Non-profit organisations (non-profits) provide an important service to communities or groups. It is either classified as voluntary associations or they are incorporated as either non-profit companies or as non-profit trusts. All of these structures have legal requirements that board members or trustees need to comply with. This article will highlight a few governance issues that non-profits should be aware of.
Public Benefit Organisations
Many non-profits qualify to register as a Section 18A public benefit organization (PBO), in terms of the Income Tax Act. But many non-profits don’t make use of this tax benefit. Registering as a PBO will allow donors to donate cash or property to your PBO and then deduct the donation for tax purposes, once the PBO provides a Section 18A receipt back to the donating company. This makes PBOs more attractive for donations than ordinary non-profit organisations.
Commission-based fundraising
The Income Tax Act allows for the payment of a reasonable remuneration so non-profits should be aware of fundraisers who offer their services at a high commission fee. In terms of the Consumer Protection Act, fundraisers are also required to disclose certain information to benefactors and donors such as their personal details, the charges that will be levied against donations as well as any deductions such as commissions payable to fundraisers.
Employing staff
Non-profits should ensure that its employment contracts are prepared or reviewed by a legal practitioner. Amendments to the Labour Relations Act introduced legal implications for fixed-term contracts in certain instances. This means that non-profits cannot solely rely on the lack of funds for operational reasons, when retrenching staff. Volunteer contracts as well as independent contractor contracts should also be reviewed to ensure that it is not considered as being employment contracts.
POPI Act
The Protection of Personal Information Act (POPI) requires that an Information Officer be appointed for every organisation. The Information Officer is a senior person in the organization and is responsible for the lawful collection, processing, storing and management of personal information that is held by the organization.
Every non-profit should therefore have standards and measures that will ensure that it is POPI Act compliant.
The service providers and other third parties that have access to the personal information held by non-profits, should also be POPI Act compliant.
Board Matters
Board members or Trustees should ensure that they are sufficiently experienced and have knowledge of governance and management matters relating to the non-profit as well as the legal and regulatory environment wherein the non-profit operates. Technology management, technology security and conflicts of interest should be continuously assessed and managed. Board members should also ensure risk management in a manner that will support the non-profit to reach its goals. Stakeholder management is another matter that should always be on the agenda of Board Meetings. Contract management is vital for any organisation and board members should be aware of all the contracts of the non-profit and its obligations in terms thereof.
Avoid getting de-registered
If the non-profit is registered as a non-profit organisation with the Department of Social Development, then remember to file the Narrative Report or an Affidavit stating that the NPO has no funds. If you are registered with the CIPC, then submit your annual returns, every year. Also, update any changes for the office bearers, the NPO constitution and address details, with either the CIPC or the Department of Social Development.
Non-profits are invited, for a limited time period of 6 months from the date of this publication, to contact Julies Attorneys Inc. for a free online or telephonic consultation, relating to any corporate governance matter. Non-profits should quote the name of this publication, to access the offer.
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