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
Greener Future Foundation
It has been such a great experience working with Nicole and Lisa in getting Greener Futures Foundation’s paperwork sorted out in record time. ngoLAW’s experience and highly capable consultants made this process a seamless and efficient one. Their attention to detail and the way they helped us understand the intricacies of resetting our NPC allowed me to hand over the entire matter to them with confidence, knowing it will get done right. Timeframes for delivery were given and, in every case, they met these deliverables way within what was promised. The final process could have been 21 days, but it ended up only taking one day – now that is great service!!! I have no hesitation in recommending Nicole and her team to anyone needing these services. Thanks Nicole and Lisa for your outstanding service.
Steam Foundation
ngoLAW are the absolute go-to legal practice that specialises in all aspects of ngoLAW in the country. They are deep subject experts in the various forms of non-profit – from Voluntary Association to Non-Profit Company to Charitable Trust. They have also published books on the matter which are well worth getting for every organisation. Their book, NGO Matters: A practical legal guide to starting up was my go-to bible as it neatly summarises everything you need to know about founding a non-profit entity. Over and above writing MOIs, Constitutions, or Deeds of Trust, and ensuring the contents comply with what is required for both NPO and PBO registration, they are able to ensure you meet your yearly compliance requirements and provide independent, third party verification to your funders that you are currently up-to-date – thereby providing management, Boards, and funders with peace of mind. For all things NPO, PBO, and associated issues, they are unparalleled in the country. They are an unbelievable clock-work machine, and I cannot praise their services or expertise too highly. Kathryn Kure
VAT LADY
Dee Bezuidenhout is a VAT Specialist with 30 years’ experience and a useful depth of practical insights. Website: https://thevatlady.co.za/
# HASHTAG NONPROFIT
Hashtag Nonprofit is a news magazine website celebrating the South African nonprofit sector. The site includes news and opportunities, profiles of NPO changemakers, NPO success stories, as well as a large collection of resources from leading NPO service providers. Ruen Govinder Website http://www.hashtagnonprofit.org
FORGOOD
Forgood gives NPOs the chance to connect with people who have the skills or goods they need to solve social problems and continue serving their communities. In addition, the platform acts as a marketing platform, exposing the work that you’re doing to the world. Nerissa Roberts, Operations & Community Manager Website https://www.forgood.co.za/
October 2021: news and updates including: NPO Amendment Bill
Welcome to October and to the final newsletter of the year from the team at ngoLAW. There is quite a bit of content here so, to help you navigate it and find the bits you need first, a summary: The times we live in Reflections on our mental state, a handy document for organisation health-checks, and mental health resources for non profits. Useful for: NGO leaders and founders, those looking for tailored support. POPIA update Updated suggestions for approaches to compliance and resources Useful for: practical tips and links for all NGOs on their journey with compliance 18A legislation changes coming A small tweak to section 18A of the Income Tax Act that could have a big (positive) impact but which requires some attention and planning for compliance Useful for: All organisations which issue 18A receipts and want to make sure they continue to comply with SARS requirements NPO Amendment Bill Some alarming and some rather puzzling proposed amendments to the NonProfit Organisations Act. Response opportunity closes end October. Please share immediately and widely – to ensure that your networks of organisations have a chance to comment and influence the amendments. Training: Financial Management for nonprofit leaders Links to a training series by Cathy Masters. Useful for: topical, practical guidance on financial management We hope that you find all of this information useful, not too alarming (!) 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. Stay safe, keep calm and carry on- A Luta Continua! Nicole, Bandile, Janice, Lisa and Dorothy THE TIMES WE LIVE IN Those who work in and for non-profits and those who govern them know what they are signing up for and are under no illusions about the commitment, the effort and the energy it takes to do good and do it well. And NGO leaders and workers are used to obstacles and setbacks, to constant change in the funding environment and we adapt, we are so good at that. Many NGOs are built to deal with crises, with urgent and pressing needs, so you would think that surviving in a long-term global pandemic and dealing with unrest and instability would be in our DNA, yet still … All of us are under what feels like relentless pressure, and without the outlets, social interactions and connections which might before have buffered, balanced and diluted the demands on us. Electronic communication has been a life-line (and has given us some new opportunities) but has come with its own costs and downsides. As we prepare for year-end board meetings and many are counting the cost of losses (fiscal, opportunities and personal) we wish all of our readers a chance for deep and honest reflection and the understanding and support that you need to make hard choices. Your bravery, perseverance and devotion to those you serve is seen and we hope that you are carving out some real time for self-care and to rest and recover, so that we may face future challenges with renewed strength and hope. For those looking for help and support for the mental health and recovery of those who work in their organisations, please see this link to a free mental health support service that has been set up specifically for those who work in and for non-profits https://www.npowersa.org/about . Their toll free hotline is 0800 515 515. This from their website: “NPOs have always been important in providing support and care to South Africans and this has been highlighted throughout the Covid-19 pandemic. Although NPOs provide such crucial services, resources are often stretched and teams are overworked and facing trauma every single day. Pandemic-related issues have caused many NPOs to close their doors and to stop the valuable work they have been providing when communities need it the most. NPOs have always provided help, resources and support to others, but never before has the mental health of our NPOs and their staff been prioritised. While many corporates have Employee Assistance Programmes in place, the NPO sector has been forgotten in these processes. Now more than ever, we need to give NPOs the Mental Health support they so desperately need. NPOwer is a first-of-its kind NPO Mental Health Support Programme and 24-hour toll-free Helpline that offers FREE Mental Health care and support to all NPOs in South Africa. This initiative sees Tshikululu Social Investments partnering with SADAG (South African Depression and Anxiety Group) who provide psychological first aid to NPO leaders, staff and volunteers, many of whom are experiencing unprecedented strain and burnout.” The NPOwer programme includes a dedicated 24-hour NPO Mental Health and Psychosocial Support Helpline manned by a team of dedicated counsellors. The programme also includes capacity workshops on NPO related issues. The Toll-Free NPOwer helpline is now LIVE and will be open 24 hours a day, 7 days a week, 365 days a year with counselling available in all 11 official languages.” Please make use of this valuable resource and long may it continue! At ngoLAW we are embarking on an internal year-end reboot-reflection process, and have developed the following questionnaire for use in preparation for our sharing session, please click on the link to access and use, or customise for your purposes. POPIA COMPLIANCE UPDATE: RESOURCES AND OPTIONS The ‘D’ day for POPIA compliance has come and gone. Some of us have it all sussed and sorted, some had good intentions but have been diverted by other dramas, and some are still wondering whether they need to engage with POPIA (for the last lot, yes you do!) The good news is that the Information Regulator’s office seems to be as stuck as its website still is, with the Information Officer registration portal still
Updates, Advice, Links and Events
Dear Friends It has been a while since we last wrote, but I know that we have all been busy, re-building what had fallen, creating new ways of working, adapting as we always have, to survive and continue to serve. In this ngoLAW Brief we bring you a mixture of topics and links that we hope are useful to you including: The POPI deadline looms– should we be afraid? (and a link to Nicole’s intro webinar) A note (from a SARS binding private ruling) on possible consequences of acting outside of your objects; The SARS 18A audit certificate requirement– who needs to pay attention to this? Janice and Nicole have an adventure with Wildlife Act; Marcus Coetzee on Founder Syndrome – an extract and link to the full article; The 18A Q&A answers and Words That Count Growth Academy; and The Papillon Fundraising Conference – sign up now (links here) [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Please feel free to send this Brief 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. Stay safe, keep calm and carry on- A Luta Continua! Nicole, Lize, Bandile, Janice, Lisa and Dorothy THE POPI ACT: DO WE NEED TO BE AFRAID? The deadline for POPIA (Protection of Personal Information Act) compliance is 30 June 2021 and those of us who have been busy with other things (!) are doing some quick scrambling (and a small amount of panicking) to make sure we are not in breach. For an introduction to the basic concepts of POPIA and path to compliance, follow this link to the POPIA for Non Profits presentation, hosted by Fundraising Talk. https://www.youtube.com/watch?v=MloJlyYXp7g Data is the currency, the treasure of our age and the quest to protect it is a good quest and true- it is a battle against the commodifying of what makes each of us (and all of us) who we are. Commercially-driven data accumulation has been going on, unseen, for some time and although we are now busy building fortresses and digging moats against these brutish invasions, we also have to deal with the internal mould that has quietly taken hold. We are aiming to include POPIA focus points in each of our next few newsletters but, for now, some good news which should help you to approach POPIA calmly and with a measure of confidence: NGOs are not the ‘bad guys’ that POPI has in its sights. We focus on uplifting, serving and protecting our beneficiaries, and not on selling their details to the highest bidder. We have always been required to adhere to confidentiality protocols and our work has always been, project by project, for a defined purpose (an important POPIA concept). The scary fines and consequences that those who are selling POPIA services, tools and seminars keep mentioning are only applicable in very limited circumstances, and to actions which we would all recognise as criminal or deeply unethical (selling data, giving false evidence, obstructing investigations, failing to comply with an enforcement notice). For more routine compliance gaps and misses, there is an enforcement process (with much lower or less severe ultimate consequences) and which goes through the stages of: POPIA requires that organisations take “appropriate, reasonable technical and organisational measures” to safeguard the data they hold. It is not a ‘one size fits all’ requirement, and it cannot be dealt with ‘all in one’. POPIA compliance should be dealt with in the same way as any other compliance matter is: beginning with an assessment of the risks, dealing with the biggest gas and risks first, and then putting in place a compliance plan which, step by step, builds awareness into the systems and psyche of the organisation. It is a process. A sneak peek at our summary of suggested first steps: ACTING OUTSIDE YOUR OBJECTS- TAX AND OTHER CONSEQUENCES Some people believe that trading is prohibited for PBOs, and others that all income of PBOs is tax exempt. Neither of these is true, and the answer lies somewhere between the two extremes: Under Section 10(1)(cN) of the Income Tax Act, all non-trading income and some types and parts of trading income are exempt from tax if the organisation has PBO status. Any organisation with PBO status potentially receives three categories of income: Non-trading tax exempt income; Non-taxable trading income; and (the rest) which is taxable trading income. One way to understand this is that PBO status is granted to your organisation, but tax exemption only applies to certain parts of the organisation’s income stream. Section 10(1)(cN)(ii)(aa) says that business or trading income which satisfies all of (A), (B) and (C) in that section will not be taxable. The three parts (summarised) are: The income is integral and directly related to the object of the PBO; and It is substantially a cost-recovery operation; and Taxable entities are not unfairly competed with. A recent SARS Private Binding Rule (BPR 348) examined part (A) in relation to a particular PBO. (Although these BPRs are not of general legal application, they do give an indication of how SARS will approach and interpret this part of the law.) In this case, the PBO was set up with the object of promoting entrepreneurship through education and training. It now wished, as part of its entrepreneur-training programme, to provide seed funding to young entrepreneurs. The proposed loans granted to the beneficiaries would not attract interest in the usual way, but beneficiaries would repay the loans by paying a small percentage of monthly revenue to the PBO. The income received by the PBO would be used to provide further funding or for other PBAs. SARS was
Fundraising Talk Session February 2021: 18A Q&A
[siteorigin_widget class=”SiteOrigin_Widget_Headline_Widget”][/siteorigin_widget] [siteorigin_widget class=”SiteOrigin_Widget_Headline_Widget”][/siteorigin_widget] Q: In proposals, can we still offer to put their information on our sites (social media and website) if they donate alongside the 18A certificate? Q: If you are writing articles or posting on social media about a donation, is that considered them getting something back for the donation? A: Recognition and association with an organisation is the only benefit a donor can expect when donating (for it to still be classified as a donation). However, there is a line that can be crossed and a point at which it may become a marketing expense and expenses for the donor/client. Q: A company is allowing us the use of their boardroom/conference room/ stand at their event/ discounted accommodation for meetings as part of their BEE requirements. Would this qualify for a S18A certificate? A: No. Use of a space for free or offering a rebate on the usual rental does not qualify as it is not a donation of funds or property in kind. , donating a stand at an event or use of space for free would not qualify. Q: We receive a donation of books to be used as teaching resources. Does this qualify for S18A? A: Yes. Donated books are classified property in kind and qualify for 18A. Q: Can we issue a donation receipt if a plumber offers their service as a donation without advertising? A: No. The donation of a service such as time, skill, or effort to a section 18A-approved organisation will not qualify as a deduction for purposes of section 18A since a service is not a donation of funds or property made in kind. Q: Should we not advocate for 18As for services as these can save our organisations significant funds? A: You are not currently permitted to issue 18A receipts for services. It seems extremely unlikely to us that this will ever be permitted or drafted into law, as the potential for fraud and difficulty of control is too great; and it does not accord with basic accounting practice for a deduction to be given where services are offered. [siteorigin_widget class=”SiteOrigin_Widget_Headline_Widget”][/siteorigin_widget] Q: If a donor donates a computer, do we put the depreciated value or the value of the item on the donor’s assets register? A: If the computer is an asset used in the donor’s trade, the value to be used is the lower of the fair market value on the date of donation of the property or the cost to the taxpayer of such property less any allowance (other than an investment allowance) deducted from the income of that taxpayer for that asset. Q: When you receive a new computer from a computer company, do you issue the 18A to the value of the cost or the sales price? A: If it has been donated by a business that sells computers as part of their trading stock, the value will be the amount which has been taken into account for that year of assessment for the value of that trading stock forming part of trading stock of the taxpayer under section 22(8)(C) or paragraph 11 of the First Schedule, as appropriate. Q: If items are near expiry date, but the donor provides us the market value, can we use that as the value? A: Yes. The value of the donation is taken as the value on the date the donation was made. Q: Some NGOs state that they do not issue 18As for second-hand items. Only new items. Is this correct? A: No. The Act allows for items used by donor in conducting their trade (but are not trading stock) such as used computers, crockery, cash registers, garden equipment etc. to give rise to 18A receipts. Only issuing 18As for new items is too restrictive an interpretation, and not required by SARS. Q: Is it correct to issue a s18A on scrapped goods (goods that were damaged and written off on the company’s side)? Is it the legal obligation of the NPO to discover if the corporate has written off the item? A: When the donated item is trading stock, the value will be the lower value of the fair market value or the cost to the donor. However, it is not the responsibility of the organisation receiving the donation to verify that the value is the lower of the two or do investigations into how the donation will be recorded in terms of the donor’s internal accounting systems. [siteorigin_widget class=”SiteOrigin_Widget_Headline_Widget”][/siteorigin_widget] Q: If somebody donated an item like a computer, do they need to give us an invoice before we can give them an 18A? A: The organisation is not legally obligated to require an invoice to issue an 18A certificate. Where a donor whose financial system requires a document reflecting the value, they will do so and the organisation will use that as the value. However, where the issuing of an invoice is not required by a donor system, the organisation must merely request the value of the items in writing. Q: May we use a PO Box in the address section, or must it be a street/physical address? A: The SARS guide is not specific and merely refers to an ‘address’ of the donor. Our feeling is that a P.O box address may be used in this case. Q: We issue receipts on request, but sometimes donors request these two or three years down the line. Can you still issue and update your tax receipt schedule for the relevant years – and update subsequent returns? A: Receipts can be issued at any time but must be factually correct (ie. must record the actual date of donation). Q: is it abuse for an organization to use the 18A certificate if the donation does not affect the beneficiaries directly? A: An 18A receipt may be issued if funds are used to carry on public benefit activities. Part of the carrying-on of activities are the admin, staffing, head office or ‘care’ costs of developing and
An invitation to join us on a #FUNDRAISINGTALK Webinar with Nicole Copley
Please join us as Nicole, hosted by FundRaising Talk, gives a free webinar from 10 -11 am (log in from 9.45 am) on Thursday 4 Feb 2021 about: 18A in practise – be careful what you promise! (basics, updates and what to watch out for) and the ‘audit certificate’ newly being required by SARS (do you need to worry about it, does it apply to your organisation?) Feel free to forward this invitation to anyone else who may be interested. Login Details Zoom ID: 845 3733 2799 (If you can’t connect, try and remove the spaces) Password: FRtalk Email melanie@wordsthatcount.co.za with any questions. (Ps: If you can’t make the webinar, it will be uploaded to this link, along with other useful webinars) [siteorigin_widget class=”SiteOrigin_Widget_Video_Widget”][/siteorigin_widget]
November 2020: letter eight from lockdown
In this, our last letter of the year, we: deal with the upcoming NPO register clean up (!) in some detail, with practical tips; discuss whether the PBAs SARS classifies organisations under matter; and give some practical advice on filing objections with SARS. We also introduce our theme for the next few letters: 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. Alert: Clean-Up of the NPO Register Cometh Initially promised to be implemented in 2020, but delayed because of the impact of Covid-19, the long-overdue update of the NPO register (restoring confidence in the register’s credibility by removing non-compliant NGOs) will be effected as follows: From 3 November 2020, the Minister of the Department of Social Development (‘DSD’) launched an awareness campaign called ‘Know your NPO status’ designed to encourage all NPOs registered with DSD to check on their status, update details and lodge any annual reports which are due. From 1 April 2021 (and also from 1 July 2021- typo suspected in the DSD notices, but we have not been able to obtain clarification): organisations which were granted NPO status between 1998 and 2012 and which owe reports will be de-registered. From 1 October 2021: organisations with outstanding reports with registration dates 2013 – 2015 will be deregistered. From 1 April 2022: organisations which were registered between 2016 and 2019 but which owe reports, will be de-registered. Please note that the ‘order of attack’ is not based upon the date that reports are due from, but date of registration as an NPO, beginning with those who were registered first and then working forwards. In the period 1 April 2021 to end September 2021, DSD typo notwithstanding, we conclude that they will begin their work with those registered in 1998, which should mean that those who are registered in 2010, for instance, have a few more months to get things straight. The lack of consequence for non-filing of reports over the past eight or ten years has meant that many organisations have become complacent. The time for complacency is over, and all organisations which wish to retain their NPO status and who owe reports, need to get moving now. In our experience with catch-up reports, there is often a bit of back and forth with DSD, as there may be registration details which need to be updated and it is often the case that the organisation gave up filing because of administrative/documentation issues along the way. So please allow for a couple of extra months to get things right. We suggest that you plan to have all outstanding reports filed 6 months before the applicable deadline, to allow for these sorts of issues, and also because the deluge of reports landing at DSD is likely to affect turnaround times in processing the reports. If you are not sure of your organisation’s compliance status and/or need help in getting outstanding reports lodged, please let bandile@ngolawsa.co.za know, as we have a team who are experienced with these reports and able to assist and advise. Some practical tips from ngoLAW for getting NPO reports up to date File reports in date order, starting with the oldest one due; If you are lodging reports online, make sure that the login password is being sent to a current email address, or you will not be able to lodge reports. Email npoenquiry@dsd.gov.za to find out whose email address is on record. The link to the form to change the email address is http://tcn.org.za/wp-content/uploads/2019/08/FORMS.pdf Make sure the accounting officer puts their practice number on the financial reports; For any changes in board members bearers, send the following: Voluntary associations Signed Minutes of meeting and signed attendance register reflecting clearly changes in board members Trusts New letters of authority and copy of signed Deed of Assumption NPCs New CoR39 If the online system is not useful to you, courier physical reports to DSD at NPO Directorate, Department of Social Development, HSRC Building, 134 Pretorius Street, Pretoria 0001 (phone number 012 312 7500). PBAs: Do they matter? (This discussion is a follow-on from a topic of a previous brief, ‘Mission-Drift in Time of Covid’. To access that newsletter, please go to our website https://ngolawsa.co.za/16-june-2020-letter-six-from-lockdown/) If you have an organisation which has a much-coveted exempting letter
Advance access & delivery
I am very happy with the service at I received at ngoLAW. The team is always polite and professional and very knowledgeable. The systems Nicole has built to make sure there was consistent and clear communication across team members must be commended. I would highly recommend ngoLaw. Michael Wilson
Call 2 Care
“Working with ngoLAW was the best decision our organisation made and helped us fast track updating our MOI and getting approved for Section 18A. The team at ngoLAW were insightful, professional and methodological which ensured the best possible outcome. Our organisation can not recommend ngoLAW enough.” Steven dos Ramos – Call 2 Care director
Sizanani Benthem Trust
“I have dealt with ngoLAW since 29 June 2018 for an application for tax exemption and 18A. It has been a pleasant journey with assistance from Nicole Copley who from the very onset had clear understanding of my organisation, although it was a novel idea. She did not just provide the promised service, but she lifted my application to another level by improving its visual presentation. She made sure that the application was a success by offering new advice that had not been available previously. Dorothy O’Neill moved everything to the next gear by giving regular updates on my application. I will definitely continue utilising the services of ngoLAW and continue in relying on their specialised knowledge in this field of work”. Dr C.D mashiloane, Obstetrician & Gynaecologist, Founder of Sizanani Benthem Trust
Baykhanya
“Nicole and the ngoLAW Team’s reputation is well-deserved! As a legal colleague, I have particularly valued their specialisation and insight into the nonprofit sector -and how they have translated our vision of empowering parentless children to star. Highly recommended!” Debbie Wybrow, founder of The Bayakhanya Foundation NPC
Papillon Press
Papillon Press – The largest supplier in Africa of guide books and donor resources to the non-profit sector. Fundraising and marketing consulting and training courses. Website https://www.papillonpress.biz/ Tel +27 076 224 4468 Email admin@papillonpress.biz
17 July 2020: letter seven from lockdown
AGMs in the time of COVID For many organisations, AGM (Annual General Meeting) season is upon us, and we are having clients ask- Do we have to hold an AGM, or can we postpone it, or even skip it for this year? We have elderly or immune-compromised members, and we do not want to risk calling them to a physical meeting – how do we allow them to participate? Will a Zoom/Teams/Google hangouts AGM be allowed and be valid? First: please note that, as we will mention again, these are strange and unusual times- the advice that we give here is based upon the law as we know it, and aimed at being practically useful. Please send your questions and any other suggestions through for sharing- scroll to the end for options. Before we get into the detail of alternatives, let us examine the possibility of and restrictions on a physical meeting, looking at the Stage 3 Lockdown regulations – and this is an extract from the relevant part: “Gatherings 37. (1) All gatherings are prohibited except a gathering at – … (d) conferences and meetings which is subject to- (i) a limitation of 50 persons, excluding those who participate through electronic platforms; (ii) restricted to business purposes; and (iii) strict adherence to all health protocols and social distancing measures as provided for in directions that must be issued by the responsible Cabinet member, after consultation with the Cabinet member responsible for health;” It does not appear that any specific protocols have yet been issued for conferences and meetings. In their absence the general protocols of screening: upon entry for fever, sanitising upon entry, taking full details including up-to-date contact details from all who attend (to allow for contact tracing), maintaining physical distance, and wearing of masks which fit properly and cover both mouth and nose throughout the meeting, will probably be advisable as minimum requirements. It should be noted that the meeting must be ‘restricted to business purposes’. Any social or networking component of the AGM should not take place (no lunch/dinner/tea together afterwards or at the break) and, to limit potential exposure, the meeting should be tightly managed to keep it as short as possible. The suggestions made later in this Brief on ways to take care of aspects of meetings remotely will be useful in trimming the time of the in-person meeting. For instance, if all documents and reports are circulated and read by members before the meeting, then there is no need to read/present the reports at the meeting, and you may proceed straight to question time. You should probably warn members clearly in advance that this will occur, as many (sadly) may not be in the habit of reading reports prior to meetings. Regarding the serving of tea/refreshments, it should be noted that many cases of spread of infection have come from the tearoom or breakroom. People who are eating and drinking will not be wearing masks and it will be hard to maintain the physical distance requirements. It is probably better to serve nothing at all. Recent research indicates that a meeting held out of doors or in a very large venue with all doors and windows open, will be the safest bet. Of course, any in-person meeting involves some risk, particularly if the crowd is large and sociable. It may be hard to ensure everyone’s safety. Nonprofits will not want their AGM to be the cause of spread of infection, both because they will want to care for their members and also because the media is unlikely to be kind when reporting that your meeting was the “epicentre” (that much-misused word!) of a local outbreak. So, if you have decided that an in-person meeting is not possible or advisable, what are your options? The first question you need to ask is: 1. DOES OUR ORGANISATION HAVE TO HAVE AN AGM? To answer this question, you will need to know what sort of organisation you have, what type of legal entity. This handy table will tell you which you are and whether you need to have an AGM: Founding document is: Type of organisation Members/No Need AGM? Constitution Voluntary association Has members Must hold AGM Trust deed Trust No members No need for AGM Memorandum of Incorporation (MOI) which states it is a “with members” NPC Was called a section 21 company, now called a non profit company (NPC) The old memo and articles will specify that there are members Must hold AGM Memorandum of Incorporation (MOI) which states it is a “with members” NPC With-members NPC Has members Must hold AGM Memorandum of Incorporation (MOI) which states it is a “no members” NPC No-members NPC No members No need for AGM As you can see from this table, only organisations which are membership-based need to hold an AGM of members. If your organisation is a trust or a NPC (non-profit company) without members, then an AGM is not necessary. However, if it is a voluntary association or a NPC which has members, then an AGM is required. If an AGM is required by law then it is not advisable to just skip the AGM this year. For organisations which have members, AGMs serve a purpose and, if they cannot be held in person, the organisation should find a way to have the functions of the AGM take place in different way from usual. 2. CAN WE HOLD A VIRTUAL MEETING? With-members NPCs: The Companies Act specifically permits participation in meetings electronically or by electronic communication by members provided that the members can properly participate in the meeting in the same way as they would if they were in the same room with the same effect. Voluntary associations: You will need to have a look at your constitution. You may find that it already provides for an electronic participation by members in meetings. If the constitution does not mention Zoom/Skype/other online meetings, and your members are able to participate in an electronic meeting, then you
16 June 2020: letter six from lockdown
MISSION-SHIFT in the time of COVID MISSION-SHIFT in the time of COVID The times are a’changin, and it looks as though we will have to reset to a ‘new normal’ for the foreseeable future. At ngoLAW we are helping our clients adjust and this ngoLAW Brief deals with a current adaptation taking place: NGOs who need/want to shift their focus and embark new sorts of work/projects (Our next newsletter will deal with the practical question of looming AGMS: how do organisations comply with legal obligations while protecting their members?) Before we get into the detail of the mission-shift question, I would like to refer you to a recent article by our friend, strategic consultant Marcus Coetzee, on decision-making at this time. It has been immensely helpful to us https://www.marcuscoetzee.co.za/recent-events-have-made-our-decisions-simpler-but-not-easier/. I would also like to share with you a distillation of some insights from Mike Saunders, author of Human Centric https://mikesaunders.com/. Mike’s observation is that the usual role of leaders is to drive progress and change in their organisations by pushing their people out of the comfort zones of the known and the stable, and into some of the chaos which is required for creativity and growth. However, at this time of pervasive, wide-ranging and (often) terrifying uncertainty, the people who we lead need just the opposite from us – they require stability and routine so that they can settle, focus and be productive. Mike advises that we prioritise creating for our teams a dependable work rhythm and predictability in these turbulent times, so that we all feel that we have some solid ground under us, some comfort from the familiar. Our work is all about people, and we need to remember that it is done by the people we lead and that they need to be able to function and deliver. We hope that the information and ideas in this newsletter are useful to you. Please feel free to share it with anyone who you think would benefit. If you would like to be added to our mailing list, please click on the “Subscribe” link here or at the end of the email. MISSION-SHIFT- CAN WE CHANGE WHAT WE DO? We are regularly getting calls from clients that go something like: We are set up to deliver sanitation systems, but are now wanting to deliver food parcels; or We generally fund bursaries but now want to set up online learning platforms or buy laptops, can we do this? Non profits are good in a crisis, and used to pivoting to meet new challenges (and access new funding sources!) and if your organisation has built a network and has employees with expertise but no way to send them out fulfilling your usual mission, then the temptation (or the need) to diversify might be compelling. This is especially when you are in direct contact with real and immediate needs/threats to be dealt with. Before you change track, however, there are some legal and strategic questions which need to be answered, to determine whether you can go in a new (or additional) direction and these are: Do grant agreements/other agreements with donors or stakeholders permit the shift? Does our founding document allow us to carry out the new or added activities? and Is the shift a wise move, looking at the history, focus, strategy, sustainability and structure of the organisation? GRANT AGREEMENTS AND OTHER CONTRACTS Many organisations have in place grant agreements which are project-specific: the funds are paid over but only drawn against delivery of defined projects and activities. These are what we call ‘restricted’ funds’. They do not belong to the organisation until they are spent and, if not spent in accordance with the grant agreement, they must be returned. Organisations also often enter into service agreements with government or other NGOs. Here again there is specified work to be done and payment is only made if that work is performed. In both of these circumstances the funds may only be used or allocated for the agreed purpose and, if the organisation wishes to use any part of the funds for emergency response or poverty relief or any other work not agreed on, the donor or other party will have to agree to the change and this agreement generally has to be in writing. The first step therefore, is a conversation with the donor/other contracting party, to explain the deviation and request written consent. NASCEE (National Association of Social Change Entities in Education) has done some collaborative research on this and has put out this very useful guide https://nascee.org.za/resources/nascee-guidelines-for-unrestricted-grants.pdf which gives input on this conversation with donors. The Independent Philanthropy Association of South Africa has issued the following ‘best practice’ guide for donors, http://ipa-sa.org.za/newsletter/ipasa-best-practice-guidelines-during-covid19/ which may also be helpful in managing these relationships. 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
23 April 2020: letter five from lockdown
With a week left of lockdown and restrictions after the 30th seeming inevitable, we bring you in this ngoLAW Brief: an update on the C19-TERS scheme (some good news and some clarity); a warning about a scam doing the rounds in the non-profit sector; and some guidance on ways to deal with the risk of scams. TERS UPDATE: IT’S COMPULSORY! (ALSO: ANNUAL LEAVE, PAYE AND THE SUMS) Please note that the TERS Directive has been amended (and expanded) again. It has been clarified in signed amendments of Thursday 16 April (which have not yet been published in the Government Gazette) that: Employers who, as a result of the Covid-19 pandemic, close all or part of their operations for a three month (or lesser) period must apply for Covid-19 benefits for and on behalf of affected employees. This is a dramatic change, as there was previously no wording making the TERS application compulsory; Applications for TERS funding may be made even in cases where the relevant employees have already been asked or agreed to take annual leave during the period of closure of the business or organisation. Also, employers who have requested their employees to go on leave: “may set off any amount received from the UIF in respect of that employee’s COVID-19 benefit against the amount paid to the employee in respect of annual leave provided that the employee is credited with the proportionate entitlement to paid annual leave in the future” Employers who may not receive the applied-for COVID-19 benefits in time to pay employees are encouraged to make the payments and then wait to be reimbursed by the UIF: “To speed payment of COVID 19 benefits to employees, employers are urged to pay employees based on clause 3.4 of the Directive and reimburse or set off such with COVID-19 benefits claim payments for UIF.” Please note that the tax treatment of TERS payments should be like UIF: they are not taxable (i.e. PAYE should not be deducted from them), and should be recorded as “TERS/UIF benefits” on the payroll. There are some practical difficulties for those administering these payments to employees. Among them: if the payments arrive as a lump sum, how do you know how to divide it out? If the payments do not arrive before payday, how can employers be sure how much they should pay out in the interim; and, where employers are topping the payments up, how will they know what proportion of the payment they should not deduct tax from? If a breakdown does not arrive from UIF, our suggestion is that you ask your accountant for guidance and, if that is not possible or useful, you use an online UIF calculator, with adjustments being made as follows: Insert the maximum period (48 months) as the period of employment is not relevant; Adjust any result amounts under R3500 up to R3500; and As the UIF calculator works with a lower maximum base salary than TERS (it seems to max out at R12500) apply the lowest percentage (38%) to the salary amount between R12500 and R17712. Please also note that some of those who have been paid out under TERS are being required to submit additional documents to comply with the follow-up audit requirements. These include proof of payment of UIF, Compensation Fund documents, payroll reports, attendance registers, UI-19 declarations and sample copies of employment contracts and salary slips. To read our previous detailed advice on the TERS scheme and process please see Letter four from Lockdown and Letter three from Lockdown For assistance from ngoLAW with these applications please email lisa@ngolawsa.co.za. We are offering slashed rates on fees for the lockdown period and are able to assist with, advise on and/or make these applications on your behalf. THE “NGO CERTIFICATE” SCAM At ngoLAW we have been inundated with queries and requests to ‘convert’ the registrations of non-profits from an “NPO” to an “NGO”. This request originates in a scam operation, in which a fraudster has induced panic in the non-profit sector by claiming that this “NGO” certificate is required in order to access a huge pot of overseas relief funding. There are costs involved, of course: the immediate fee paid to the defrauder of R1999; and the (potentially bigger and riskier) cost of providing them details and documents that would enable hijacking of the organisation. DSD has issued a formal statement on this renouncing this scheme as a fraud (Read statement here) and correct legal position is the following: An NGO is not a type of legal entity, it is just a general word used for all types of non-profit organisations, at whatever stages of registration. There are three types of legal entities in South African law which non-profits can be established as – a voluntary association, a charitable trust or as a non-profit company (“NPC”) (previously known as a Section 21 Company). A voluntary association is established and comes into being by agreement between its members and its founding document is a constitution which contains the governing rules of the association. Legally this agreement and the adoption of a constitution with the required clauses is the only requirement necessary for a voluntary association to be formed; A charitable trust has a trust deed as its founding document which is registered at the Master of the High Court; and An NPC (section 21 company) has either a Memorandum of Incorporation (MOI) or Memorandum and Articles of Association and is registered with the Companies and Intellectual Properties Commission (“CIPC”). When you have a properly established legal entity you may apply for further registration with the NPO Directorate at the Department of Social Development and they will issue you with an NPO number and certificate and this is will be your proof of registration with the Department. You may also make an application to SARS for income tax exemption (also known as public benefit organisation “PBO” or “section 30”) status. If anyone is telling you that another registration is required for your organisation in order to acquire funding please note that it is fake news and a scam being perpetuated on you and you should
09 April 2020: letter four from lockdown
GAME CHANGING ALTERATIONS TO THE C19-TERS UIF BENEFITS If you or any business or organisation you know is considering retrenching staff or putting them on short time now, please read this first (and pass it on) – or you could be missing out on a real opportunity to support and retain your staff. As you may know, C19-TERS is a temporary UIF-based scheme which provides funding for payment to employees during a temporary closure of operations of the organisation due to the Covid-19 pandemic. TERS is intended to allow organisations to survive a break in operations of up to three months without retrenching its employees. TERS IS AVAILABLE To organisations which are registered for UIF; For employees who are registered with UIF; and For the duration of a closure due to COVID-19, up to a maximum of three months. The Minister of Employment and Labour gazetted on Wednesday, 8 April amendments to the Directive on the Covid-19 Temporary Employee/Employer Relief Scheme (C19 TERS) which have dramatically changed the landscape for those considering applying for support under this system. The major amendment now specifically allows employers to top up TERS payments received by employees under the Covid-19 TERS scheme.The previous version of the Directive had prohibited an employee who was receiving any payment from an employer from benefitting from the TERS scheme. The amended Directive now states that if an employee is receiving a TERS benefit, the employer may top up this payment subject to a maximum ceiling of the salary that the employee would ordinarily have received. This change to the Directive means that those who have dismissed use of the TERS scheme because the amount that would have been paid out under the scheme was unconscionably low in supporting their employee, can now apply and, if they have funds, add to the amounts received from the C19 TERS UIF scheme for employees under TERS. The other major amendment is the recognition that a total closure of the organisation or its operations should not be applicable as a pre-requisite to apply for C-19 TERS. The previous directive as gazetted on 26 March 2020, had referred to a “temporary closure of business operations” or a temporary “closure” of the company.Those who read our previous brief on the TERS regulations will recall a discussion around whether any organisation which wanted to survive post Covid would be able to comply with the previous TERS requirements and close all of its operations. The Minister has recognised this and provided that the TERS benefit is available during a “temporary closure of business operations whether total or partial”. The regulation now also refers to a “reduction in work” as opposed to a complete cessation of work.Whereas the previous Directive had provided for where an employer “as a direct result of Covid-19 pandemic close[s] its operations for a three month or lesser period” it now provides for a scenario where an employer “as a direct result of Covid-19 pandemic close[s] its operations or part of its operations for a three month or lesser period”. Please note that, when it comes to applying, the amended Directive now refers to “affected employees” as those who may benefit. This amended section now reads: “Should an employer as a direct result of Coviid-19 pandemic close its operations or part of its operations for a 3 (three) months or lesser period affected employees shall qualify for a Covid-19 Temporary Relief Benefit” Therefore, where a unit/project/division of an organisation/business is still operational and funded, the employees who are busy with this work, whose salaries are still covered and whose income is not affected by Covid-19 do not qualify for the C19 TERS benefit. However, where there is partial closure or where Covid-19 has resulted in a sudden drop in income/funding for operations, our view is that all those employees who are affected by the partial closure and/or the lack of income do qualify. Thus, all employees working for an organisation or business which is not fully operational will qualify for the C19-TERS benefit. The third important change made is that the previous directive referred to the minimum amount that would be paid under the TERS scheme being the minimum wage in the sector concerned. All of the references in the Directive to minimum wage in the sector concerned have now been amended to refer to the figure of R3 500.This means that employers need not concern themselves with proving which sector they are in in order to calculate what the applicable minimum amount would be as it is now R3 500 across the board. The language used in the previous directive resulted in some confusion around the maximum amount that would be paid out and many had believed that the maximum amount paid out would be R17 712 per month, based on the way that the regulation was phrased. The language of the directive has now been amended to clarify matters.It is now clear that the maximum amount to be payable will be calculated at the UIF rate based on a maximum salary being taken into account of R17 712. The clause now reads:“The salary to be taken into account in calculating the benefits will be capped at a maximum amount of R17 712 per month, per an employee and an employee will be paid in terms of the income replacement rates sliding scale (38% – 60%) as provided in the UI Act”. This last clarification is one which will not be welcomed quite as gladly by those who were hoping that the actual amount of R17 712 would be paid out. The maximum benefit, as previously advised by us will be R6 730. There is also some clarity (for those who are thinking about the details) on the MOA (agreement) to be signed with the UIF. Applicant businesses or organisations must sign and lodge it, but a simpler version (not requiring a separate bank account) and already signed by UIF is now being provided. The cumulative effect of these changes is immense- organisations and businesses which have not totally closed are included; employees in closed/slowed-down divisions qualify; employers who had intended to commit to at least a ‘survival’ wage can now
06 April 2020: letter three from lockdown
Many organisations, facing significant drops in funding and other income, as well as the inability to carry out many of their projects, are considering temporary or even permanent shutting of operations, and looking for advice on how to support employees at this time. There is much discussion (and confusion) around the new TERS (Covid-19 Temporary Employer/Employee Relief Scheme)) scheme offered in the Directive issued under the Disaster Management Act on 25 March 2020. Some of the confusion was sown by an inaccurate initial guide issued, and some of it is contained in the Directive itself. In this ngoLAW Brief we: Examine the TERS offering, explain how it works and when it is applicable, and deal with the misconceptions; and Compare the TERS option to the more final option of retrenching and allowing ex-employees to claim UIF. We don’t deal with the mechanics of the application and the forms, as there is plenty of useful information already in circulation on these aspects. Please note that this advice is our current interpretation (6 April) of a Directive which was speedily drafted, and which has not yet been tested (people know how to make the TERS applications, but we have not yet spoken to anyone whose claims have been paid). If anyone has any practical experience which sheds further light, please let us know. We will be sending out updates as the situation unfolds. We apologise for the length of this- it is not “Brief” but we have many clients wanting this guidance urgently. In the emails to follow this one, we will Analyse the other options available to organisations (leave, reducing working days, advance payments etc); Answer further questions on the TERS option and other questions you send us; and Discuss those who work for the organisation, but who are not formal employees: consultants, short-term contractors- ‘piece’ workers. Neither the TERS nor the UIF benefits will be available to these workers. WHAT IS TERS? TERS is a temporary UIF-based scheme which provides funding for payment to employees during a temporary closure of operations of the organisation. TERS is intended to allow organisations to survive a break in operations of up to three months without retrenching its employees. WHEN IS TERS IS AVAILABLE? To organisations which are registered for UIF For employees who are registered with UIF; and For the duration of a closure due to COVID-19, up to a maximum of three months. IMPORTANT DIFFERENCES BETWEEN TERS AND UIF FOR UNEMPLOYMENT (this table does not deal with short-payment UIF, which will be dealt with in the next Brief) How do we calculate the TERS benefit? The benefit will be calculated in terms of the UIF INCOME REPLACEMENT RATE SLIDING SCALE of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act 63 of 2001 (UI ACT). The maximum benefit for a high earner would be 38 % of R17 712 a month, which amounts to about R6 730 a month. For the duration of the shutdown or a maximum period of three months, the benefit will not be less than the minimum wage applicable for the relevant sector. To allow you to compare the options and see the resulting payments, we have taken examples of levels of monthly salary and then showed you the amount which would be paid. (The benefits here stated are taken from the examples in the Third Schedule to the UI Act, and with the help of the calculator at http://ezuif.co.za/uif-calculator/) . The numbers are intended to be illustrative only. We have presumed in this table that the national minimum wage is applicable and, remember, the period of employment is not relevant: Example: TERS MYTHS (and truths) INITIAL TERS QUESTIONS Complete closure required? The Directive issued seems to contemplate and assume that there is a complete closure of the organisation, in order for the TERSbenefit to be applied for, and many commentators have agreed with this. However it is unlikely that all of the staff of any organisation will be unable to do any work during a temporary cessation of activities and, certainly, if the intention of TERS is to assist organisations so that they do not close down for good or retrench staff, then we believe that it must be accepted that certain levels of organisational operations must continue. For instance, if the TERS payments are to be processed and made to the employees during temporary closure, then the finance and admin team will have to be working. And, if the organisation is to survive this crisis, then marketing and fundraising should be harder at work than ever. It also may be that there are certain projects or divisions which cannot continue, and then some which can. If an organisation is, for instance, involved in one project which is about delivering essential services, then that project can continue but others which are not essential (and the workers who are not essential to the essential services) will not be working. Our feeling is that, if the TERS support is required for employees who are not able to work due to COVID-19, then the organisation should make the application to register for TERS for those employees. Although the Directive does not seem to contemplate the realities we have outlined, we feel that our interpretation is in the spirit of what is intended. Can we claim TERS and the short-payment UIF benefit at the same time? Because TERS is for temporary closure and short payment UIF benefit is for carrying on work but for fewer hours/days, the applications and the system is not designed to accept applications for both sorts of applications from one employer. Although a technical argument could be made that different employees could be treated differently (if our position on the total closure aspect holds up) we very much doubt that an application for both TERS and short-payment UIF support from the same employer will be accepted and processed. Can we claim TERS and top it up with what we can, to support employees?
02 March 2020 – letter two from lockdown
Every day and every hour brings messages about new initiatives and partnerships to deal with the health and economic crisis in a holistic way and to support and join together all citizens in flattening the curve.
March 2020: letter from lockdown
While the earth (and we personally) may welcome the compulsory reset of the lockdown, our beneficiaries and organisations are going to be hard hit by the halting of many projects. NGOs across South Africa have been a step ahead in taking responsible action, and many have already suspended programs and activities. NGOs are also showing typical resourcefulness and grit, finding new ways to continue their work and to ensure that their organisations survive this period. There is much work to be done, and it is time to work together, to let the voices of our beneficiaries be heard and to be the leaders which our communities need. This brief newsletter contains the latest information on closures of the government departments that NGOs typically deal with, and our comment on the ongoing work which may be done. At ngoLAW we will be continuing our work and will research and draw together information and advice to assist you with thinking through and making some tough decisions over the next while. Watch this space for our correspondence and conversations and please forward to anyone who may benefit. To submit your questions, visit our website https://ngolawsa.co.za/, 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, Lize, Bandile, Janice, Lisa and Dorothy Government service status: GOVT DEPARTMENTS CLOSURES AND DEADLINES IN THE MEANWHILE The CIPC (Companies office) has announced that: it will be closed entirely from 4.00 pm on 24 March until 31 March. Limited electronic services will resume on 1 April, and the rest of their services will resume on 17 April. We will still be able to compile and create CIPC documents for lodging, and will be able to submit some on 1 April and the balance on 17 April. Email lisa@ngolawsa.co.za The NPO Directorate will be closed from 27 March until 16 April. The clean-up of the NPO register,which was planned to start on 1 April, will be delayed until 1 July. We do not yet have exact details of the plan, but we know that organisations with the longest outstanding NPO reports will be deregistered first. The lockdown gives organisations which are behind with their reports a chance to catch up. ngoLAW will continue to obtain information and compile NPO reports but will lodge these from 17 April onwards. No new NPO applications will be made during the lockdown period, but we will gather information and prepare for them. Organisations which are behind with NPO reports should contact us urgently for assistance in using this time to get the reports ready to lodge. Emailbandile@ngolawsa.co.za SARS had already called on citizens to stop coming into branches and to use e-filing. The TEU (Tax Exemption Unit) will be closed and will not be dealing with applications during the lockdown period. ngoLAW will continue to work on and assemble exemption applications so that they are ready to be lodged when the TEU re-opens for business. Email janice@ngolawsa.co.za Courts across South Africa are halting new court applications, restricting access to existing hearings and issuing directives around non-essential work and working from home. No national directive has yet been issued specifically around trust administration departments but our feeling is that the charitable trust registrations and updates will not be seen as essential and that work on them will cease for the duration of the lockdown. Sadly, a 21-day delay will not have a huge impact on the already terrifically slow turnaround time of the various offices of the Master. We will continue to draft the documents needed for trust and trustee changes, and will liaise with our agents in the various centres about when they may be lodged. Email lize@ngolawsa.co.za Time to catch up The next three weeks may be the gap you needed to get your admin, governance, standard agreements and overdue updates done. This is the stuff we are best at, so let us know how we can help. ngoLAW services continue. From Friday 27 March we will all be working from home. The easiest way to get in touch is email, and we will also be available on zoom/skype/cell phone (the landline will only be answered intermittently). Useful resources: Recommended reading: Joan Garry’s blog post on virtual meetings– how they should be designed and led (hint: not just as rushed versions of in-person meetings!) is useful and includes a free download of guidelines for a valuable virtual gathering https://blog.joangarry.com/virtual/ new from Marcus: https://www.marcuscoetzee.co.za/wp-content/uploads/2020/03/Social-Enterprise-Glossary-4th-edition.pdf this glossary is designed to help non-profits and social enterprises think clearly about strategies and business models. More than just a list of definitions, it explains key concepts and enables meaningful conversations Please share this newsletter freely (and subscribe to it, if it has been forwarded to you), let us know what you think of it and send us any ‘ask NGOLAW’ questions you have. (To unsubscribe, click the button at the end).
Avereli Ryder Global Reward Specialists
Avereli Ryder Global Reward Specialists Master reward and remuneration specialist. Offering comprehensive remuneration solutions to your organisation. www.rewardspecialist.co.za Cell: 083 293 2037 Email: averile@rewardspecialist.co.za
ngoLAW Update November 2019
The times are uncertain, the going is tough and financial realities are biting. The non-profit sector is hard hit but undaunted and we at NGOLAW feel lucky to serve and assist so many who remain positive and who are taking action, day by day, to improve lives, increase opportunity, protect and serve, expose truth and build a better society. This newsletter contains one of our ‘agony aunt’ responses, in which we answer a FAQ. To submit your own questions, visit our website https://ngolawsa.co.za/, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided. We end with some quick governance definitions, and connections to articles and resources you may find useful. A Luta Continua! Nicole, Lize, Bandile, Janice, Lisa and Dorothy 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. 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. Useful resources: Recommended reading: https://www.marcuscoetzee.co.za/constructing-a-philosophy-vision-and-mission-for-your-organization/ Marcus’ advice on why and how every organisation needs to be clear on (and go public with) its ‘why’ and ‘how’ will inspire and equip you to do this exciting and necessary work. Joan Garry’s Leadership Lab has a min-series on “how to build a thriving nonprofit without the typical burnout” https://nonprofitleadershiplab.com/ The Averile Ryder NPO Salary Survey has a new report out, and is looking for participants in their next survey http://www.rewardspecialist.co.za/ Please share this newsletter freely (and subscribe to it, if it has been forwarded to you), let us know what you think of it and send us any other ‘ask NGOLAW’ questions you have. (To unsubscribe, click the button at the end). Is it too late to wish you all Happy Spring? We hope it sprung happily for you!
Lotteries Commission: The Beast Awakens
The panic: ngoLAW has received a number of queries from non-profit clients concerned about notices received from the National Lotteries Commission (NLC) letting them know that their fundraising raffles or competitions are unlawful/unauthorised. The under-resourced non-profit sector tends to feel aggrieved at any ‘new’ requirements imposed on them, as compliance is already burdensome, and we have had to point out that the law being highlighted by these notices is not new, but has been around since 1997. It seems, though, that the National Lotteries Commission (NLC) has awoken from some sort of slumber, and is staking its territory. The law The Lotteries Act defines a lottery as: “…any game, scheme, arrangement, system, plan, promotional competition or device for distributing prizes by lot or chance…” The Lotteries Act then goes on to specify in what circumstances a ‘lottery’ as defined may be conducted. All lotteries which do not comply with the Act are prohibited as unlawful and those who conduct them are guilty of an offence. Non-profits who wish to maintain their reputation and credibility and to avoid risk must take note of these requirements and ensure that they comply with them. There are two types of lotteries which non-profit organisations may run without first having to register with the NLC: those which are ‘incidental to exempt entertainment’ (which we will call “Exempt Entertainment lotteries”) and “Private Lotteries”. The options: Please have a careful look at the identifying features of each of the options, so that you may check whether the fundraiser you want to run qualifies as one of these. Lotteries that are incidental to exempt entertainment or which are private lotteries are essentially self-regulated. Organisers do not need to register with the National Lotteries Commission or report to the commission. But they do need to observe the rules to stay within the law. If, however, the competition/raffle you are planning does not satisfy ALL of the requirements of either an Entertainment or a Private Lottery, then you may have to look at making an application to the NLC to register a “Society Lottery”. 1. Exempt Entertainment Lottery: To qualify as an ‘Exempt Entertainment’ lottery, your fundraiser must abide by ALL of the following: EXEMPT ENTERTAINMENT LOTTERY: The lottery must be conducted as part of some event or ‘entertainment’ ( a bazaar, sale, fête, dinner, dance, sporting event or other entertainment of a similar character); All proceeds of the entertainment, including the lottery, must be used “for the benefit of any deserving section of the public”. Expenses that may be deducted before using the money for a deserving cause are restricted to: The expenses of the entertainment, including those related to the lottery; The expenses of printing lottery tickets and advertising the lottery; and The cost of purchasing lottery prizes. None of the prizes in the lottery may be a money prize; The total value of the prizes may not exceed R5 000,00; The total value of tickets sold may not exceed R10 000,00; and The price of a single ticket may not exceed R10,00. 2. Private Lotteries: This sort of lottery is not likely to be conducted by a non-profit to raise funds, as it is one in which a closed group of people participates and benefits, but the requirements for this are: PRIVATE LOTTERY: Participants and beneficiaries are all part of the same closed group: social/sporting club, co-workers, residents on same premises If it’s a private lottery run at a sporting or social club, the governing body of the club must authorise the lottery in writing. The price of a single ticket may not exceed R10,00 The total value of all tickets available in a single lottery may not exceed R10 000,00. The total value of prizes may not exceed R10 000,00. No written notice or advertisement of the lottery may be displayed except: on the club premises; on the property where participants work or reside; on the lottery tickets; and no ticket may be sent through the post. The organiser of the lottery must be a member or the club or society and authorised in writing by the governing body to run the lottery. No management fee or expense allowance may be deducted from lottery proceeds. The only deductions allowed from the amount raised are for printing, stationery and notices. The income from the lottery must be used entirely for prizes or divided between prizes and the club fund. The maximum number of lotteries run by any club, workplace or residential entity is 12 a year. IF YOUR FUNDRAISER IS NOT ONE OF THESE: OPTION 3:REGISTER AS A SOCIETY LOTTERY: Society lotteries are competitions organised to raise funds from the public for various non-profit organisations. A short summary and explanation of what the Act says about this: SOCIETY LOTTERY: The lottery must be conducted entirely within South Africa; The organisation benefitting from the lottery must be registered under the NPO Act; The organisation benefitting from the lottery must not be connected with lotteries, gambling or betting; The lottery must be conducted in accordance with a “scheme” – or plan – that has been approved both by the organisation and the National Lottery Commission; The maximum value of tickets to be sold in a single society lottery is R2 million; The total value of prizes may not exceed R1 million per year per organisation; The total proceeds, after deduction of permissible expenses (up to 15% of proceeds where proceeds are under R1 million, and up to 10% of proceeds where these exceed R1 million) and the cost of prizes, must be used solely for: the charitable purposes for which the organisation is authorised to collect funds; support of sport or cultural activities for which the organisation is authorised to collect money; or other non-commercial or not-for-gain purposes approved by the National Lotteries Commission; Tickets for the lottery can only be advertised, marketed, promoted or sold in a prescribed area; The lottery may not be advertised, marketed or promoted jointly with any other society lottery, nor may funds for prizes be combined with any other lottery; and The lottery must be conducted strictly in
Wildlife Act
“Nicole and her team have been a crucial support system for our growing NGO, from providing well considered legal and governance advice on complex issues to efficient administrative services. Nicole is both professional and personable with a genuine desire to help our organisation achieve its goals.” Johan Maree – Co-Founder and Chairperson
ngoLAW Update April 2019
Welcome to our first newsletter. These updates aim to deliver useful insights and information on legal, governance and compliance matters relevant to the NGO sector, and to connect you with resources and events. This first issue introduces some new (and newish) team members and contains the first in our NGO Agony Aunties series: “Ask ngoLAW”. Please let us know what you think of it, and feel free to send it to others who may benefit. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] ngoLAW meets the new year with some new team members: Lisa D’Eramo (second from right) joined us in March 2018, so is not that new- Lisa is the engine room of our efficient CIPC department. Lize Vermeulen and Bandile Khwela (far left and second from left) joined us at the end of 2018, and are young attorneys with a focus on serving the non-profit sector. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Dear ngoLAW : Why do we need PBO (tax exempt) status? Question: I hope that registration as a non-profit company will meet any funders’ requirements. From your experience is it necessary to register as a PBO as well? ngoLAW answer: NPC registration (or trust/voluntary association founding) is only the first step to meeting the requirements of funders and stakeholders as a non-profit. Potential donors will require that your organisation also has PBO status (tax exemption), and you will want to have PBO status in place for a number of reasons including the following: Donors which are themselves tax-exempt are only permitted to donate to tax-exempt entities; If you are not tax-exempt, then donations tax at 20% can be levied by SARS on donations made to your organisation; Tax exempt (PBO) status is a standard requirement of donors, just for the credibility it confers- donors know that you have jumped through the SARS hoops, and are complying with their requirements; Tax exemption brings with it not only exemption from tax to be paid on earned income, but other advantages, like potential skills development levy exemption, exemption from estate duty for those who leave you money in their wills, exemption from transfer duty if the organisation ever buys a property, etc; and Depending on the sort of work done by your organisation, it may also be able to obtain 18A status, which gives your local donors a tax deduction, which can be a useful way of incentivising giving. In each newsletter we will answer a question commonly asked by our clients. If you have any puzzling issues, please click on the button to email your question to us. Past questions and answers will also be available on our website. [siteorigin_widget class=”SiteOrigin_Widget_Button_Widget”][/siteorigin_widget] 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.
CRSP Design
CRSP Design: Nicole and the team at ngoLAW have been incredibly supportive of our journey towards the creation of our Non Profit Company. From the very first engagement we had, we were presented with all the relevant information to decide what would work best for us. Upon deciding, the ngoLAW team was swift in their preparation of the relevant information and documentation and have been exceptionally responsive to any questions and concerns that we have had.
Just Share
ngoLAW is super-efficient, professional and friendly, and most importantly of all, they know exactly what they’re doing! They really do make stressful, complicated processes easy to manage. We thoroughly recommend them.
Beauty for Ashes
Blood Lions
Blood Lions: “Working with Nicole Copley and her team at ngoLAW has been an absolute pleasure! The assistance, advice and feedback provided was of an exceptionally high standard – extremely professional, punctual and explicable – and I would not hesitate to endorse the company.” Pippa Hankinson, Director Blood Lions
Breadline Africa
Breadline Africa – “Nicole and her team at ngoLAW have been tremendous in assisting Breadline Africa with legal and governance advice in the NPO sector. They offer tailored business solutions to the satisfaction of all stakeholders. Their level of professionalism and on-time service delivery has benefited our organisation. What a pleasure working with such a team.”
Future Farmers
Future Farmers –“We have had some difficulty with becoming registered as a PBO. It was a huge relief to meet Nicole who is able to assist us in a meaningful way. We are hoping to have the PBO registration before the end of the year and after several years of going about things in the wrong way, this seems really close!”
Syafunda
Thinking about income generation and profit in a non-profit world
by Marcus Coetzee Non-profit organizations and social enterprises that wish to design sustainability strategies need to have clarity around the concepts of income generation and profit, and how to achieve them. This article aims to debunk some misconceptions around income generation, equity investments, loan finance, and the profits or surpluses that these organizations may generate or receive. In previous articles, I have focused on legal structures, business models and common confusions. In this article, I propose that non-profit organizations and social enterprises can change the way they cost proposals and transact with their customers (i.e. the people and organizations they are getting money from). I believe this will increase the opportunity to generate income and the profit or surplus that may result. It is hoped this article will help you to better harness your organization’s potential while still delivering on its social goals. The first issue is the myth that “income generation” and “donations” are separate and utterly different. Non-profit organizations are skilled at fundraising and know how to submit proposals to donors. This is their comfort zone. In contrast, “income generation” is seen as something different, new, “business-like” and sometimes “dirty” – something that should be separated into another legal entity. This split thinking discourages organizations from exploring easy opportunities to earn income. For example, a national rehabilitation organization recently introduced a differential pricing strategy where certain services are free for poorer beneficiaries but charged to others who could afford the services. This opportunity was in its reach and did not require the establishment of side businesses, additional legal entities etc. Another recent example is a non-profit organization in the Cape Town townships that wanted to use its extra land to establish various businesses. However, when we explored these opportunities, none turned out to be viable. Instead the organization decided to make better use of its reputation and buildings, and become a “social services hub”. This meant upgrading the value they provided to tenants and bringing in new tenants at more profitable rates. Ultimately, this decision aligned better with the organization’s core values. It also promises to generate a surplus and expand the organization’s social impact. The second issue is the confusion between “income generated” and “equity investment” or “loan finance”. Income generated is money that is earned or raised and therefore is recorded in the income statement. This income includes many forms such as donations, grants, dividends and the sale of goods or services. “Active income” is income an organization needs to invest effort to earn, whereas “passive income” is money that an organization receives with minimal effort, such as through rental income, dividends or interest. In contrast, capital investment or “loan finance” is not income, but is equity or liabilities respectively which must be recorded as such in the statement of financial position (former balance sheet). Loan finance must be recorded as a liability as it is money that is owed by the organization. Equity investments occur when someone seeks to earn a return on their investment and usually involves buying shares of a private company (that you or your organization may own) with the hope of future income (dividends) from the investment and/or capital growth. Remember loan finance can never be treated as income, as the amounts ultimately will need to be paid back. Poor understanding of loan finance often results in organizations being unable to pay back creditors and quickly becoming insolvent. Income from receiving equity investment should not be used to cover day-to-day expenses, but should rather go into reserves, be used to purchase assets (e.g. property for your office), or be used strategically to build/expand stream of income. It is important for an organization to be clear on what it is aiming to achieve and to pursue appropriate sources of funding. It may not be appropriate to pursue equity investment or loan finance when the organization should be focusing its efforts on generating the income it needs to cover its on-going costs. The third issue relates to earning a “profit” or “surplus”, which arises when income earned from activities is greater than the true and full cost of these activities. These surpluses or profits can help organizations to build reserves, fund strategic activities, expand operations and manage risk. However, some leaders are uncomfortable with non-profit organizations earning a profit. Surprisingly, some donors, businesses and government departments also expect non-profit organizations to work at discounted rates without any surplus being generated. I believe that it depends on how the profit was generated and how it is applied. It is essential that beneficiaries are not undermined, neglected or misused in the process, and that profits and surpluses are reinvested so that they can further the mission of the organization. The term “non-profit” means that no profits should be distributed in any form to investors, donors, staff or board members in the form of hefty salaries or bonuses, or other stakeholders. It is vitally important that non-profit organizations cost projects fully in order to match the costs to the income stream. Organizations could, at times think that they’re making a profit from their income-generating activities, but they may not be. If the income does not cover the full costs of implementation, including a share of the overheads, it would result in them cross subsidizing these initiatives through other income sources. Organizations that do this are far more likely to run into cash flow problems as they may use their reserves, other income sources or advance payments to fund current activities. They may also choose to reduce their overheads to accommodate their donors, but this may have negative consequences for their ability to deliver and for their futures. For example, it may leave them unable to pay market-related salaries to their staff. Rooted within this constraint is a narrow set of budgeting skills. Non-profit organizations tend to present donors with a budget that represents a vertical slice of their income statements – a portion of all their actual costs, including overheads and direct project costs. Too often this is followed by arguments with
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.
Our 2nd Home
Dalmeny Consulting
Dalmeny Consulting Financial management capacity building services for management teams, finance staff and boards of NPOs. Also assist with large project budget conceptualisation/reporting. Cell 079 306 3372 Email dalmenyconsult@gmail.com Web dalmenyconsulting.webs.com
Marcus Coetzee
Marcus Coetzee is a South African management consultant who helps leaders cultivate strategic clarity. He also specialises in social enterprises. Marcus is based in Cape Town, South Africa. Cell 082 879 9131 Email marcus.coetzee@gmail.com Website www.marcuscoetzee.com
Ziyo
Ziyo – Accountants with heart Ziyo offers financial accounting, bookkeeping and outsourced payroll services, reviews, funder support, financial management and reporting and training to the NPO sector. Tel 021 797 6226 Email ziyo@ziyo.co.za Website www.ziyo.co.za
Drakensberg Boys School Choir
ngoLAW has efficiently and cost-effectively advised and assisted the Drakensberg Boys Choir School Educational Trust to review its legal governance structure, register the Drakensberg Boys Choir Foundation and update our Trust Deed. Her office has consistently travelled the extra mile in ensuring all the I’s are dotted and T’s crossed in the many CIPC and Masters Office annual updates needed. I have really appreciated your service, Nicole. Thank you so much for your always cheerful approach to our very tedious requests.
IZIKO Museums
South African Association for Marine Biological Research
Brownies & Downies
There was a time during our first year of operation when the pressures of governmental departments, city by-laws and regulatory agencies began their steady crushing pressure on us as a fledgling organisation. Because what we do is a unique and a new step for NPO’s in SA, our two founding members struggled to find professionals who could relate to what they were envisioning and trying to build, and a government department who knew how to categorise and register us. They were referred to Nicole Copley and ngoLAW through their business consultant. She (and her team) are incredibly knowledgeable on ngoLAW and regulations in South Africa, and it was evident when they consulted and worked with our founders to create our social enterprise that the vast practical experience and networking that they have acquired over many years of trade, while still retaining a gentle and nurturing attitude towards their NPO clients, should give them a market-leading edge in the industry. It was evident at the very early stages of our dealings together that the knowledge that could be gleaned from one another would be most beneficial. We look forward to a continued fruitful relationship with ngoLAW as we grow, expand and flourish in the years to come. Thank you for all your help thus far Nicole! Wade Schultz and Wendy Vermeulen
Fix Forward
We used ngoLAW to assist with a number of things, including drafting agreements between our non-profit trust and company, drafting the MOI for the company and submitting reports and name change requests to the NPO Directorate. We found them highly knowledgeable, particularly in the field of social enterprise which blends the non-profit and for-profit worlds. They were very responsive to any requests we made and all around a pleasure to deal with. We have already recommended them to a number of other social enterprises. Joshua Cox
Wildlife SOS
The Wildlifesos Trust could not have come about without the attention to detail, efficiency and helpfulness of Nicole. She has been with us through every step of the way and continues to be available for any help we need. Her team had a tough task setting up this trust and from its inception right through to getting our tax exemption and NPO registration has been a very smooth process. We hope to have a long working relationship with her and her team in the future. Frith Douglas
Woza Moya Community Development Project
TREE (Training and Resources in Early Education)
