Registering a Non-Profit entity in South Africa:
Part 2: 3 Big Questions to ask yourself when deciding between an NPO and NPC:

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  1. How much money will you be working with?

If you will be working with a lot of money, then an NPC, which is regulated by the Companies Act 71 of 2008, would be better suited as this entity is required by law to have better:

  • infrastructure,
  • accountability systems,
  • TAX, audit and/or reviews,
  • Open books,
  • and, founders and directors who take fiduciary responsibility from the founding of the entity.
  1. How much public trust will you be working with, and do you have it already?

Will you be working with a large amount of public trust, maybe scattered across several communities or even across cities, provinces, or nations? The further your field or reach spreads, the more public trust you will be working with.

Connected to this is the question of whether it is already implicit trust that you or your organisation enjoy, or whether it trust still to be earned? By this, I mean, do you already have a group of donors or supporters who have implicit trust in what you are doing, e.g., a small community church group or a community soccer club? Or, will you be looking to find donors that you do not necessarily have contact, connection, or relationship with as yet, and who will not have implicit trust in you and your entity, therefore, you will need the added security of accountability imposed by law?

If you are looking to build with donors from more than one community and with donors whose trust you must still earn and keep, then I would suggest that the NPC with its better-regulated accountability and governance structures is again preferable. However, if it is a community-based program such as a soccer club or a book club, then an NPO is all that would be required in that instance.

  1. How long are you looking to build for?

Please note that this is just my personal view; when I look at the Companies Act and the steps the legislature took with it, I deduce that the Non-Profit Company emerged and evolved as a more sustainable entity that allows for better governance and accountability, and therefore it is my preferred choice when building for the long term. The added fact that it is regulated by the Companies Act, just like normal for-profit companies are, is also helpful for South Africans. It helps us to know how to treat this entity, how to hold it accountable, and how to build it for the future.

In my opinion, an NPO can still work for a voluntary association that does not require a lot of accountability or infrastructure. However, if you are going to be working with a lot of money, a lot of public trust that you don’t yet have, a long-term goal, or even a lot of unknowns, then you will benefit from investing in an NPC and then following that through with the second step of PBO (public benefit organisation) registration.

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.

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