Do you want to start a Non-Profit? Let’s talk about the set-up.

I ended off the previous article by mentioning that South Africa has put certain safety measures in place to encourage public trust in non-profits. One of these measures is the introduction of non-profit companies. Therefore we now have the option of registering an NPO or NPC.

1. NPO or NPC?

A NPO (Non-Profit Organisation) is registered with the Department of Social Development and an NPC (Non-Profit Company) must be registered with the CIPC. The primary requirement for all non-profits is that the profits are not enjoyed by individuals but is reinvested into the purpose of the organisation or company. There are no owners or shareholders in a non-profit. Both NPOs and NPCs can have employees, and you as the founder can also be one of the registered employees if you do remunerable work for it.

2. Here are some differences to help you clarify your choice/ route:

• A Memorandum of Incorporations is required for a NPC and a written Constitution is required for a NPO.
• An NPC is governed by the Companies Act 71 of 2008, and NPO is regulated by the Department of Social Development.
• An NPC needs three directors (who must be unrelated for PBO/tax exemption) for formation, whereas five board members are required for a NPO.
• An NPC is much quicker to register as it can take just a few weeks (with the CIPC), as opposed to NPO registration which can take several months to complete.
• An NPC has better accountability structures due to the required annual audits, which are not a requirement for NPOs.

3. What is the big deal about NPCs?

Well, the big deal is accountability! Much needed and very valuable accountability and transparency, which in turn yields trust. NPCs are regulated by the Companies act and are obliged to undertake annual audits. Though nothing is foolproof, this system of auditing and open books create greater public trust and are a much more reliable donation option for givers.

Section 1 of the Companies Act defines a non-profit company as a company which is incorporated for a public benefit and whose profits and property are not distributable to its incorporators, members, directors or related persons.

4. What is a PBO

PBO stands for Public Benefit Organisation. Once your non-profit is registered in one of the ways above, the application to SARS for PBO status can be made. Organisations and companies with PBO status get the privilege of tax exemption. Certain of these public benefit organisations or companies may qualify for the s18A certificate as well, which also provides donors with tax exemption for donations made.

Section 30 of the Income Tax Act, No 58 of 1962 prescribes the requirements for an organisation to be approved as a PBO, which include the carrying on of one or more public benefit activities. Public benefit activities are listed in Part I of the Ninth Schedule. Further requirements are that the PBO must be carried out with altruistic or philanthropic intent, may not promote the economic self interest of any employee or person in a fiduciary position, and the activity must be for the benefit of, or widely accessible to the general public at large.

5. How do you start?

The way you start with almost anything is by asking yourself the “w” questions. What? Why? Where? When?

Your purpose or plan does not have to be well developed in order to take the first steps. I often find that the shaping of a venture often follows once the first step is taken in the right direction. Once you have a thought of what you would like to create a non-profit to do, and have some answers to the “W’s”, it is time to call an attorney and embark on the challenging but exciting journey!

Disclaimer: This article is for information purposes only and not intended as legal advice. You are welcome to contact me or any other Attorney to book a consultation for specific advice applicable to your circumstances.