The passing of the Amendment Act has resulted in the proposed NPO Bill being withdrawn given that many of the proposed amendments were addressed in the Amendment Act. But what changes have the Amendment Act introduced in respect of NPOs?
The Amendment Act has amended the Nonprofit Organisations Act 71 of 1997 (“NOA”) which now provides that NPOs must maintain adequate standards of governance, transparency and accountability and must improve those standards. Given that NPOs have become worldwide notorious vehicles susceptible to abuse by money launderers, terrorist and criminal organisations, the amendments, from the outset, establishes the need for high standards by NPOs.
According to the Amendment Act NPOs that are not an organ of state may apply for registration to the Director of Nonprofit Organisations (“Director”), but NPOs that make donations to individuals or organisations outside of the borders of South Africa, or provide humanitarian, charitable, religious, educational or cultural services outside of the borders of South Africa must register. Thus, registration remains voluntary for many NPOs, unless they fall with within the cross-border category for example by providing humanitarian support to an African country, thereby falling into the category of NPOs that must register.
The Amendment Act also makes it clear that whether registered or not, an NPO that must be registered will be bound by the provisions of the Nonprofit Organisations Act regardless of whether registered or not.
Registered NPOs are required in terms of the Nonprofit Organisations Act 71 of 1997 as amended (“NOA”) to keep accounting records as well as provide reports to the Director, with the additional requirement added by the Amendment Act to now also annually report on the office bearers, control structure, governance, management, administration and operations of the NPO. Information to be retained and reported on by registered NPOs is set out in Regulation 5 of the recently published Regulations in Respect of Amendments to the Nonprofit Organisation Act, 1997 as contained in the General Laws Amendment Act, 2022 (Act No. 22 of 2022) (“Regulations”). This includes information regarding the ownership and control structure of the NPO to enable enforcement agencies to establish the persons behind an NPO controlling its funds and functions.
The Director, just like the Master of the High Court with trusts and the CIPC with companies, is also required to keep a register of all registered NPOs and which register must contain prescribed information about the office-bearers, control structure, governance, management, administration and operations of registered NPOs. The Regulations further provide that the Director may provide electronic access to the information contained in the register, undoubtedly to enable enforcement agencies, as with the trust and company registers, to be able to access and search data necessary for the fight against money laundering and terrorist financing.
Further, the Amendment Act introduces a new Chapter 3A containing Section 25A to the NOA that deals with the disqualification grounds of an office-bearer of a registered NPO. These disqualification grounds mirror similar disqualification grounds in the Trust Property Control Act in respect of trustees as well as directors under the Companies Act (as expanded by the Amendment Act) and aims to ensure that inappropriate persons cannot remain in a position of control in respect of a registered NPO, particularly where that person has also been involved with, convicted or linked to money laundering or terrorism in South Africa or abroad. The Amendment Act also empowers the Director to have an office-bearer removed should the person become disqualified on the grounds set out in Section 25A(1), the office-bearer’s estate is sequestrated or liquidated, or, if the office-bearer fails to satisfactorily perform any duty placed on him under the NOA or to comply with a lawful request of the Director.
The Amendment Act has expanded the offences and penalties of the NOA which now determines that any registered NPO that fails to perform any duty imposed under the NOA or fails to register or report the prescribed information as discussed above will be subject to an administrative sanction, with sanctions dealt with in detail in the new Regulations.
NPOs, particularly NPOs that will have to register with the Director, must take note of the Amendment Act and the new requirements imposed in terms thereof as the requirements are effective as of 1 April 2023.
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