Author: Lambert

WOODGROVE RETIREMENT VILLAGE

Congratulations on a brilliant presentation at Woodgrove on Tuesday. You both were superb. Great contact with a diverse congregation, empathetic responses to questions, eloquent!! I’m delighted that you are with us on this complex legal journey.   – Dave Mayo – Woodgrove Retirement Village Resident Association member (Woodgrove is one of the Mowana Communities NPC Villages)

BIODIVERSITY LAW CENTRE

I just have to commend you on the slick, efficient and friendly operation of your ngoLAW team. It is SO good working with them! They identify what’s required before I even do, and I consider myself quite organised. Kate Handley (Executive Director)

RHINO REVOLUTION

A big thank you to ngoLAW for guiding us through the transition from Trust to NPC.  Clear, responsive and organised, every step of the way—we’re glad to keep collaborating.  Hanno Nusch (CEO)

DEMOCRACY DEVELOPMENT PROGRAM (DDP)

Thanks for the excellent service rendered. I appreciate it. Keep it up. Dr Paul Kariuki (Executive Director)

KRONENDAL MUSIC ACADEMY

After 17 years, Kronendal Music Academy (KMA) needed an updated Constitution and ngoLAW was referred to us. Within days they were on it! An initial zoom meeting and subsequent reviews meant that we received a practical, meaningful and up-to-date document that is going to serve us well. Thank you ngoLAW for your professional, friendly and efficient service. It was such a relief to know we have everything covered.  Dwyn Griesel – CEO and Founder

YOUTH MENTORS AND DEVELOPERS

When our funders introduced us to ngoLAW at one of the grantee convening workshops, we learned so much on the different types of non-profit entities and legality associated with the registration. Therefore, when we left the workshop, we knew that we needed to contact them soon on various issues we did not understand, as youth-led NPO. To date. ngoLAW has helped us so much on compliance, having a correct and legally accredited constitution for our organisation. There is so much I can thank the ngoLAW team for, but lastly, thank you so much for this PBO and Section 18 registration which will change our lives and all the communities we work in as we can now try to get funding for salaries and wages. Lindani Samkelo Makhaye – Governing Board member

ALL PROTOCOL OBSERVED

We worked with ngoLAW to create a new home for The Continent, a weekly African newspaper based in South Africa. They suggested the best, non-profit structure to support this journalism work. They also took us through a meticulous process to help create the guiding documents for that new home — All Protocol Observed NPC. These are the documents that will guide the organisation for decades to come. All this was done with consideration to the tiny budgets that journalism projects have to work with. And we now have a home. Sipho Kings – Publisher – All Protocol Observed and The Continent

PENNY APPEAL SOUTH AFRICA

I highly recommend ngoLAW for anyone seeking top-notch legal services and advice. Clear communication, strategic guidance, and attention to detail were evident throughout the process, resulting in our entity having a smooth transition. Shahnaaz Paruk – CEO: Penny Appeal South Africa

HANDS THAT CARE

Exceptional service! From start to finish, ngoLAW demonstrated professionalism, expertise, and a genuine commitment to assisting our legal matter efficiently. A pleasure to work with.”! Shahnaaz Paruk – Board of Directors

Welcome to the first ngoLAW Brief of 2024

This is the first ngoLAW Brief of 2024 and coming to you a bit later than usual, as it has been a busy (and tough) first quarter of the year for ngoLAW, and many others.  And it comes to you on an auspicious day, as we await results from our journeys to the polls yesterday. Whatever the election outcome, non-profits will continue to do their work, so take deep breaths and dive into our updates on and explanations of: The 18A third-party filing roll-out (31 May deadline) Beneficial Ownership- what does it mean and what do we have to do about it? Why is updating directors with CIPC suddenly so hard? Discrimination in employment for faith-based organisations. The new ‘multinational tax’- should we worry? Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. Aluta continua Nicole, Bandile, Janice, Chelsea, Lisa, Dorothy and Alison Below: our logo made with Woza Moya (Hillcrest Aids Trust) baskets on our office wall. 18A FILING REQUIREMENTS – DEADLINE, GUIDES AND SOME GOOD NEWS For those unfamiliar with the concept of 18A third-party returns, please see the introductory note in our 2023 2nd quarter Brief: https://ngolawsa.co.za/second-quarter-2023-ngolaw-in-brief/ The first mandatory deadline for filing these returns is 31 May and SARS has issued some updated information, guides and FAQs here: Tax Exempt Institutions Connect Issue 5 (May 2024) | South African Revenue Service (sars.gov.za) Please do visit this TEI issue and the FAQs for all of the detail, but our snapshot of useful bit is: The tax reference number of donors is not mandatory in this first filing season. However, advice from Somaya Khaki of SAICA is that the efiling form still makes it mandatory and this has not yet been fixed by SARS.  It will become mandatory in subsequent filing seasons, so please do collect them, file them if you have them, and, depending on how soon the efiling fix is on place, there should be no need to panic in this filing season if you have not historically collected donor tax reference numbers. Organisations which have 18A status and have not issued any 18A receipts in the period 1 March 2023 to end Feb 2024 DO have to file an IT3(d) but it will be a Null declaration. This may be submitted via efiling. The period for which you file is not connected to your financial year, but is for the exact period required by SARS; SARS does accept an annual (summary) receipt being issued for monthly/other periodic donations, and has issued a Binding General Ruling in this regard: Legal-IntR-R-BGR-70-Issue-of-a-Single-Section-18A-Receipt-to-a-Donor-Taxpayer-for-Multiple-Bona-Fide-Donations.pdf (sars.gov.za). You may choose whether to issue monthly or annual receipts. The IT3(d) reporting may be conducted on efiling for up to 50 receipts being reported. The full set of FAQs contains a lot of useful detail and some step-by-step tutorials and can be found here IT3(d) Third Party Data FAQs | South African Revenue Service (sars.gov.za) (Please note that ngoLAW is not able to assist with the actual filing, as we leave those to accountants who have this skill set). WHO ARE OUR ‘BENEFICIAL OWNERS’? For non-profit organisations which, by their very nature, cannot be owned, the idea of having ‘Beneficial Owners’ is alien and feels ill-fitting.  However, this is the globally understood phrase for ‘people in control’ and it seems we are stuck with it. Although non-profits have no owners, they are administered and controlled by people, and the identification of ‘Beneficial Owners’ is about listing (and then reporting on) the actual (warm-bodied) people who have the ultimate responsibility for and authority over the organisation. Beneficial Owners are not: In the case of non-profits, they are not owners. They are also not beneficiaries (unless the beneficiaries also have voting powers in the organisation). They are not other companies or organisations but are the people at the very bottom (or top!) of the structures. They are not anyone whose vote or power is less than 5% of the total voting power for the part of the organisation they serve on or belong to.  So, for a club, association or with-members NPC which has more than 20 members, those members are not ‘Beneficial Owners’ and do not have to be listed as reported on.  (We predict an uptick in membership for organisations whose member quotient is hovering under 20!) Beneficial Owners always include the Board All of those who serve on governing bodies of any type of non-profit will be counted as ‘Beneficial Owners because: They are people; They are in charge.  So: For NPCs, the directors will all be Beneficial Owners; For Trusts, the trustees will all be Beneficial Owners; For voluntary associations, the main governing body (whether called Board, Management Committee or Governing Body) will all be Beneficial Owners.  For organisations which have only Boards, only the Boards are the Beneficial OwnersFor no-members NPCs and Trusts, if there are no people or organisations which have ‘Founder’ or “Donor’ powers, then the Beneficial Owners are the directors or trustees.  End of. Just them. For organisations with members or Founder/s there are more Beneficial OwnersRemember the guiding principles – we are looking for warm-bodied people who have 5% or more of voting power: For a with-members NPC or voluntary association where: all of the members are people; and there are 20 or fewer members; those people are Beneficial Owners (as well as the Board). For a with-members NPC or voluntary association where: all of the members are people; and there are more than 20 members; none of the members are Beneficial Owners. For a with-members NPC or voluntary association where some or all of the members are companies or other organisations, the Beneficial Owners will be the shareholders or members of the member companies or member organisations unless there are 20 or more of them. For any type of organisation which has named ‘Founder/s who have ongoing powers such as to appoint the board or veto certain decisions: If the Founder/s is/are people, they will be Beneficial Owners (in

Little Zebra Books

Little Zebra Books has been very pleased with the service we have received from ngoLAW.  When we needed help on our Section 18A, they communicated, set realistic deadlines, and met them. And our application was successful! Thank you, ngoLAW. Tamlin Jethro

Northland School

ngoLAW provide a personal,  professional and efficient service that has MORE than met our requirements. We highly recommend this company for all your legal requirements. A big thank you to ngoLAW! Anne-Mary Myhill – Principal

Welcome to the last ngoLAW Brief of 2023

First the news that the latest iteration of the “Spy Bill” (which looks like being rushed through committees and Parliament in the dying days of 2023 in the same way that the FIC General Laws Amendment Act was in 2022) has dropped specific references to security vetting of all NGOs, but is still terribly vague on accountability and lacking in enforceable oversight of the security sector. See Heidi Swart’s article at https://intelwatch.org.za/2023/11/28/op-ed-new-spy-bill-will-businesses-be-next-to-face-state-security-vetting/ to follow and add support to the civil society stand against invasive overreaches of State power. Regarding the FIC provisions and Grey Listing the Financial Action Task Force, has recently issued amendments “to address the misapplication and misinterpretation of Recommendation 8, that had led countries to apply disproportionate measures on Non-Profit Organisations (NPOs)” for the full story: https://www.fatf-gafi.org/en/publications/Fatfrecommendations/protecting-non-profits-abuse-implementation-R8.html In the rest of this Brief we deal with some questions and issues often encountered in our work: How can we help boards do better? Why do the CIPC standard-form MOIs not contain the PBO clauses? What is the fuss about Objects clauses? Is it a conflict of interests or a breach of duty? We end with a note on changes coming for parental leave rights for employees, based upon our fabulous Bill of Rights. Long may she provide the impetus for South Africans to equally and fairly enjoy their rights. We hope that you find all of this information useful and,  as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future newsletters, click this link to subscribe  If you would rather not be sent these, then unsubscribe at the end of the newsletter. Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. The end (of 2023) is nigh! Nicole, Bandile, Janice, Chelsea, Lisa, Dorothy and Alison TOP THREE THINGS TO HELP BOARDS DO BETTER In a recent training/refresh session with the profoundly passionate and highly qualified board of WESSA, https://wessa.org.za/ I was put on the spot with the question: “What three things should we do to make sure that new board members, who may come from a corporate context, are able to properly engage with the work of governing a non-profit?”     With WESSA’s permission, I share here my generally-applicable top three, in no particular order:  Enable proper understanding of NGO financial reports.  These reports should clearly show the difference between ‘deferred’ funds (held for donors and to be spent in particular way) and the funds available for running the organisation.  The language used to describe different sorts of income should be accurate and make sense to outsiders/new board members. Give the board an accurate picture of the extent of work and time which fundraising takes.  They cannot oversee the work of the CEO if they do not understand the demanding nature of raising funds and then reporting to donors; Let the board directly encounter the work being done: field trips to projects and bringing project-managers into the room to report will do so much more to inspire, inform and allow useful input than all of the lovely words and numbers that are sent to them. (I am still mulling on my recent visit to the new home ground of the Siyazisiza Trust and now have a real and ‘live’ connection to the amazing work being done there https://siyazisiza.co.za/ .) THE SARS CLAUSES AND STANDARD NPC MOIs When SARS grants PBO (and some other sorts of exempt) status, it usually includes in the exempting letter a requirement that the founding document of the organisation is amended within a period of time, in order to include the clauses which are legally required under the relevant section of the Income Tax Act. Those who have registered as a non-profit company (NPC) using one of the standard-form memoranda of incorporation (MOIs) available from CIPC are often surprised to find that these standard MOIs do not include the required SARS clauses. Because there are many varieties of tax exemption and also not all NPCs will be applying for the status, it is not possible for the CIPC standard documents (or any standard or precedent MOI)  to also do the SARS-end work. For those NPCs who are granted exempt status, the MOI will have to be amended by special resolution of the members (or directors, if it is a no-members NPC)  and the amended MOI registered with CIPC, and then sent to SARS. At ngoLAW, we see the drafting of these amended MOIs as a wonderful opportunity to create for the organisation a ruling, founding document which is appropriate, relevant and useful for their governance and protocols.  There are others who might (instead of drafting a unique MOI) lodge with CIPC an addendum to that standard form MOI with all of the SARS clauses slapped into it, but we do not take this approach as: We think that this adds confusion, as you then have two (unintelligible) documents to refer between and confusion and misunderstandings arise; Annexures which deal with things also dealt with in the main body will almost invariably introduce internal contradictions, which make thinking lawyers break out in hives; We think the standard form MOIs are not easy to follow and take every chance we get to replace them with documents more useful to governance.  The good news is amending the MOI need not be a rushed affair. Even if the deadline in the SARS letter has expired, they cannot remove exempt status from you without notice and an opportunity to correct matters. If you did receive a notice to comply, a response that the board is engaging with the process of crafting a special MOI which will be sent to SARS in due course is, all else being well, likely to be satisfactory. So the members or board may approach the matter in a considered way. But a start should be made. OBJECTS: WHAT ARE THEY GOOD FOR? We routinely come across organisations whose ‘objects clause’

NGOs are under attack by the South African state again – including the knitting clubs

Non-profits must be alert to a new threat to their freedom of association and ability to operate from a draft Intelligence Laws Amendment Bill. (This article was written by Nicole Copley, and appeared in the Daily Maverick on 03 Sep 2023)

Ask NGOlaw

Dear ngoLAW can my brother-in-law/mother/husband serve on the same non-profit board as me?  NGOs quite often begin as family affairs, in which some family members call on other (family) they know and trust, get some good stuff done, and then come to us to set up a legal structure to house, manage and fundraise for the work. Sustainable and credible NGOs cannot continue to be dominated by one family, however. Not only do they face the risks that family businesses do (when everything is going right it works well, but when things go south, family fallouts can be catastrophic for operations) but there is also a major issue with credibility with donors: donors will suspect that a family-led NGO is set up to feather the nest of the family members, and will be reluctant to donate. Then there are the legal restrictions: For tax exempt status, the Income Tax Act requires that a board has at least three people on it who are not “connected persons”.“Connected” includes relatives by marriage as well as blood (and adoption) and you are ‘connected’ if there are three or fewer people between you and another person, thus your adopted child’s wife’s brother is ‘connected’ to you. The Income Tax Act does not prohibit any family members from serving on a board together, but you have to make sure that there are at least three of you who are not related to any of the others. Therefore, if there are three of you are on a board and one resigns and the organisation wants to replace them with a family member of yours on the board, you can do this, but you would need to add another unrelated board member, to keep satisfying the SARS requirement. In case you thought that you could then have any number of family members on the board, as long as there are also at least three who are not related to any of you, we now turn to the requirements of the NPO Directorate: The NPO Directorate will not accept more than a total of two board members who are related to each other. So, in summary: SARS requires that at least three of the board are NOT related to each other; NPO requires that no more than two are related to one another; and Donors don’t like boards to be dominated by a family. Our advice is that if you have good reason to include related people on a board, make sure that you don’t go over the maximum of two, and that the majority of the board are not related to one another.

Dear ngoLAW: No-members NPC

Back when we were operating under the old Companies Act we used to be required to have members and once a year we would have an annual general meeting. It was a bit silly in that we would just close the normal board meeting and then open the AGM with the same participants, do the required things and close the meeting. Now that we are operating under the new Companies Act and have chosen not to have members, we have not been having a separate AGM. I’m fairly sure I was told that was correct. But as we have been working on funding applications there is often mention or a question on when we have our AGM. Do we legally still need to have an AGM? If not and we chose to have one anyway, just to help us in our applications, is there anything we need to be aware of and would you suggest that we do something similar to what we did before where we would just close a normal board meeting and then open the AGM for the formality of having one? Would the annual financial statements typically be signed at an AGM, as well as auditors appointed? No-members NPC Dear No-members NPC You are correct- without members, there is no legal requirement for an AGM to be held, in fact, it is legally not possible to do so, since an AGM is a meeting of members/shareholders.  In fact, the new Companies Act defines an AGM as ‘the meeting of a public company required by section 61(7)’. As an NPC is not a public company, this section and definition do not apply. My suggestion is that, when funding applications ask for details of your AGM you fill in ‘not applicable’. If there is a narrative description of the meeting and what occurs to be completed, you could say something like: The non-profit company has no members and only a board of directors, and therefore it is not necessary or possible to hold an AGM. However, the Board does set aside a meeting in each year at which the typical agenda items for an AGM, are dealt with. Thus, at the meeting of the Board on …., the financial statements as presented by the auditors were considered and adopted, the appointment of auditors was confirmed, the Board considered and accepted the report by the CEO of the activities for the past financial year, and the Board dealt with any director resignations/appointments which were required.

Dictionary corner: “Ex Offico”- what does it mean?

This (widely misunderstood) term means “by virtue of another office held” and simply means that the person automatically becomes a board member because of some other position they are in. Those who serve ‘ex officio’ are not voted on, do not resign and are not subject to terms of office, as they are in when they are in the (other) office, and out when they leave. Please note that the “ex officio” status does not mean that they are non-voting on the board. If anyone (the CEO, the CFO etc.) is appointed to the board ex officio and the board wants the ex officio board member/s to be non-voting, the founding documents will need to specifically provide for this. However, we advise that you think through this carefully. Our view is that it is inherently unfair to put someone in a position of responsibility and then not give them the tools they need (their vote) to carry out the responsibility. If the Execs at the board meetings are not to vote, then we would rather suggest entrenching in the founding document a provision that certain specific (or at least one/two senior execs) attend all board meetings (except the parts of them where their service and performance may be discussed) but stop short of having them appointed to the board. Executives are appointed by and report to the board and will, if they are also on the board, often struggle with the switching of hats required by these dual roles. The trend towards including executives on boards ex officio can be traced back to the King governance codes, which support the ‘balanced board’ idea, meaning that there is an equal number of management and non-executives on the board. In our view this is appropriate in the for-profit environment, where all directors are appointed by shareholders and the directors often are shareholders themselves, but careful thought should be given to the issues of accountability and responsibility before applying this principle of King IV to a non-profit.

Difference between a with and without members NPC

With members Without members –       The board governs, the members appoint the board and special resolutions are passed by members (same as shareholder role, but no ownership as no shares); –       Checks and balances in place All authority in the board of directors, including special resolutions to amend the MOI etc, and also power of appointment of new directors.   (Can adjust and give some of these powers to other parties or organisations)   Members elect the board.   Usually remaining board chooses replacement board members In the case of an impasse at board level or the board not performing or all resigning at once (!) the members can reconstitute/fix the board.  If the board is ‘stuck’, or not performing, or all depart at once, there is no back-up plan or easy way to solve. Only requires one member and members can be organisations or natural persons. Advise a wider pool of members, for future of the organisation. Three directors minimum.   Requires minimum three directors Members make special resolutions: amend the MOI, change the objects, and decide to close down. Also determine director remuneration.   Governance, oversight, strategy, financial oversight, risk management, policies, structures, appointment of executive- All decisions made by the board AGM must be held   No AGM Allows for growth to a bigger membership, and for these members to then elect a ‘fit for function’ board to govern. In cases where representation is key, as participation would only be through appointing a person to the board, growth in organisations involved could lead to a too-big board.   Members must elect at least one third of the board each year (statutory minimum requirement) i.e. board rotation terms should be based on a three year cycle.   It is advisable for board terms to be observed anyway, but they can be structured in any way.

Fiduciary Duty

DID YOU KNOW?   Defined: Fiduciary Duty This is the general duty of trust which rests on anyone acting not for themselves but for another. Directors, trustees, committee members and employees of organisations are required to act with the level of care and diligence which could reasonably be expected of someone taking care of the affairs/money/property of another. This duty is owed to the organisation and also to its beneficiaries.

Founder syndrome

In his new article published on marcuscoetzee.co.za,  Marcus Coetzee says: “ Founder’s syndrome occurs when a founder struggles or refuses to ‘change gear’ and adopt a new mindset, approach or skill set as the organization grows and as its strategic context changes. Rather than making way for a new leader to take the organization to the next level, the founder tries to hang on to power. The founder becomes unable to achieve the outcomes associated with effective leadership. The organization then becomes maladapted – inappropriately or poorly adapted to its environment”. Marcus’ insightful article diagnoses the syndrome and prescribes some treatments and also preventative measures.  At ngoLAW we always advise those founding new organisations to think and build beyond themselves from the start, and we support the advice given by Marcus- read the full article here: https://www.marcuscoetzee.co.za/founders-syndrome-undermines-the-legacy-of-strong-leaders/    

Governance concepts: some quick definitions-types of board members

We find that our clients are often confused by these terms- hopefully this brings clarity: Executive Those (on the board or not) who have management authority and responsibilities. The Managing Director, “Executive Director”, Chief Executive Officer, CFO, COO, etc are all executives. Non-Executive Those who serve on the board or any other structure of the organisation (advisory council, committees) who do not have any managerial responsibility for day to day running of the organisation Independent A non-executive board member who is not remunerated by the organisation for any services provided to the organisation (other than board fees, if applicable) and who has no personal connection to or financial interest in the organisation.(For contemplation: King IV states that once a board member has served for nine years, they are no longer truly independent anymore, in that they will have got too comfortable and familiar to be able to wield the sharp edge of independent perspective required) Ex Officio Those who are on the board automatically because of some other position they hold, either in the organisation or in another organisation.

Governance: Why and How

“Governance” is a word more likely to produce a (politely stifled) yawn than any excitement or interest. It does not sound like fun and many founders of organisations and those who go on to lead them treat it as an irritation and a hindrance, something that is a boring waste of time and money when there are (surely) more interesting and impactful things to do with funds and energy. In fact, good governance (which entails putting in place systems, limits and controls and a rigorous, ongoing adherence to them) is a crucial component of building an organisation which makes an impact, attracts support, draws in good board members and staff, and survives in the long term.  Passion and drive are important for success but governance is the ‘yin’ to passion’s ‘yang’ – it is the foundation-stone and the central support.  I may be getting a bit poetic here, but really believe that good governance is like the soft rain which falls all night, nourishing and feeding. It is hard enough to build a sustainable organisation which achieves its objects over the long term and survives in a world of ever-changing demands and pressures with good governance mechanisms in place – try to do it without a firm support structure, and you will find the work, the dreams and the people start to fray, to come apart at the seams, and rupture under strain. This view of the fundamental importance of governance is one we have arrived at after long years of experience with organisations. Over our next few letters, we will examine some of the important components of governance, and open spaces for conversation and learning.  If you have any stories to share, and suggestions to make about topics and issues to discuss under the heading of ‘governance’ be sure to let us know on enquiries@ngolawsa.co.za or go to our website, and send us your suggestion in the ‘contact form’ on www.ngolawsa.co.za.

What are the limits in our founding document?

Every founding document defines the objects/mission of the organisation and 98% of founding documents will say that the efforts and the funds of the organisation may only be expended in pursuit of that defined object. This echoes the Income Tax Act requirements for tax exempt entities: activities and expenditure are strictly limited to those which further and support the objects of the organisation. The first step, then is to find your constitution/ trust deed/ memorandum of incorporation and have a close look at the objects clause. If your objects are fairly widely phrased and the new/additional work you intend falls within them, then you can go ahead. If, however, this is not the case, then you cannot proceed without first amending your founding document as those who serve the organisation are literally only empowered to do so in pursuit of the objects and any actions taken which fall outside of the pursuit of the objects will be unauthorised and could be called into question and be classed as a breach of duty by the individuals involved. Now, amending your founding document is a pretty, well, foundational thing to do, and will require: In the case of a voluntary association or an NPC with members, a vote by members and with a higher percentage of agreement required than ordinary resolutions (typically 75%); In the case of a trust, the Master will require all of the trustees to agree; and For a no-members NPC, the directors (and any other stakeholders who may be given powers to vote on this decision) will have to vote, and usually also 75% in favour is required. The practicalities of voting and signing are one current impediment, and will be dealt with in the next newsletter but a really important question is how soon is the decision effective, ie, how soon can the organisation start doing the new/added work?   Nature of change When is it effective? Note: Reporting requirements Voluntary association The constitution of a voluntary association is a contract between the members of the VA. Changes are made by agreement, in terms of the rules set out in the document (notice period, quorum, votes required). The change will take effect from the date that the agreement is reached, or from any other agreed date. (Where an organisation may, by agreement of members, already have embarked upon the new work and now are following up with the formalities, the resolution to amend the objects clause could record the date upon which the members actually but informally consented to the change as the actual date of the change, if necessary) If the organisation has tax exempt status, a copy of the minutes/resolution and of the amended document must be sent to SARS Tax Exemption Unit (TEU). If the voluntary association is a registered NPO, then a copy of the amended constitution must also be lodged with the NPO Directorate along with proof of how it was validly adopted. Trust The trust deed is an agreement between trustees and named beneficiaries who have vested (enforceable) rights. Most charitable trusts do not name individual beneficiaries or, if they do, do not give that beneficiary an ongoing enforceable right to benefits. Therefore the trust deed is usually amended by the unanimous agreement of the trustees. It should be noted that, even where trust deeds record that a lower percentage of trustees may agree to changes, the Master still enforces the law on this and requires 100% vote in favour. Although the amendment to the deed must be registered with the Master, it is effective from the date agreed by the Trustees and, as with the voluntary association, that resolution could record a past date upon which consensus was actually reached and which is the effective date of the change. All trustees must sign an original amended deed and an original deed of amendment (resolution to amend) and these must be lodged with the Master of the High Court. Once the Master has confirmed that the amended deed is on record, a copy of that letter, the amended deed and the resolution should be sent to SARS TEU and to the NPO Directorate. NPC The Memorandum of Incorporation (MOI) of an NPC is a statutory document which is governed by the Companies Act. Any change to the MOI must be made in accordance with the procedures set out in the Act as well as any permitted variations from the Act which are contained in the existing MOI of the Company. The change is adopted by special resolution. The amended MOI is effective from the date that the amended document and supporting forms and documents are lodged with CIPC. Amendments to the MOI must be lodged with CIPC. It usually takes about a week or so for the amendments to be noted and registered. This notice from CIPC, the amended MOI and supporting documents should be lodged with SARS TEU and the NPO Directorate.

uMgeni Tourism Board

I would like to thank Nicole for writing the three practical guides to NGO’s. It has been extremely helpful and I will definitely be reading her advice with a new set of eyes.  The practicality and simplicity of the books are a perfect fit for someone like me who does not enjoy reading. I have already suggested the books to a few new and aspiring organisations.  Once again thank you and excellent work.  JP Prinsloo (uMngeni Tourism Board Chairperson)

KidsCan!

KidsCan! is still a small organisation but if it is planned for us, we will grow. Our dream is to become the best After Care and Learning Centre in our area, helping children from a vulnerable background. Without ngoLAW’s guidance and straight answers to the many questions we had, we would have struggled receiving the PBO and 18A status. We are also grateful for their assistance with the B-BBEE affidavit. Hannatjie Doorduin

Second Quarter 2023 ngoLAW in brief

Welcome to June!- the past couple of months have brought more regulatory changes to the sector, including the final versions of: the NPO Act Regulations (the draft version was dealt with in our previous Brief) and the new Companies Act Regulations (which we will deal with in our next Brief). For this Brief, though, the focus is on 18A and the new “third party return”– which is in the pipeline -but needs to be prepared for. This Brief will explain the general principles, and then the next issue will go into the finer details of preparations required. We also deal with the difference between ‘doer’ and ‘donor’ 18A status and why the details of this distinction are so important. We end with reflections arising from a recent online webinar hosted by Trialogue and the lively debate with two CSI Foundation Leaders- also a link to that webinar included. We hope that you find all of this information useful and, as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future newsletters, click this link to subscribe If you would rather not be sent these, then unsubscribe at the end of the newsletter.Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. Hands to the plough and eyes on the horizon, as ever! Nicole, Bandile, Janice, Chelsea, Lisa, Dorothy and Alison NEW FROM SARS- “THIRD PARTY RETURNS”  BY 18A ORGANISATIONS In our previous Brief https://ngolawsa.co.za/first-quarter-2023-ngolaw-in-brief/ we explained the new details which have to be captured on the expanded version of the 18A receipt to be issued to SA taxpaying donors who request them. In the next step towards closing down 18A fraud, SARS has introduced a new tax filing requirement for organisations issuing 18A receipts (and for trusts which ‘vest’ an amount in a named beneficiary)- the filing of “third party returns”. What is a “third party return”?These are information returns (so reports filed with SARS in a specific format) and they are currently required to be filed by banks, medical schemes, and other entities as part of their tax compliance obligations. For example, banks and other financial institutions in South Africa are required to submit third party returns to SARS (the IT3(b) and IT3(c) returns) which give information about interest earned, dividends paid, and other investment income earned by their customers. Similarly, medical schemes are required to submit third party returns such as the IT3(m) return, which provides information about contributions received from and benefits paid to their members. These third party returns are used by SARS to verify the information provided by the bank customers and medical aid members when these taxpayers file their individual tax returns. The information reported in these returns helps SARS in its efforts to detect and prevent tax evasion, and to ensure that taxpayers are accurately reporting their income and deductions. So, a “third party return” is a sort of tax return which is not about your own tax affairs, but about the tax affairs of others (your customers, members and now donors) and helps SARS to connect the dots and check that people are not making false claims in their tax returns. SARS issued a draft Notice in April 2023, adding to the list of the organisations needing to file what are called third party returns. The new additions to the list of organisations which must, when the final Notice is issued, submit these returns is: Organisations which have 18A (donor deductibility) status and which have issued 18A receipts within the relevant period; and Trusts which are established or managed in South Africa and which ‘vested’ any amount in a beneficiary during the relevant period. The process of rolling these requirements out is in the testing phase and the first date by which submissions will be due is only end February 2024 (in respect of the period 31 Aug 2023 to end Feb 2024). SARS is, however, calling for early adopters to assist in testing their systems (and the organisation systems) and for voluntary submissions to be made. If the organisation you work with is likely to have innate complexities which will make this process difficult, or lack of technical expertise and support, we suggest that you do volunteer and make these returns before they are officially due, as the SARS systems will be refined and updated based upon the practical examples they process in their systems. Before getting into the details, it is good to know that the main aim of SARS in all of this is not to make the lives of NGOs more difficult, but to make giving and getting 18A deductions easier for donors, while clamping down on fraud. The end-game is that, when donors come to file their tax returns, the fields for 18A donations made will be pre-populated for them, based upon the information submitted by the recipient 18A organisations. Also, the likelihood of a need for an audit or for supporting documents to be filed by donors will be greatly reduced, as the system will independently verify the tax deductions claimed. Another important point to note is that SARS has not so far proposed any penalties for non-compliance with the requirement to file– they anticipate that there will be tweaks and accommodations to be made, and want to encourage participation so that they can make the necessary adaptations. Early adopters who make errors or who battle with the requirements need not fear that there will be SARS penalties for mistakes or technical issues. Will our tax-exempt organisation have to submit an 18A third-party return?Not all tax-exempt organisations and not even all tax exempt organisations which have 18A status will have to submit these new returns- SARS is only interested in the information of SA taxpayers (so, individuals and corporates) who have made a donation to an 18A organisation, and requested an 18A receipt to be issued to them.

NPC advice: what is a ‘unique moi’ and do we need one?

Many NPCS which are registered in a hurry or without any understanding of the importance of the Memorandum of Incorporation (MOI) of an NPC are often established with the CIPC standard form MOI as their founding document. At ngoLAW we only register with a standard CIPC MOI as a short-term emergency measure when the NPC needs to be registered fast and it is felt that there is not sufficient time for the board to engage with the process of drafting a “unique” MOI. (“Unique” is what the Companies Act calls all MOIs which are registered and which are not in one of the standard formats available online at CIPC). There are sound legal and governance reasons for using a unique MOI: In terms of the new Companies Act, the registered MOI is always the ruling document(the previous Companies Act was different in this respect).  This has made board charters (and-for PTYs- shareholders agreements) much less useful as they cannot override the provisions of the registered MOI.  Under the previous Companies Act it was standard practice to use a standard-form Memorandum and Articles of Association and then just adopt a Board Charter or other set of rules which usually began with something like: “In the case of any contradiction between what is in this document and what is in the registered Memo and Articles, the provisions of this document will apply.” This is no longer possible or useful, as, in the case of any contradiction, the new Companies Act specifically says that provisions of the registered MOI will apply. So, in the case of any dispute about rules or governance processes, the board may be following the internal governance document to the letter but, if they act in contradiction to what is in the registered MOI, then they will be in breach of the actual rules. In our view, it is far simpler and safer to have a unique MOI properly drafted to reflect the actual ‘ground rules’ of the NPC, than to be continually referring back and forth or righting a contradiction between the MOI and document adopted by the board. Where it is felt that a board charter is still useful to articulate details of governance structures or processes which are more fluid and will not be entrenched in the MOI, then the MOI needs to be the constant reference point for the Charter, to be sure that they do not contradict each other. The standard-form NPC MOIs do not comply with Income Tax Act provisionsrequired to be reflected in the founding documents of tax-exempt organisations.  SARS is permitted to and will grant PBO status to an NPC which has a standard form MOI, but (and look at your exempting letter to verify this) the status will be conditional upon the MOI being amended within a certain period (which has, by the time you read this, probably expired. Don’t panic, the exempt status remains in place until SARS tells you otherwise. But you do need a new MOI, and, while you are complying with SARS, we strongly suggest that you have a document crafted which is a useful, readable rule book for governance and which correctly reflects the structures and processes in the organisation.) The standard form MOI, as the ruling document of the company, is not a useful guide or reference point for governance of an NPC.  It jumps back and forth between topics, is hard to comprehend and follow as a whole, and relies on references to sections of the Companies Act, instead of spelling things out plainly. As we have already advised, a plain language, concise but thorough and appropriate, specially crafted MOI will make everything clearer and easier.

Corporate Foundations webinar

https://youtu.be/YmwxQhQceNA This link is to a high-speed panel discussion, featuring Nicole and hosted by Trialogue, on Corporate “Foundations” Trialogue’s primary research shows that 43% of companies surveyed in 2022 managed some or all of their corporate social investment (CSI) through a separate legal entity, 28% through trusts and 15% through non-profit companies. This is an increase from 35% in 2021. On 30 March 2023, responsible business consultancy Trialogue hosted a webinar to explore the motivation behind setting up these separate entities, and to consider which may be best for corporate CSI. The panellists included Tshego Bokaba (Group CSI Manager, Momentum Metropolitan Holdings), Arthur Mukhuvhu (General Manager, MTN SA Foundation), and Nicole Copley (founder of ngoLAW). Three legal options for companies Nicole Copley indicated that there are three legal options available to companies that do not wish to manage their CSI function internally. These are: A voluntary association A charitable trust A non-profit company (NPC) None of these entities can be owned, although they retain strong ties with the company funding them, and they can be registered as non-profit organisations. “They all exist for a purpose, as against organisations that exist to make a profit,” Copley noted. It is recommended that organisations that want to raise funds externally should consider externalising the CSI function. A voluntary association can be established under common law with no registration necessary, says Copley. It is inherently democratic and is often a grassroots or community-based organisation, with new committee members voted in each year. Although it is a quick and affordable option, companies may get into trouble as they may not want members, but donors will be under the impression they have them. This is generally not a good structure for CSI, according to Copley. Charitable trusts have long been a favourite with companies. They are governed by a board of trustees and must have their own bank accounts. However, trust deeds must be physically registered with the Master of the High Court, and the Master must be notified in writing every time a trustee is changed. This is a time-2 consuming process, which is why trusts are becoming less popular. Copley notes that the Master will be introducing electronic systems in future, though this may not apply retroactively to existing trusts. Non-profit companies were previously known as Section 21 companies under the previous Companies Act and had to convert to NPCs when the new Companies Act came into being in May 2011. A Memorandum of Incorporation replaced the Memorandum and Articles of Association. “An NPC provides you with greater flexibility as you can set it up with or without members,” says Copley. It can also appoint a diverse board consisting of external board members. Another obvious advantage is that you can make any changes electronically and any information can be verified online – for example, whether directors have been filing their annual returns.” Although greater compliance is required, this confers greater credibility. The tax picture An in-house CSI department may claim expenses as tax deductions, which can be justified as marketing or stakeholder engagement expenses, for example. However, there is always the chance that an auditor may question whether expenses have been incurred in the production of income, and this may prompt a company to set up a separate legal structure for tax reasons. Companies can’t provide Section 18A certificates, while other legal structures can, says Copley. However, it is important to note that Section 18A certificates can’t be issued for anything other than authentic donations. “It can’t be a disguised payment for something that’s actually a marketing service,” she notes. “If you can satisfy the requirement of section 11A, which applies to pre-trade expenses incurred, then you can claim a normal tax deduction. However, if you can’t justify such a deduction inside the business – if it’s inherently misaligned and there’s no tangible benefit to the business – a Section 18A can be issued.” Momentum Metropolitan Foundation Tshego Bokaba explained that the Momentum Metropolitan Foundation was established in 2009 when the two companies merged. “We did this because the business was highly fragmented, with subsidiaries of companies within companies,” she pointed out. “This made it difficult to manage CSI initiatives, especially from an SED perspective – and it limits the impact of your CSI, because that is also fragmented. We had to set up a structure where all the business units could contribute their NPAT to the foundation.” Another challenge involved different business units wanting to report separately. “There needs to be alignment from both the SED and ESD perspective, or we could potentially return to a fragmented approach, which we don’t want,” Bokaba said. “The closer the foundation works with the business the better. We can’t operate in silos – both stakeholders have to work together for the benefit of business and society.” Copley remarked that there can be a lack of control where there are many business units, and bringing their work together under one umbrella makes sense, not least of all because it is easier to put across consistent brand messaging. “I don’t believe in having extra organisations you don’t need, and it’s a good thing if you can run your initiatives in-house. However, you often have placatory or piecemeal, reactionary giving, and a new entity can bring proper strategic focus,” she said. “You can consolidate funds and have big ambitions, as well as demonstrate real impact to donors.” 3 For the foundation, setting up a trust was never an option. “We felt all the requirements would make it too cumbersome,” Bokaba said. “Setting up an NPC is seamless, and it has the same benefits as a trust.” MTN Foundation Arthur Mukhuvhu says the MTN Foundation was registered in 2007. “Before this, our charitable initiative was a part of the business,” he says. There were a number of factors that persuaded the company that setting up an NPC would be the best vehicle for its CSI initiatives. “The funding model itself appealed to us as the business provides cash flow,

First Quarter 2023 ngoLAW in Brief

This year has begun with a bang, as the contents of this Brief will show- there are three major regulatory changes for the NGO sector to understand and respond to: A major expansion of the FICA Schedule of “accountable institutions’ and who it now applies to; New 18A receipt rules, effective 1 March 23 (so, last week already); and Draft Regulations for the NPO Act released for comment and submissions by 23 March. We will deal with the last one first, as it is crucially important that news about the draft Regulations is spread widely and that the sector engages with it by the deadline set. (Also, we know you will keep reading for the 18A bit, anyway!) We hope that you find all of this information useful and, as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future Briefs from us, click this link to subscribe. If you would rather not be sent these any longer, then please unsubscribe at the end of the email. Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. Hands to the plough and eyes on the horizon, as ever! Nicole, Bandile, Janice, Chelsea, Lisa, Dorothy and Alison NPO ACT : DRAFT REGULATIONS Status update: Those who have been following (or who were involved in) the submissions made on the ‘Octopus Bill’ will be interested to know that: The ‘Octopus Act’ (General Laws (Anti Money-Laundering and Combatting Terrorism Financing) Amendment Act 2 of 2022) was gazetted and promulgated on 29 December 2022; and The promised regulations relevant to the NPO Act and the amendments made to it by the Octopus Act were released in draft form for comment on 21 February  2023, with a 30-day deadline for comments which we make to be by close of business on 23 March 2023 (the draft regulations may be accessed at PMG: https://pmg.org.za/call-for-comment/1251/ and comments and enquiries can be directed to the persons there listed. Parts of these draft regulations will affect all organisations which are already voluntarily registered as Non Profit Organisations (NPOs) as well as that group of organisations for whom NPO registration will become compulsory with effect from 1 April 2023; and then there are parts which will apply only to those who fit the definition of organisation for whom registration is now compulsory. Recap:  Organisations for whom registration as an NPO is now compulsory are those SA-based organisations which: make donations to individuals or organisations outside of South Africa; or provide humanitarian, charitable, religious, educational or cultural services outside of South Africa. (Those who have been following the saga will recall that the initial plan was to make registration compulsory for all organisations of a non-profit nature in South Africa.  As the proposed changes were intended to deal with the risks highlighted by the Financial Action Task Force, our legislators were persuaded to dial back the requirement and focus on organisations where the perceived risks were higher.  Bottom line:  your knitting club need only register as an NPO if the knitting is a cross-border project! For a bit more detail on the process so far see the opening part of our previous newsletter https://ngolawsa.co.za/last-quarter-2022-ngolaw-in-brief/ ) Initial note on the draft Regulations:Those who take the time to read the draft Regulations will soon detect that parts of them are in language not appropriate for regulations and seem to be informative, rather than enforceable. This is because those who laid the Regulations out included the explanatory notes within the main text of the Regulations.  This appears to have been done in error and we suggest that those submitting detailed comments merely reflect, for each of these portions, that they are not part of the Regulations. For those wanting a shortcut, our list of the probably purely explanatory parts is: the last five lines of the para 2(a) on page 3, the top part of which is intended as regulation 8A; on pages 4-5, the items numbered (3) to (8); at the foot of page 5, items (4) to (6); near the end of page the items (80-(10). The following summary of Regulations is only our snapshot of what each of them contains and then what we think they mean. We have tried to restrain ourselves from actual commentary, where possible, so as not to constrain the creative and independent engagement which will be so useful. For each of the draft regulations, think through the practical impact on the organisation you serve. In your commentary we advise that you give examples and illustrations of any negative or inacceptable practical impact and also, if possible, come up with alternative suggestions for the relevant part of the draft regulation. As we did in the comments on the Octopus Bill. We have provided an easy-to-use tabulated version of the proposed regulations, with a blank column for your own comments and alternate suggestions. Download this from our website  at https://ngolawsa.co.za/wp-content/uploads/2023/03/NPO-draft-Amended-Regulations-2023-A.docx. SUMMARY OF REGULATIONS 7A In December 2022 a new Section 25A was added to the main NPO Act and contains a list of sorts of status or behaviour which will bar people from service on governing bodies of NPOs.  This is the first time the NPO Act has had such a list.  This list includes  disqualifications/ineligibility standards already applicable to directors of NPCs and trustees of trusts, but adds convictions or sanctions for fraud, dishonesty, money laundering or terrorist financing (amongst others) to the list. This regulation 7A deals with the register of disqualified persons which the Directorate of NPOs must now maintain, the details required to be kept, and a right of public inspection of this list (limited to inspection of a physical list, kept in Pretoria and during office hours only – not terribly useful). Regulation 7A also seems to place the burden upon registered non-profit organisations to assemble and populate this public list.  It requires that a registered

Understanding the differences between NPO, NGO and NPC and the governance policies

NGO, NPO, NPC, PBO – all these acronyms lead to confusion as to where charitable organisations and other similar entities fit into the equation. This also speaks to the funding models and criteria for each of these organisations, interrogating the issue of governance, transparency, and accountability in the organisational operations. NGO stands for a Non-governmental Organisation and is an international term used to describe a voluntary group or institution with a social mission, which operates independently from the government. Although these terms are not necessarily interchangeable, an organisation similar to an NGO may also be called non-profit, charity, non-profit organisation (NPO) or a voluntary organisation. A Non-profit Organisation (NPO) is a trust, company or other association of persons established for a public purpose. The income and property of these organisations are not distributable to the members or office bearers except for reasonable compensation for services rendered to the organisation. NPOs are required to register with the Department of Social Development under the NPO Act and must register with SARS as taxpayers. NPOs may apply for approval as a tax-exempt institution (see PBO underneath) if they meet the relevant requirements. NPC is the acronym for a Non-profit Company and is defined as a company incorporated for a public benefit. Here again the income and property are not distributable to the incorporators, members, directors or any office bearers. NPCs are required to register with the Companies Intellectual Property Commission (CIPC) under the Companies Act, must register with SARS as taxpayers and may also apply for approval as tax exempt institutions (see PBO underneath) if they meet requirements vant require Source

Last Quarter 2022 ngoLAW in Brief

Our last newsletter of 2022 begins with an update on (and some practical advice coming out of) the major legislative changes that we have been engaged with government over, in an effort to: avoid grey-listing of our country by the Financial Action Task Force (FATF); AND limit unnecessary, not useful and potentially harmful extra regulatory requirements which were being unilaterally imposed on the non profit sector. We also report back on some recent community trustee training and deal with some practical advice on these topics:  What is an ‘independent’ board member and why do we need some? Can government employees serve on the boards of non-profits? Can public benefit organisations purchase shares in (and receive dividends from) commercial companies? We end with links to other places you can see our work (and that of others) – the Independent Philanthropy Association South Africa (IPASA)’s 2022 Annual Review of South African Philanthropy and Book Dash- “Matthew is Up” (and other books). We hope that you find all of this information useful and, as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future Briefs from us, click this link to subscribe. If you would rather not be sent these any longer, then please unsubscribe at the end of the email. Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. We wish you a proper rest and more gladness, less madness over the holiday season. Chelsea, Dorothy, Bandile, Nicole, Janice, Lisa and Alison THE OCTOPUS BILL UPDATE AND IMPACT The dust has all but settled on the submissions and responses on “A” (for Alarming 😊) and then the updated, “B” version of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill. We have taken to calling this Bill the ‘Octopus Bill’ because of its impact on multiple Acts, many of which affect the nonprofit sector.  For the background, see https://ng olawsa.co.za/urgent-call-for-submissions-on-the-anti-grey-listing-compulsory-npo-registration-bill/ . The most important result of our engagement has been the removal from the Bill of the proposed mandatory registration of all non-profits in South Africa. In the “B” version of the Octopus Bill (which we anticipate will be passed into law shortly) compulsory NPO registration has been limited to the ‘at risk’ category of non-profits, as per the proposed amendment to section 12 of the NPO Act: (b) A nonprofit organisation must be registered under this Act if it— (i) makes donations to individuals or organisations outside of the Republic’s borders; or (ii) provides humanitarian, charitable, religious, educational or cultural services outside of the Republic’s borders. TAKE-AWAYS FROM THE OCTOPUS BILL PROCESS FOR THE SECTOR AS A WHOLE Civil society, and all of it, needs to be able to speak to government and proposed changes with an informed, coherent and broad-based voice. We will not always agree on all aspects, but we should be more active in finding common ground and being able to show government departments and parliamentary committees the number and extent of organisations we speak for.  In the process just ending, a fabulous effort was made around this in the very short time available.  (When we complained that we had not had enough time for proper responses and were asked ‘but what would more time have allowed you to do better?’ our answer was – ‘consult more broadly, engage and inform more extensively, consolidate a joint response in a more considered fashion’.) Despite the short time given, when we apply ourselves to making practical, engaging and relevant responses, our voices are heard and even appreciated. Government is often disconnected from the reality of life and struggles in South Africa, and civil society is a very useful window to reality. The non-profit sector needs to have people who are dedicated to doing long-term, big-picture work on behalf of the entire sector on an ongoing basis. The Octopus Bill may have come at us suddenly, but there was, really, plenty of advance warning of the brewing FATF process.  But there was no-one on the look-out on behalf of the non-profit sector with the spare time and energy to galvanise an earlier response or pro-active actions. Imagine a world where, instead of Treasury driving the FATF response, a collaboration of non-profits had already undertaken a detailed risk analysis, survey and research and had proposed an action plan and even a private Bill, if we thought it necessary. In our view, this is the main lesson to be learnt here, that there are opportunities to be more pro-active and to lead the way, and we need to lift our heads up long enough to spot them, and then work together to get them done. Being more pro-active can start now.  We could: drive greater participation in the survey and risk analysis already undertaken by Treasury; commission and conduct our own research and analysis; come up with our independent recommendations on appropriate and implementable steps to meet the ongoing FATF requirements and standards; come up with our own set of risk factor ‘red-flags’ for organisations to watch out for and make sure that they do not fall prey; and develop materials and tools to allow non-profits to assess, evaluate and report on the identified risk factors and how, if they arose, they were dealt with. The NPO working group is already engaging independently with various international FATF meetings and reviews of their proposed approach to the non-profit sector worldwide and invites interested organisations to join the network, support, assist and stay informed.  Email suzanne@inyathelo.org.za  to get onto the mailing list and see the  history of the work done at Inyathelo | The South African Institute for Advancement – NPO Amendment Bill. TAKE- AWAYS FROM THE OCTOPUS BILL PROCESS FOR INDIVIDUAL ORGANISATIONS FATF has highlighted the risks of non-profit organisations being abused for money laundering, terrorist financing and other

ONE PLANET SA NPC

It has been an absolute pleasure having the support from ngoLAW to set up our NPC, although I have worked for many years in the sector, I was very hesitant about starting something up on my own.  ngoLAW took the edge off and made it feel achievable. They took care of all the daunting bureaucratic steps keeping me updated all the way. I was thrilled to have their legal expertise too, in helping to ensure our MOI was professional and appropriate for our needs. I also appreciated their consistency in communication and follow-up and, never for one moment doubted, they wouldn’t get all our requirements through the systems which they did with great speed and accuracy too! I highly recommend this wonderful team of the most competent, patient and attentive women! Bridget Ringdahl (Director)

LIV CENTRAL

Working with the ngoLAW team has been an extremely pleasant process for us at LIV Central. The level of excellence, professionalism and support they have provided, has been outstanding. We highly recommend their services which comes with great wisdom and the ability to understand our organisation’s needs, which ultimately saved us so much time and frustration. Lizemari Moller (Brand Manager)

URGENT call for submissions on the anti-grey-listing (compulsory NPO registration) Bill

https://www.dailymaverick.co.za/article/2022-10-08-mandatory-registration-requirement-in-money-laundering-and-terrorist-financing-bill-will-badly-hurt-sa-non-profits/ In an effort to prevent the severe economic consequences arising from the imminent threat of the “grey-listing” of South Africa, a General Laws Amendment Bill has been published that aims to avoid this grey-listing by demonstrating compliance  with the recommendations contained in South Africa’s Mutual Evaluation Report of the Financial Action Taskforce Force (FATF). The non-profit sector, which depends heavily on foreign donor funds, would be devastated by the grey-listing, which would block and/or slow the flow of funding to South Africa. It is of crucial importance that the Bill is passed but not in its current form as it contains sweeping provisions which are not useful, appropriate or achievable. With sensible and suitable adjustments made, the Bill could ward off the grey-listing and allow donor funding to continue to flow. But the sector needs to engage with and lodge comments on the Bill, for this to occur. The Bill was released for public comment on Tuesday 27 September 2022 :  General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill | PMG. with a deadline for submissions to be made by noon on Monday 10 October 2022. The actual Bill is available by copying and pasting the following link into your browser: https://static.pmg.org.za/B18-2022_General_Laws_Anti-Money_Laundering.pdf Please also see the background information as posted on the SARS website:  https://www.sars.gov.za/businesses-and-employers/tax-exempt-institutions/exempt-institutions-connect-issue-1-september-2022/ The pressure and impetus for this Bill comes from FATF’s recommendations, which are that a risk-based approach be adopted  to reducing the opportunities for legal structures in South Africa to be used to hide money laundering, terrorist financing and the promotion of terrorist activities. The Bill proposes to amend five Acts: The Financial Intelligence Centre Act, Trust Property Control Act, Companies Act, Nonprofit Organisations Act, and Financial Sector Regulation Act with the main aims of: exposing the ‘beneficial owners’ (people ultimately in control of) all companies and organisations; making it compulsory for all companies and organisations ‘operating’ in South Africa to be registered with a regulatory authority.  In the case of non-profits, it makes NPO registration compulsory, including for foreign non-profits ‘operating’ in South Africa; and adding a range of fraud-related offences to the lists of things which will make it impossible to hold a fiduciary office in a company or organisation, and requiring CIPC, the Master of the High Court and the NPO Directorate to keep a list of those who are so ineligible for office, and order their removal. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] In an effort to prevent the severe economic consequences arising from the imminent threat of the “grey-listing” of South Africa, a General Laws Amendment Bill has been published that aims to avoid this grey-listing by demonstrating compliance  with the recommendations contained in South Africa’s Mutual Evaluation Report of the Financial Action Taskforce Force (FATF). The non-profit sector, which depends heavily on foreign donor funds, would be devastated by the grey-listing, which would block and/or slow the flow of funding to South Africa. It is of crucial importance that the Bill is passed but not in its current form as it contains sweeping provisions which are not useful, appropriate or achievable. With sensible and suitable adjustments made, the Bill could ward off the grey-listing and allow donor funding to continue to flow. But the sector needs to engage with and lodge comments on the Bill, for this to occur. The Bill was released for public comment on Tuesday 27 September 2022 :  General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill | PMG. with a deadline for submissions to be made by noon on Monday 10 October 2022. The actual Bill is available by copying and pasting the following link into your browser: https://static.pmg.org.za/B18-2022_General_Laws_Anti-Money_Laundering.pdf Please also see the background information as posted on the SARS website:  https://www.sars.gov.za/businesses-and-employers/tax-exempt-institutions/exempt-institutions-connect-issue-1-september-2022/ The pressure and impetus for this Bill comes from FATF’s recommendations, which are that a risk-based approach be adopted  to reducing the opportunities for legal structures in South Africa to be used to hide money laundering, terrorist financing and the promotion of terrorist activities. The Bill proposes to amend five Acts: The Financial Intelligence Centre Act, Trust Property Control Act, Companies Act, Nonprofit Organisations Act, and Financial Sector Regulation Act with the main aims of: exposing the ‘beneficial owners’ (people ultimately in control of) all companies and organisations; making it compulsory for all companies and organisations ‘operating’ in South Africa to be registered with a regulatory authority.  In the case of non-profits, it makes NPO registration compulsory, including for foreign non-profits ‘operating’ in South Africa; and adding a range of fraud-related offences to the lists of things which will make it impossible to hold a fiduciary office in a company or organisation, and requiring CIPC, the Master of the High Court and the NPO Directorate to keep a list of those who are so ineligible for office, and order their removal. [siteorigin_widget class=”SiteOrigin_Widget_Button_Widget”][/siteorigin_widget]

Special Brief from the Companies and Compliance team at ngoLAW

NOTICE TO NON PROFIT COMPANIES (AND PTYS): THE CIPC CHECKLIST WHAT IS IT? The Companies and Intellectual Property Commission (CIPC) has introduced an additional compulsory reporting requirement for companies with effect from the 2020 year, to increase awareness of and compliance with the obligations and processes of the Companies Act 71 of 2008. This additional requirement takes the form of a checklist, and companies must each year indicate which of the listed sections of the Companies Act they have complied with. Please note that this compliance requirement is only applicable to companies which are registered with the CIPC. For those who are trusts or voluntary associations, you may ignore this notice.   ngoLAW CHEAT SHEET As the compliance checklist issued by CIPC refers just to the numbers of the sections of the Act,  ngoLAW has created  a user-friendly version of the checklist, which explains the sections and the factors to consider when answering the questions. The brief but precise explanations of each item in the ngoLAW CIPC checklist have been crafted specially for use by the non-profit clients of ngoLAW. They do not contain all of the words in the Act, just the parts we think most relevant. (We think that this approach is more likely to achieve accurate reporting and compliance.)   THE YEARS CIPC currently has two years available for filing the checklist- 2020 and 2021. Both of these are currently due. The process is being rolled out by CIPC and there is still leniency with deadlines, but the ongoing requirement will be that companies are required to submit their responses for the preceding calendar year (based on anniversary of incorporation date) within 30 business days of each anniversary of incorporation date.   IF WE ARE NOT HANDLING YOUR ANNUAL RETURNS TO CIPC please check with your accountant, bookkeeper or auditor whether they are handling the compliance checklist function. If they are, they may already have contacted you for the details they would need in order to do this. If they have not been in contact, and are not in a position to assist OR if their document or list of questions is difficult to understand, please contact us for our assistance on CIPCTeam@ngolawsa.co.za .     IF ngoLAW ALREADY HANDLES THE FILING OF YOUR ANNUAL RETURNS and you do not shortly receive an email from us, feel free to email CIPCTeam@ngolawsa.co.za.   HOW IT WORKS Our compliance checklist is made available in an online form and, once you have completed it, the answers to your questions are sent directly and securely  to ngoLAW, so that we can enter these into the CIPC reporting database on your behalf. We have also built in a step of checking the answers given and assisting you with answering accurately. A copy of the completed checklist would be sent to you for signature, and for filing with your records. (Alternatively, you or your accountants or auditors could use the completed checklist to file the responses).   THE COSTS For the 2020 and 2021 compliance checklists owed, we are offering the catch-up service or assistance with it for a discounted fee of R950 plus VAT for both years. For those who subscribe to our ngoComply annual service, the checklist will become part of that service for future years.   ANY QUESTIONS If you have any concerns about the checklist or about any compliance issues arising, please let us know and we can assist.  Please let us know if you would like this assistance by return email to CIPCTeam@ngolawsa.co.za .

SECOND Quarter 2022 ngoLAW in Brief

Our winter newsletter has a little of something for everyone, and most of them come from questions our clients have asked us in the last couple of months – An introduction to a new CIPC annual compliance requirement; The question of the AGM- who needs to have one; For organisations which have a (dormant) trust lying around- can you just leave it in the back drawer in case it is needed in future, or should you terminate it? For NPCs- the process to remove an unwanted director; and Some ideas on agendas for and minutes of meetings- what job they do and how to make them work harder and better. We hope that you find all of this information useful and, as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future Briefs from us, click this link to subscribe. If you would rather not be sent these any longer, then please unsubscribe at the end of the email. Keep the questions coming and send us suggestions for future topics – visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. Stay safe, keep calm and carry on- A Luta Continua! Nicole, Bandile, Janice, Lisa, Dorothy, Alison and Chelsea   CIPC COMPLIANCE UPDATE: THE ANNUAL CHECKLIST For NPCs and PTYs, CIPC is in the process of rolling out a new compulsory compliance process which involves submitting a report to CIPC on which sections of the Companies Act the NPC or PTY has (or has not) complied with. Because the language in the sections of the Act can be hard to navigate, particularly for non profits, ngoLAW has created an NGO-friendly checklist, and an online form which is easy to complete. For those of our clients where we are already filing your annual returns, you should shortly receive a link to our online form and instructions to follow. We guide you in your answers where needed compile a final version and lodge the required reports with CIPC. If your accountants or auditors are filing your annual returns, they should also be completing and filing this report. If they send to you a set of questions which you need assistance with navigating, please contact us for access to our NGO-friendly version. If you find that your accountants or auditors have filed the report without consulting the board or management for the details required, please note that there are penalties and fines for inaccurate responses and that the board should ensure that the proper process is followed and that answers are accurate. The CIPC compliance checklist is a useful tool for the board and should be used to improve governance and as part of the annual compliance routine. For support and enquiries, please contact our compliance team at bandile@ngolawsa.co.za WHO NEEDS TO HAVE AN AGM? An annual general meeting (AGM) is a meeting of members or shareholders, and its usual function is to elect the board, hear the reports on the activities and plans of the organisation, and view the annual financial statements (AFS). For a non-profit which has members, the AGM is a fundamental part of the governance routine allowing the members a regular opportunity to receive information, and to exercise their basic function of holding the board to account and electing board members. For a non-profit which has no members (a trust or a no-members non-profit company (NPC)), an AGM is not required, as the board has no-one to report to. For no members NPCs and trusts, the annual functions of approving the AFS and selecting new board members to replace those whose terms of office have come to an end will take place at a board meeting. (When lodging NPO reports for these organisations, you can say ‘no AGM required as no members’). For a voluntary association, which has to have members in order to exist as a legal structure, an AGM is certainly required. For a with-members NPC, the provisions of new Companies Act are somewhat confusing as: Section 61(7) makes an AGM mandatory only for public companies, and NPCs are not public companies under the new Act. However, with-members NPCs are required, in terms of sections 30(1) and 30(3) of the Companies Act to present the AFS to an annual general meeting. Our view is that the requirement that the AFS be presented at an AGM effectively does make the AGM mandatory for all companies with members or shareholders. Also, for NPCs with members, the members should be gathered together (in a room or virtually) at least once a year to play their basic role of holding the directors to account. If this annual routine is not followed, then the board is in danger of forgetting who the members are, and the members themselves might think that their services are no longer required. If it is worth having members, then one needs to keep them up to date and engaged. We too often see organisations which have neglected to follow the membership routines and the members fall into disarray and cannot play their role when they are needed. CAN WE LEAVE OUR UNUSED TRUST DORMANT? The functioning of the various Masters of the High Court being what they are (and the comparative speed and ease of use of CIPC being markedly better) we are quite often asked by clients who have decided to no longer use a trust as their main operating entity, whether they could and should just leave a trust which is not currently in use “dormant”, or whether they should take the active step of notifying the Master that it is being terminated and close officially it down. Technically and in terms of the law as strictly applied, a trust does terminate as soon as it has no assets. However, the office of the Master does not seem to actively investigate or police this, and relies rather

Parkinsons Disease South Africa

I was referred to Nicole Copley by another NGO that I am a patron of. Nicole quickly assessed what I required and minutes later I received a very clear proposal outlining my various options. Through every step of the process, I felt very comfortable that I was in capable hands. There were applications to several government agencies but the entire process was executed seamlessly. I believe this is an all-women team – a true testament to ngoLAW’s efficiency and professionalism. Rakesh Harribhai | Director

SA Foundation For The Advancement Of Artificial Intelligence NPC

We are very grateful for all of the assistance from the team at ngoLAW with our tax exemption application. We wouldn’t have been able to do it without their help, knowledge and guidance. From the onset we received guidance on how the process will work and what documents were needed. A few gentle but needed reminders from Lisa also kept us on track with the submission of all the required documentation. We would highly recommend them. Tharien Potgieter | (Public Officer)

I can Innovate NPC

We have had an incredible experience working with ngoLAW since our inception in 2018. The team is professional, efficient and always able to assist with our non-profit needs. The guidance and support we’ve received has allowed our team to reach thousands of students around the country. We would recommend ngoLAW to any non-profit company getting started or maintaining their organisation. Thank you for your on-going support. Trisha Crookes | CEO

Juju Surf NPC

The ngoLAW team has been incredible in helping us set up our non-profit organisation, registering it and obtaining our 18a tax status in South Africa. Our experience has wonderful because every person on the team was very professional, kind and went above and beyond to help us along the way. Thank you ngoLAW for sharing your expertise, experience and lovely customer service with us. We would highly recommend using ngoLAW. Ozeltia February | Co-founder, Juju Surf

First Quarter 2022 ngoLAW in Brief

It almost seems like it might be (hopefully, possibly) if not the end, at least the beginning of the end of our days of being dogged by pandemic panic. Please, God. Hope springs, facing forwards etc and this Brief is packed with useful, normal advice and insights for the day to day job of governing credible, successful NGOs. There is something of a governance focus in the Brief (and don’t glaze over or think it will be boring!) Some practical insights, and possibly controversial views, follow. So keep with us for a bit- you will be rewarded as we deal with: “EX OFFICIO”- what does it mean and is it useful? UNIQUE MOIs- why would an NPC need one of these? DISPUTE RESOLUTION CLAUSES- do they belong in founding documents of non-profits? We hope that you find all of this information useful and, as usual, please feel free to send this on to anyone who you think might benefit from it. If you have been sent this by someone else and would like to receive future Briefs from us, click this link to subscribe ….. If you would rather not be sent these any longer, then please unsubscribe at the end of the email.   BOARD TRAINING IN GOVERNANCE While we are on the topic of governance, we wanted to mention one of our favourite things that we are able to do again, properly, now that some sorts of gatherings are allowed–  training Boards in governance concepts, requirements and how to fulfil their duties. We find that (wonderful supportive, talented) people who agree to serve on boards often do not know what is expected of them or how to engage with the important work of governance. There are all sorts of things which can go wrong on boards, as we all know, ranging from: The disengaged Board: The CEO is doing a fabulous job, everything seems to be running smoothly and this well-fed crowd manages to pretend to have read the board pack and minutes of the previous meeting (which they may have had a short nap during, anyway); to The ‘getting stuck in’ board, which micro-manages all aspects of the work of the organisation, wearing themselves and the CEO out in the process! We love to get into a room with a board and take them through what it means to be on the board, what is expected of them and then how they can find fresh ways to keep engaged and supportive in overseeing and supporting the amazing work being done. We recently had a fabulous time with the board of Singakwenza in Hilton, KZN, and this is what they had to say: “I just wanted to thank you most sincerely for a fantastic presentation today. You really inspired our Board and made this process so easy to understand for everyone. Your ability to put very complex legal terminology into language that us plebs can comprehend is a real gift!” (Julie Hay, Founder and Director) “Just to say an enormous thank you for the most outstanding training session on Monday.  You brought just the right amount of humour combined with practical theory to make it thoroughly engaging!!  Who’d have ever thought that Good Governance could be fun, but somehow you made it so.” (Louise Duys –louise.duys72@gmail.com– and Simone Dale –elementscoachingsa@gmail.com-: Strategy & Organisational Resilience Consultants) Coming soon to a board near you, contact enquiries@ngolawsa.co.za to make a booking.   DICTIONARY CORNER: “EX OFFICO”- WHAT DOES IT MEAN? This (widely misunderstood) term means “by virtue of another office held” and simply means that the person automatically becomes a board member because of some other position they are in. Those who serve ‘ex officio’ are not voted on, do not resign and are not subject to terms of office, as they are in when they are in the (other) office, and out when they leave. Please note that the “ex officio” status does not mean that they are non-voting on the board. If anyone (the CEO, the CFO etc.) is appointed to the board ex officio and the board wants the ex officio board member/s to be non-voting, the founding documents will need to specifically provide for this. However, we advise that you think through this carefully. Our view is that it is inherently unfair to put someone in a position of responsibility and then not give them the tools they need (their vote) to carry out the responsibility. If the Execs at the board meetings are not to vote, then we would rather suggest entrenching in the founding document a provision that certain specific (or at least one/two senior execs) attend all board meetings (except the parts of them where their service and performance may be discussed) but stop short of having them appointed to the board. Executives are appointed by and report to the board and will, if they are also on the board, often struggle with the switching of hats required by these dual roles. The trend towards including executives on boards ex officio can be traced back to the King governance codes, which support the ‘balanced board’ idea, meaning that there is an equal number of management and non-executives on the board. In our view this is appropriate in the for-profit environment, where all directors are appointed by shareholders and the directors often are shareholders themselves, but careful thought should be given to the issues of accountability and responsibility before applying this principle of King IV to a non-profit.   NPC ADVICE: WHAT IS A ‘UNIQUE MOI’ AND DO WE NEED ONE? Many NPCS which are registered in a hurry or without any understanding of the importance of the Memorandum of Incorporation (MOI) of an NPC are often established with the CIPC standard form MOI as their founding document. At ngoLAW we only register with a standard CIPC MOI as a short-term emergency measure when the NPC needs to be registered fast and it is felt that there is not sufficient time for the board to engage with the process

Lulamaphiko NPC

I naturally turned to ngoLAW for guidance and support when I started Lulamaphiko in the middle of 2021, having relied on Nicole’s legal knowledge and experience from 2008 when I was director of the Family Literacy Project.  Nicole and her team expertly steered us through the legal requirements and registration processes for a new NGO, freeing us up to find our feet and focus on our work.  Our NPC, NPO and PBO registrations were completed within five months, with no glitches or delays.  Kudos to this efficient team! Lynn Stefano

Khula Natural Health

ngoLAW assisted us right from the beginning with excellent and professional advice on starting our NPO, guiding us through all the legalities and always answering all our questions. The advice we received, and are still receiving, is always up to date, quick and professional. ngoLAW  is a most valued partner for all our Non-Profit Organisation’s questions and requirements, they are most efficient, up to date, competent, professional, affordable and with that special personal touch which makes them stand out above the rest. Nicoliene Potgieter Steiner

Sdi Global Support Organization NPC

Nicole and her team have been so helpful in supporting us to ensure we have everything in order to operationalise our newly registered nonprofit company (NPC). Her expertise in South African ngoLAW and her responsive and highly competent team have really helped us to ensure we have everything in order to get us up and running smoothly and in compliance with SA legislation. Ariana Karamallis

ISSY GESHEN

CENFRI

Nicole from ngoLAW assisted us with advice on our membership restructure as well as on governance design for a subsidiary organisation in Rwanda. Nicole is on top of her game as far as the legal context of non-profit organisations are concerned and she is willing to listen and translate between the business context and the legal environment. This is a rare inclination and skill for a legal advisor and one that allowed us to get to good outcomes for the organisation and not just legally correct actions. I enjoyed our interactions. She is our go-to resource on matters relating to our non-profit structure and governance and I have recommended her to others in a similar space. Doubell Chamberlain

HandsandFeet

HandsandFeet NPC has so valued the input, guidance and wisdom ngoLAW has provided to us over the years. From the transition from a Voluntary Association to a Not for Profit Company, to assisting us to stay on top of our compliance requirements and more. ngoLAW is incredibly efficient, friendly and helpful. They are trusted experts in the field and came highly recommended to us from multiple sources. It’s a pleasure working together. Tessa Gardener, CEO

Federation For A Sustainable Environment

The FSE has no hesitation in testifying to ngoLAW for its professionalism, ability, diligence and expert knowledge of the relevant legislation governing Non-Profit Organisations (NPO), and in highly recommending it to any NPO or civil society organisation. ngoLAW has always shown a keen interest in the progress and welfare of our organisation and has always been willing to assist us in shouldering our responsibilities to ensure that our organisation comply with all the legislative requirements. Mariette Liefferink, CEO

Edulution

Edulution was fortunate to be introduced to ngoLAW just when their services were most needed! How grateful we are for the guidance and support from ngoLAW. Without the help of ngoLAW to navigate registering a non-profit as a Section 18A organisation and applying for PBO status and tax exemption, we would still be waiting.  Their knowledge of the process, their relationships with key individuals within the department and their patience and professionalism at all times proved to be invaluable to Edulution. Sandy Mattison | Strategic Projects

TFT in Practice NPC

“Working with ngoLAW was such a pleasurable experience. Your efficiency, prompt response and experience in dealing with matters as the application process in getting TFT in Practice NPC the PBO status in drawing our MOI helped us to reach at the stage where we are at. Throughout the process I also appreciated the fact that my input was valued even though not my field. The team is very helpful and you get to deal with each one of them at every level of their expertise. So thank you so much and I surely will recommend your services.” Eunice Nldovu, TFT in Practice NPC, Accountant