The Omnibus Bill proposes amendments to the Nonprofit Organisations Act, 1997 (NOA), primarily related to registration of nonprofit organisations and disclosure of information relating to their office-bearers, control structure, governance, management, administration, and operations. Other amendments to the NOA were proposed in the Nonprofit Organisations Amendment Bill, 2018. These amendments have not been finalised and it is not clear how the amendments in the Omnibus Bill will impact on these proposed amendments.
This alert summarises the amendments proposed to be made to the NOA by the Omnibus Bill.
Mandatory registration and mandatory compliance with the NOA
Section 12 of the NOA provides that a nonprofit organisation that is not an organ of state may apply to the Director of Nonprofit Organisations (Director) for registration.
The Omnibus Bill's proposed amendment to the section makes registration
mandatory for nonprofit organisations that are not organs of state and that intend to operate within South Africa. This expressly includes foreign nonprofit organisations.
In terms of these proposed amendments:
- all such nonprofit organisations must register before they commence operations; and
- existing nonprofit organisations that are not registered in terms of the NOA on the date of commencement of this provision of the Omnibus Bill will need to register within a period to be determined by the Minister of Social Development by notice in the
Government Gazette, in accordance with prescribed transitional arrangements and registration requirements.
The position as regards registration of nonprofit organisations is currently as follows: a nonprofit organisation applies for registration by submitting to the Director the prescribed form, properly completed, two copies of its constitution and such other information as may be required by the Director. The Director must consider the application within two months after receiving it, if the application is fully compliant. This means that a new nonprofit organisation may have to wait for two months before it can begin to operate. In our experience, the existing registration process takes a significant amount of time. If registration is to become mandatory, it is important that the Directorate for Nonprofit Organisations (Directorate) is effectively administered to ensure that registration and regulation are well supported.
The Omnibus Bill also obliges nonprofit organisations (whether registered in terms of the NOA or not) to comply with the NOA.
The Omnibus Bill therefore does not limit the registration requirement or the requirement to comply with the NOA to nonprofit organisations that are not nonprofit companies (local or external) or trusts, which are already regulated by the provisions of the Companies Act, 2008 (Companies Act) and the Trust Property Control Act, 1988.
Failure to comply with the section is made an offence. In terms of section 30 of the NOA, a person convicted of an offence in terms of the NOA is liable to a fine or to imprisonment or to both a fine and imprisonment.
Duty to provide prescribed information
The Omnibus Bill extends the information disclosure requirements contained in section 18 of the NOA to include prescribed* information relating to the office-bearers, control structure, governance, management, administration, and operations of nonprofit organisations. Nonprofit organisations must provide this information to the Director. Again, the Omnibus Bill makes it an offence for persons, bodies, or organisations to fail to comply with this obligation.
The Director must maintain a register, in the prescribed* form, of the prescribed* information, and both nonprofit organisations and the Director must provide access to the prescribed information maintained by them to any prescribed* person.
Disqualification and removal of office-bearers of nonprofit organisations
The Omnibus Bill introduces a new Chapter 3A into the NOA, which deals with the disqualification and removal of office-bearers of nonprofit organisations.
This Chapter:
- identifies categories of persons who are disqualified from being an office-bearer of a nonprofit organisation (broadly, the same categories of persons who are disqualified in terms of the Companies Act from being a director);
- deals with the expiry and extension of the period of a person's disqualification and exemptions from certain grounds of disqualification; and
- deals with the removal of a disqualified person from office.
It also places an obligation on the Directorate to establish and maintain, in the prescribed* manner, a public register of persons who are disqualified from serving as an office-bearer of a nonprofit organisation, in terms of a court order pursuant to the NOA or any other law.
Directorate's functions
The Omnibus Bill's proposed amendments to section 5 of the NOA empower the Directorate to collaborate, and enter into arrangements, with other organs of state to promote the achievement of the NOA's objects and enable the Directorate to perform its duties and functions. These arrangements may include implementing measures to co-ordinate their approach to performing their statutory functions; entering into a memorandum of understanding relating to information sharing; and assisting each other in the performance of their statutory duties, including through the provision of advice and support.
These amendments align with the new approach adopted by the South African Revenue Service to increase and strengthen its service offering in this sector, which includes increased reporting enhancement. Many nonprofit organisations may also qualify for tax exemption and it should be beneficial to strengthen all the pillars that support the nonprofit sector.
* These prescribed requirements must be prescribed after consultation with the Minister of Finance and the Financial Intelligence Centre.
This summary is not intended to, and does not, constitute legal advice, and may not be relied upon. For further information or tailored advice, please contact
Madelein van der Walt or your usual Webber Wentzel contact.
You can also access the Omnibus Bill's proposed amendments to the other pieces of legislation
here.
