May june 2011 npo legal issues vol 12 version 2

By Ricardo Wyngaard
The Companies Act of 2008 (the Act) and Companies Regulations, 2011 (the ABOUT NPO LEGAL
Regulations) came into operation on 01 May 2011. The Act has, to a large extent, been amended by the Companies Amendment Act, 2011. This brief article focuses on some of the key issues that should be taken note of by s21 companies and those who will be establishing non-profit companies. published by:
S21companies will, unless otherwise provided, continue to exist as if incorporated in terms of the provisions of the Act which automatically applies to existing s21 companies from 01 May 2011. Submitting Annual Returns
Section 33 (1) of the Act requires every company to file an annual return with • Companies Act & Regulations the prescribed fee within 30 days after the anniversary date of its incorporation. The now-defunct CIPRO issued a noticed on 26 April 2011 in which it stated that: “The Companies and Intellectual Property Commission (CIPC) will enforce compliance of annual returns by non-profit companies (or section 21 companies). Thus, as from such date, non-profit companies that become due for compliance with annual returns for the current year will be required to comply with the provisions of the Act.” Every company must, in terms of section 33(3) of the Act, annually designate in its annual return, a director, employee or other person who is responsible for the company’s compliance with the requirements listed in Part C of Chapter 2 The Public Interest Score
Non-profit companies are, in terms of the Regulations, categorised according RICARDO WYNGAARD ATTORNEYS is
to a ‘public interest score’ and must adhere to the minimum financial reporting standards stipulated for its particular category. Every company must calculate its ‘public interest score’ at the end of each financial year. Factors that determine the ‘public interest score’ include: the number of employees, the company’s turnover and number of members of the Company. The financial SUBSCRIBE:
reporting standards can, depending on the category, either be; the International Financial Reporting Standards (IFRS), IFRS for SMEs, SA GAAP, or the Directors
Companies have to ensure that all directors, officers, company secretaries and
auditors are not ineligible to be or disqualified from serving in their respective positions. As stated in earlier editions, members of board committees may, in terms of the Act, be held liable if they breach any provision of the Act and any provision of the company’s Memorandum of Incorporation. This liability extends to committee members who are not members of the board of directors. Fax: +27 86 538 8435 [email protected] Transitional Provisions
S21 companies have until 30 April 2013 to file a Memorandum of
Incorporation and change its name, without charge, to bring it in harmony with the new Act – otherwise it will be deemed to have done so after that date. It is advisable to do so during the transitional period. Name Reservation ito Companies Act
By Ricardo Wyngaard
Section 12 of the Companies Act provides that a CPA Regulations – In Operation
person may reserve one or more names to be used at a later time – for the incorporation of a new The Consumer Protection Act Regulations also company or for an amended name of an existing came into operation during May 2011. It is company. A name gets reserved for a period of six important to note that the Minister of Trade and months. This time period may be extended by the Industry has now decided that juristic persons, including NPOs, with an asset value or annual turnover less than R2m at time of a transaction,
The most important change that has been introduced also qualify as ‘consumers’. This was changed from by the Companies Act, is that the application for name reservation does not have to precede an Promotional Competitions in terms of CPA
application to incorporate a NPC. The incorporators do not have to wait for the name to be reserved before application is made for incorporation of the The Consumer Protection Act (the CPA), which company. The application for the name reservation came into force on 01 April 2011, repeals section and the incorporation of the company can be done 54 of the Lotteries Act which regulated promotional simultaneously. The Department of Trade and competitions and introduces a new definition of Industry has explained the position as follows: provision that if a competition satisfies the “Basically the new process for the approval of a name requirements set out therein and the prize offered will be that an incorporator will submit four choices of exceeds a prescribed threshold, the competition will qualify as a promotional competition. It will therefore names on the Notice of Incorporation, which is the founding incorporation document of a company, containing information on type of business, directors, The promoters of the competition will have to registered company addresses etc. comply with all relevant aspects of the CPA. The CPA also contains a number of requirements to The Companies and Intellectual Property Commission [which replaces CIPRO as the registrar and regulator De-registration of NPOs
By Ricardo Wyngaard
of companies] will then put those name choices through a checking and testing process to determine if I recently visited the offices of the Directorate for they are suitable to be approved. Suitability for Nonprofit Organisations in Pretoria. During this visit I was informed that large numbers of registered approval of a name will rest on three criteria as per NPOs face potential de-registration for having failed to submit financial and narrative reports. The NPO Act requires all registered NPOs to submit their financial and narrative reports within 9 months of their financial year-end. If this does not happen, the “However, the rejection of all the names does not delay director for NPOs must send a compliance notice to the formal incorporation of the company, as the unique the defaulting NPO giving it one month to comply. If there is still non-compliance, the NPO must be de- designated company registration number assigned by the Commission, becomes the name of the company.” NPOs can forfeit their funding if de-registered as Section 11 of the Act also provides that a company donor agreements may stipulate that NPOs should name may comprise words in any language, together maintain their registered status in terms of the with any letters, numbers or punctuation marks, any NPO Act for the duration of the funding. Access the model report form at the Directorate’s website: of these symbols: +, &, #, , %, =; and any other
Important Note: The information contained in this newsletter is general in nature and should not be
interpreted or relied upon as legal advice. The information may not be applicable to specific circumstances. Professional assistance should be obtained before acting on any of the information



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