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This section provides detailed information about the following:  

• Definition of an NPO
• The NPO Directorate's main functions
• The benefits of registering as an NPO
• The different types of not-for-profit organisations that can register (voluntary organisations, Section 21 companies and trusts)
• Steps in obtaining NPO registration

Definition of an NPO

Any organisation that fulfils the following conditions may choose to register as an NPO:

1. A non-government organisation that provides a service to the public.

2. The members or office bearers of the organisation must not profit from this service, except to receive reasonable payment or compensation for the work they do.

The organisation must register with the NPO Directorate, a government body that operates under the Department of Social Development. Registration is not compulsory for NPOs, but there are many benefits for organisations that choose to do so.

The NPO Directorate’s main functions

• To register NPOs and keep an up-to-date record of all registered and de-registered organisations. This register is published once a year.
• To make sure these organisations comply with the conditions laid down in the NPO Act (1997) and maintain a minimum standard of good governance and accountability.
• To develop policy and programmes that help to improve the effectiveness and image of the non-profit sector.
• To work with other government departments, businesses, organisations and individuals who are interested in the non-profit sector.

Benefits of registering as an NPO

• Registration is free.
• An organisation, even if it is run on a non-profit basis, cannot access funding from the government, the National Lotteries Trust or the National Development Agency (NDA) without being a registered NPO.
• Registration shows the general public, businesses and donors that your organisation is run properly and your activities and financial situation are regularly checked. This makes it much easier to raise funds, as donors know their money will be used properly. In fact very few donors will now give money to an organisation that is not a registered NPO, or in the process of being registered.
• As a registered NPO your organisation can then apply for tax exemption as a Public Benefit Organisation (PBO) with the South African Revenue Service (SARS).

Remember that the NPO Directorate only registers NPOs; it does not fund them as well. It is the responsibility of each NPO to actively seek funding for their operations from a variety of sources. A non-profit organisation, whether it is registered or not, does not require permission from the Directorate to raise funds.

The different types of non-profit organisations that can register

There are three different legal ways to set up an organisation that is not for profit and all are eligible to register as an NPO.

1. A voluntary organisation. This classification includes most Community-Based Organisations (CBOs), and some smaller Faith-Based Organisations (FBOs) and Non-Government Organisations (NGOs).

2. A Section 21 Company under the Company Act, 1973. This type of organisation is suitable for larger operations and most NGOs, FBOs and charities are Section 21 companies.

3. A Trust under the Trust Property Control Act, 1988. Trusts are formed by individuals and businesses to manage and distribute substantial amounts of money.

The type of organisation you choose to set up depends on many factors including the work your organisation does and the size of its operation.

Voluntary organisations

If your organisation offers a local community service such as home-based care, and has no debt and a small annual budget, it is advisable to form a voluntary organisation. All voluntary organisations must begin by electing a management committee, which will then be responsible for drawing up a constitution. This constitution must be accepted and signed by all the members. You do not need a lawyer or professional advice to set up a voluntary organisation, and so it does not cost anything. Although a voluntary organisation is simpler to start and run, it can still do all the things that a Section 21 Company can. For example it can acquire assets and buy and sell goods.

Note that the NPO application form includes a copy of a model constitution suitable for voluntary organisations. This can be used to check that your organisation’s constitution contains all the necessary points to make it legally valid. Alternatively you can adopt the model constitution as your own, providing you type out all the points again and put in the details that apply to your own organisation. The bold underlined type on the model constitution indicates the entries that you need to make. These include your organisation’s name, its purpose, the number of committee members, when your financial year ends and the names and signatures of the members (including all the office bearers such as chairperson, treasurer and secretary).

Section 21 Company

If an organisation manages a large budget, deals with the buying and selling of goods and/or acquires expensive assets such as cars, machinery or buildings that need to be paid off, it is advisable to become a Section 21 Company. This will protect the members from being individually responsible for the debts of the organisation. It must be remembered, however, that Section 21 Companies are much more difficult and costly to both start and run. It also takes between six and eight months to set up this type of organisation and requires the services of a lawyer. Section 21 companies must be registered with the Registrar of Companies.

Trust

Trusts are organisations that are formed to receive and distribute funding. They need to be registered with the Master of the Supreme Court and the Inland Revenue Department. Trustees are people who are elected to manage and allocate the trust funds, according to the conditions laid down by each trust. For instance one trust might only fund educational projects, another only healthcare projects. Trustees must also make sure that the funds that are given to organisations are used properly. Trusts are therefore particularly suited to organisations that channel funds to other organisations. They need to be set up by a lawyer.

Steps in registering as a NPO

Step One

Obtain an NPO registration form from:

1. The national website: www.welfare.gov.za (go to NPO, then NPO Documents, then Application Form)

2. The Department of Social Development, Private Bag X901, Pretoria 0001. Telephone number: 012 312 7500. Ask for the NPO Directorate.

3. Any district office of the Department of Social Development/Social Services/Social Welfare

Step Two

One copy of the completed application form and two copies of your Constitution (if you are a voluntary organisation) must be sent to the address below. If your organisation is a Section 21 company then two copies of the Memorandum and Articles of Association must be sent with your application form. If you are a registered trust then two copies of the Deed of Trust must accompany the application form.

NPO Directorate

Department of Social Development

Private Bag X901

Pretoria

0001

Your organisation will then be sent a letter acknowledging receipt of your application within 6 weeks. If everything is in order, your company should receive NPO registration within two to three months of application.

Please note that the Directorate will only proceed with registration if your constitution covers all the points set out in the NPO Act. That is why it is important to check your constitution against the model constitution supplied by the Directorate. It is also important to take the time to make sure the application form is filled in properly. The NPO Directorate reports that nearly 50% of first-time applications are not filled in properly. This can lead to delays in registration for everyone as too much of the Directorate’s time is spent getting organisations to re-submit acceptable applications.

Step Three

If your application is successful your organisation will receive a certificate of registration with an NPO number and a certified copy of your registered constitution. Your organisation will then be entered into the official list of registered NPOs. Your registration number will consist of six numbers, for example: 009-057 NPO

Your registration will stay valid as long as your organisation continues to fulfil the requirements set out in the NPO Act.

What happens if your application is rejected?

The Director must give you a written explanation as to why your application was not successful. You will be given a month to try and sort out the problems and then you can resubmit your application. If your application is still unsuccessful you will be given a reason in writing. Your organisation has the right to appeal against this decision if you think it is unfair. An Appeal Tribunal will then hear your appeal.

Update of situation regarding NPO registration

As of August 2005 there were over 33 000 NPOs registered with the NPO Directorate. In addition there were around 5 000 incomplete applications awaiting further details. The Directorate can process up to 100 applications a day and receives between 50-100 new applications every day. It grants registration to approximately 90% of all the organisations that apply and is registering around 12 000 new organisations annually. Many organisations previously reported long delays but the Directorate has improved its capacity and is now granting registration within a 3-month period from application.