re-enforced the government's commitment to promulgate the necessary legislation in the 1997 session of parliament.
4. In pursuance hereof, the Minister appointed a Technical Reference Team, to formulate the policy on which legislation could be formulated. This Team comprised persons drawn from various non-governmental organisations; the Departments of Health, Public Works and Education; and several experts.
5. In addition to this, the Department of Welfare held discussions with the South African Revenue Services and briefly with the Department of Finance, as well as with the Registrar of Companies. The content of these discussions were dealt with in the deliberations of the Technical Reference Team.
6. The Technical Reference Team formulated its policy which was subsequently approved by the MIN-MEC at its meeting in April 1997 and presented to a consultative conference for consideration on 23 May 1997. The consultative conference was attended by all major stakeholders, including the Department of Welfare, other departments, representatives of domestic and international donors and non-governmental organisations.

7. This Bill applies to not-for-profit organisations who choose to subject themselves to the Bill.
8. The Bill defines a not-for-profit organisation as--

"an association of persons whose objectives and activities, when viewed as a whole, exhibit the following characteristics--

1. it has been established for a public purpose;
2. its income or profits are not distributable to its members, trustees or directors, except as reasonable compensation for services rendered".
9. In terms of this definition, the determinate factor is not the making of profit but rather its non-distribution.
10. Organs and quasi-organs of the state are excluded from the ambit of the Bill.

11. The contents of this Bill can briefly be summarised as follows--

11.1 it imposes an obligation on the state to determine and co-ordinate its efforts in relation to not-for-profit organisations;

11.2 It establishes a Directorate for Not-for-Profit Organisations. Unlike the Directorate contemplated in the Fund-raising Act, this Directorate has a policy making, co-ordination and implementation function. In addition it is empowered to draft and issue--

1. model constitutions and narrative reports; and
2. codes of good practice for not-for-profit organisations and donors;

11.3 it creates a new system for administering not-for-profit organisations by providing for a voluntary system of registration. This system is simple. It requires the completion of a basic application form and the submission of certain documents. Subjective discretion is therefore done away with;

11.4 this voluntary system of registration comes with certain advantages, viz it facilitates--

1. the attraction of donor confidence and legitimacy;
2. access to further benefits and allowances; and
3. State recognition of the "not-for-profit" sector.

11.5 in exchange for these benefits, certain obligations are imposed on registered not-for-profit organisations, viz--

1. the keeping of proper books of account;
2. the completion of a report by an accounting officer; and
3. the submission of narrative reports and financial statements;

11.6 it creates mechanisms to ensure that a not-for-profit organisation complies with its constitution and the Bill

11.7 it does away with all restrictions on fund-raising. Possession of a fundraising number is no longer a requirement for raising money from the public;

11.8 it creates an appeal mechanism in respect of decisions to refuse or cancel registration, and specifies a procedure for appointing the persons who may conduct appeals;

11.9 it provides for voluntary de-registration;

11.10 it obliges the Directorate for Not-for-Profit Organisations to keep and publish a register of all registered and de-registered not-for-profit organisations; and

11.11 it obliges the Minister to issue regulations concerning the circumstances and manner in which the public may have access to or inspect the constitution and other relevant reports and documents.

12. The Bill does not provide for a new corporate form for not-for-profit organisations, for the following reasons:

12.1 adequate provision for establishing a not-for-profit entity as a corporate body exists sufficiently either, in terms of Section 21 of the Companies Act No. 61 of 1973, or the Trust Property Control Act No. 57 of 1988, or by establishing a voluntary association in terms of common-law. The Bill has been drafted in such way that its requirements for what should appear in an organisation's constitution would automatically ensure that any organisation that gets registered would be a body corporate;

12.2 providing for a new form of incorporation is less simple than it appears. It requires detailed provisions to deal with every consequence of creating a new type of corporate body. To attempt to meet the needs of the sector, would once again involve lengthy and complex legislation which would defeat the objective of providing a simple form for this sector. For instance, the Close Corporations Act which was intended to provide a simpler form of incorporation for smaller companies took several years of preparation; and

12.3 there is no guarantee either that a new form of incorporation for not for profit organisations, would be any less complex than establishing a Section 21 Company or a Trust. The common law voluntary association remains the simplest and least complicated way for persons wishing to establish a not for profit organisation to achieve the status of a body corporate.

1. Any person interpreting and applying this Act must--
1. give a liberal construction to its provisions, in a manner that--
1. is consistent with the statement of purpose set out in Section 1; and
2. accounts for the particular purpose, role and circumstances of any relevant not-for-profit organisation;
2. consider the provisions of this Act in the light of any other law governing a particular not-for-profit organisation, preferring a reasonable interpretation of each law that avoids a conflict between those laws, over an interpretation that brings them into conflict; and
3. with respect to any particular not-for-profit organisation, apply the provisions of Section 16(1) and 17(3) only to the extent that they do not conflict with any other law governing that not-for-profit organisation.
2. Subject to sub-section (1), if any conflict relating to the matters dealt with in this Act arises between this Act and the provisions of any other law, except an Act amending this Act, the provisions of this Act will prevail.

Within the limits prescribed by law, every organ of state must determine and coordinate the implementation of its policies and measures in a manner designed to promote and enhance the capacity of not-for-profit organisations.

1. The Minister must establish within the national department a Directorate for Not-for-profit organisations to support and enhance the capacity of not-for-profit organisations.
2. The national department must provide the Directorate with the administrative support necessary to perform its functions.
3. The Directorate must perform its functions in accordance with the directives and administrative procedures determined by the head of the national department.

In addition to any other function specified elsewhere in this Act, the Directorate is responsible for--

1. developing policy;
2. determining and implementing programs;
3. facilitating the development and implementation of multi-sectoral and multi-disciplinary programs; and
4. liaising with other organs of state and relevant interested parties to achieve the purpose of this Act.

1. The Directorate may--
1. prepare and issue model documents including--
1. a model constitution for not-for-profit organisations; and
2. the model of the narrative report to be submitted by registered not-for-profit organisations to the Directorate.
2. prepare and issue codes of good practice for--
1. not-for-profit organisations; and
2. those persons, bodies or organisations making donations or grants to not-for-profit organisations.
2. Any model document or code of good practice, or any change or replacement of it must be--
1. made in accordance with the procedure contemplated in section 28 with any changes required by context; and
2. published in the Gazette.

1. Within six months after the end of each financial year, the Directorate must submit to the Minister a written narrative and financial report on the activities of the Directorate for the previous financial year.
2. Within one month after receiving a report contemplated in sub-section (1), the Minister must table it in Parliament. If Parliament is not in session at any time during that month, the Minister must table the report within one month after the start of the next session of Parliament.

The Minister must designate an employee of the national department as the Director for Not-for-profit Organisations. The director is responsible to perform the functions conferred on the director by or in terms of this Act or any other law.

1. The Minister must appoint persons as required to maintain a panel of arbitrators consisting of at least seven persons;
2. The following procedure applies whenever the Minister is required to nominate a person to the panel of arbitrators, in terms of sub-section (1) -
1. the Minister must publish in the Gazette and by any other widely circulated means of communication, a notice calling for nominees and stating the criteria for nominations;
2. the Minister must consider all nominations submitted in response to the notice;
3. the Minister must compile a short-list of nominees and publish it for comment in the Gazette and by any other widely circulated means of communication; and
4. the Minister must consider any comments received in response to the short list.
3. The terms and conditions of appointments of members of the panel of arbitrators must be prescribed by the Minister.
4. For any purposes of this Act, an Arbitration Tribunal may be composed of three members of the panel of arbitrators.

1. The Minister may appoint any advisory or technical committees for purposes of achieving the objectives of this Act.
2. When appointing an advisory or technical committee, the Minister, may determine--
1. its composition, functions, and working procedure;
2. the terms, conditions, remuneration and allowances applicable to its members; and
3. any incidental matters relating to it.

The Minister may prescribe benefits or allowances applicable to registered not for-profit organisation, but may do so only with the concurrence of any state department affected by a particular benefit or allowance.

1. A not-for-profit organisation may apply for registration by submitting to the director--
1. a prescribed form that has been properly completed;
2. two copies of its constitution; and
3. any other information that may assist the Directorate to determine whether or not the not-for-profit organisation meets the requirements for registration.
2. The director may require further information relevant to the consideration of the application.
3. Within two months of receiving an application from a not-for-profit organisation or the further information contemplated in whichever is the later, the director--
1. must consider the application and any further information provided by the applicant; and
2. if satisfied that the applicant complies with the requirements for registration, must register the applicant by entering the applicant's name in the register.
4. If, after considering an application in terms of sub-section (3), the director is not satisfied that the application complies with the requirements for registration, the director must send the applicant a written notice, giving reasons for that decision and informing the applicant that it has one month from the date of the notice to comply with those requirements.
5. The period within which compliance must be effected may be extended by the director on good cause shown by the applicant
6. If an applicant who has received a notice in terms of sub-section (4) complies with the requirements for registration within one month from the date of that notice, or the extended period granted to the applicant in terms of sub-section (5) the director must register the applicant by entering the applicant's name in the register.
7. If an applicant who has received a notice in terms of sub-section (4) either does not attempt to comply with the requirements for registration within one month from the date of that notice or the extended period granted to the applicant in terms of sub-section (5), alternatively makes an attempt within that time which the director concludes is inadequate to comply with those requirements, the director must--
1. refuse to register the applicant; and
2. notify the applicant in writing of that decision and the reasons for it.

1. Within one month after a decision of the director to not register a not-for-profit organisation, the organisation may appeal against the decision by submitting the following items to an Arbitration Tribunal--
1. the application to register;
2. the appropriate director's notice in response to the application, issued in terms of sub-section 13(4);
3. details of the organisation's response to the director's notice; and
4. the director's notice and reasons for the decision which is the subject of the appeal.
2. Within one month of receipt of the relevant items, the Arbitration Tribunal must consider the appeal in the prescribed manner and send a written notice of its decision to the organisation that submitted the appeal. If the appeal has not upheld the appeal, the notice must include the reasons for the decision.
3. If the Arbitration Tribunal upholds an appeal, the Director must register the organisation by entering its name in the appropriate register.

1. Upon registering any applicant, the director must--
1. issue a certificate of registration in the applicant's name on a prescribed form which must include a registration number;
2. send the certificate and a certified copy of the registered constitution to the applicant; and
3. advise the applicant of the date on which its name has been entered in the register.
2. A not-for-profit organisation that has been registered remains registered until--
1. its registration is cancelled in terms of this Act;
2. the organisation is voluntarily deregistered; or
3. the organisation is wound-up.

1. Every registered not-for-profit organisation must provide the Directorate with--
1. a narrative report of its activities in the prescribed manner together with its financial statements and the accounting office's report as contemplated in Section 17(2), within nine months of the end of its financial year; '
2. the names and physical, business and residential addresses of its office-bearers within one month of any appointment or election of its office-bearers even if their appointment or election did not result in any changes to its office-bearers; and
3. a physical address in the Republic of South Africa for the service of documents as contemplated in Section 16(2);
4. notice of any change of address within one month before a new address for service of documents will e effect; and
5. any other information as may be prescribed.
2. The Directorate may request a registered not-for-profit organisation to submit to the Directorate any information or document reasonably required for purposes of enabling the Directorate to determine whether the organisation is complying with--
1. the material provisions of its constitution;
2. any condition or any term of any benefit or allowance conferred on it in terms of Section 11; or
3. its obligations in terms of this section and Section 17 or any other material provision of this Act..
3. A registered not-for-proft organisation must accede to the request contemplated in sub-section (2) within one month of receipt of the request.
4. If the accounting officer of a registered not-for-profit organisation becomes aware of any instance in which the organisation has failed to comply with the financial provisions of either this Act or its constitution, the accounting officer must notify the Directorate of that occurrence--
1. within one month of becoming aware of it; and
2. in writing with sufficient detail to describe the nature of the noncompliance.
5. The duty imposed on an accounting officer in terms of sub-section (4) supersedes the accounting office's duty of confidentiality owed to the organisation concerned.

1. A registered not-for-profit organisation may change its constitution or its name.
2. A registered not-for-profit organisation that has changed its constitution or its name must send the Directorate--
1. a copy of the resolution and a certificate signed by a duly authorised office-bearer stating that the resolution complies with its constitution and all relevant laws; and
2. if the organisation has resolved to change its name, the original of its current certificate of registration.
3. Upon receiving the documents contemplated in so, from an organisation that has resolved to change its Constitution, the director must--
1. register the changed or new constitution if it meets the requirements for registration;
2. endorse a copy of the resolution, certifying that the change or
3. replacement of the constitution has been registered; and
4. send the endorsed copy of the resolution to the registered not-for-profit organisation.
4. Upon receiving the documents contemplated in sub-section (2) from an organisation that has resolved to change its name, the director must--
1. enter the new name in the register and issue a certificate of registration in the new name of the organisation;
2. remove the old name from that register and cancel the earlier certificate of registration; and
3. send the new certificate to the organisation.

1. The director may send a compliance notice in the prescribed form to a registered not-for-profit organisation if the director determines that the organisation has not complied with--
1. a material provision of its constitution;
2. a condition or term of any benefit or allowance conferred on it in terms of section 11; or
3. its obligations in terms of Sections 17, 18 or 19 or any other material provision of this Act,
2. A compliance notice contemplated in sub-section (1) must--
1. be in writing;
2. notify the organisation of the director's determination and the reasons for that determination; and
3. inform the organisation that it has one month from the date of the notice to comply with the provisions and obligations of this Act.
3. The period within which compliance must be effected may be extended by the director on good cause shown by the organisation.

1. If a registered not-for-profit organisation which has received a notice in terms of Section 20; either does not attempt to comply with the notice within one month after the date of that notice or the extended period granted to the organisation in terms of Section 20(3), alternatively makes an attempt to comply within that time, which the director concludes is inadequate to comply with the notice, the director must--
1. cancel its certificate of registration and deregister the organisation by amending the register; and
2. notify the organisation in writing of--
1. that decision and the reasons for it; and
2. the date on which the amendment was made to the register.
2. When a not-for-profit organisation's registration has been cancelled, all the rights, benefits and allowances it enjoyed as a result of being registered will end.

A registered not-for-profit organisation may appeal against the decision of the director to cancel its registration, and the procedure established in Section 14 applies to that appeal, with the changes required by context.

1. A registered not-for-profit organisation may voluntarily deregister itself by sending the Directorate a written notice--
1. stating its intention to voluntarily Reregister; and
2. specifying a date, at least two months after the date of the notice on which the Reregistration must be effected.
2. Upon receiving a notice of voluntary Reregistration in terms of sub-section (1) from a registered not-for-profit organisation, the director must--
1. cancel the organisation's certificate of registration, and deregister it by amending the register; and
2. notify the organisation in writing of the Reregistration and specify the date on which the amendment was made to the register.

1. The Directorate must keep a register in the prescribed form of--
1. all not-for-profit organisations that have been registered;
2. all not for-profit organisations that have had their registration cancelled; and
3. all not-for-profit organisations that have voluntarily deregistered.
2. Within two months after the end of each financial year, the Directorate must publish in the Gazette the names of--
1. all not-for-profit organisations that are registered; and
2. all not-for-profit organisations whose registration had been cancelled during the previous financial year, and
3. all not-for-profit organisations who voluntarily deregistered during the previous financial year.

1. The Directorate must preserve in an original or reproduced form--
1. the constitution of a registered not-for-profit organisation;
2. the constitution of a not-for-profit organisation whose registration has been cancelled, or that has voluntarily deregistered for a prescribed period from the date of the cancellation or Reregistration; and
3. any report or document submitted to the Directorate in terms of this Act for a prescribed period from the end of the financial year to which they relate.
2. All members of the public have the right of access to and to inspect any document that the Directorate is obliged to preserve in terms of i
3. The Minister must issue regulations concerning the circumstances and manner in which the public may have access to or inspect the documents referred to in sub-section (2).

1. The Minister may issue any regulation that is necessary or expedient to achieving the purpose of ibis Act, including any regulation that is explicitly or implicitly contemplated in this Act.
2. As a matter of convenience, and for ease of reference only, Annexure "A" comprises a summary listing of examples of matters in respect of whist this Act contemplates that the Minister may make regulations.

1. Any condition, restriction or prohibition contained in a regulation must -
1. be proportionate to the object pursued by that regulation; and
2. limit the conduct of persons and bodies as little as is reasonably possible.
2. If a failure to comply with a condition, restriction or prohibition in terms of regulation is an offence by which a person may be subject to criminal liability, that regulation must provide that, to the extent practicable, before being subject to criminal liability, the affected person must be given notice of the offence and an opportunity to comply with the regulations.

1. When intending to issue or amend regulations, unless the public interest requires the regulation to be made without delay, the Minister must comply with the following procedure--
1. The intention to issue the regulation must be announced by notice in the Gazette and other widely circulated means of communication;
2. The notice must specify--
1. that a draft regulation has been developed for comment; and
2. where a copy of the draft regulation may be obtained;
3. the period for comment must be at least one month;
4. at any time before issuing the regulation, discussions and consultations of any form may be held with any relevant interest group;
5. the comments received and the content of all discussions and consultations must be considered before issuing the regulations.
2. The provisions of sub-section (1) apply equally to an intended amendment of a regulation other than an amendment to correct a textual error.
3. Any regulation affecting state revenue or expenditure may be made only with the concurrence of the member of the Cabinet responsible for Finance.

1. It is an offence to cause a not-for-profit organisation, when it is being wound-up, to transfer its remaining assets in the manner contemplated in Section 12(2)(o);
2. It is an offence for any body or organisation to present itself as being validly registered in terms of this Act unless it is registered in terms of this Act.
3. It is an offence for any body or organisation--
1. to make unauthorised use of a registration number, registration certificate or any information contained in a registration certificate; or
2. to make material false representations in a narrative, financial or other report submitted to the Directorate.
4. In any criminal proceeding in respect of an offence created in terms of this Act, a copy of the register will be admissible as evidence and considered as sufficient proof of whether an organisation has been registered or deregistered.

A person, body or organisation who is guilty of an offence in terms of this Act is liable for a fine or imprisonment or both a fine and imprisonment.

The Minister, by notice in the Gazette, may add to, change or replace any Schedule or Annexure to this Act.

1. The State Liability Act, 1957 (Act No 20 of 1957) applies, with the changes required by context, to each body established in terms of this Act, but a reference in that Act to "the Minister of the Department concerned" must be interpreted as referring to the Chairperson or head of the relevant body.
2. No member of staff, person or contractor of a body contemplated in sub-section (1) is liable for any damages arising from the publication or disclosure in terms of this Act of any report, finding, or recommendation that is given in good faith and submitted to the Minister, or to Parliament.

1. The laws mentioned in column 1 of Schedule 1 are repealed to the extent indicated in column 3 in that Schedule.
2. The provisions in Schedule 2 concerning transitional matters are part of this Act.

This Act binds the state.

In this Act unless the context indicates otherwise--

This Act is called "The Not-for-profit Organisations Act, 1997", and comes into operation on a date fixed by proclamation in the Gazette.

1. any department of state or administration in the national provincial or local sphere of government, or
2. any other functionary or institution -
1. exercising a power of performing a function in terms of the Constitution or a provincial constitution, or
2. exercising a public power or performing a public function in terms of any legislation, but does not include a court or a judicial officers.

1. No person shall be appointed as or hold the office of an accounting officer of a corporation, unless he is a member of a recognised profession which -
1. as a condition for membership, requires its members to have passed examinations in accounting and related herds of study which in the opinion of the Minister of Trade and Industry would qualify such members to perform the duties of an accounting officer under this Act;
2. has the power to exclude from membership those persons found guilty of negligence in the performance of their cubes or of conduct which is discreditable to their profession; and
3. has been named in a notice referred to in subsection (2).
2. The Minister of Trade and Industry may from time to time publish by notice in the Gazette the names of those professions whose members are qualified to perform the cubes of an accounting officer in terms of this Act.
3. A member or employee of a corporation and a firm whose partner or employee is a member or employee of a corporation, shall not qualify for appointment as an accounting officer of such corporation unless all the members consent in writing to such appointment.
4. A firm as defined in section 1 of the Public Accountants and Auditors' Act, 1991, and any other firm may be appointed as an accounting officer of a corporation, provided each partner in the latter firm is qualified to be so appointed.