Non Profit Companies

A non-profit company is a company incorporated for public benefit or other object relating to one or more cultural or social activities, or communal or group interest.

The income and property of a non-profit company is not distributable to its incorporators, members, directors, officers or persons relating to any of them and must be used to advance the purpose for which it was created, as set out in its MOI. A non-profit company must have at least three incorporators and three directors and may be registered with or without members. A non-profit company is not required to have members. The members of a non-profit company are persons who participate in the activities of the non-profit company, such as members of a church or a pension fund. Non-profit companies registered without members, may be registered with a standard or a customized Memorandum of Incorporation (MOI).

Main objectives of a Non Profit Company include:

  1. Community social welfare
  2. Community youth development
  3. Community health care services
  4. Community economic empowerment and foundation
  5. Religious worship and other religious community outreach activities
  6. Community training and educational development
  7. Home owner’s association

If you wish to receive grants or donor-funding, you are required to register with the Department of Social Development.  Non-profit companies registered with the Department of Social Development can apply for funding at the National Lottery Board.

As regards to an NPC with or without members:

Previously, under the old acts when NPCs did not exist, you had to have members in an Non Profit Organisation. But since the new act, it is not necessary to have members anymore. It is one of the ways they have made it easier to register a Non Profit.

Where an NPC has members, the members do not need to be voting members. No more than two classes of members may be provided for in the MOI, that is voting and non-voting members. Membership may be held by juristic persons, including profit companies. The Act calls for each NPC’s MOI to clearly set out the qualifications for membership, the process for applying for membership, any initial or periodic cost of membership in any class, the rights and obligations, if any, of membership in any class, and the grounds upon which membership may, or will, be suspended or lost.

If an NPC does opt to have members, they may not be restricted or regulated in any manner that may be construed as unfair discrimination in terms of Section 9 of the South African Constitution. The MOI must also set out the basis upon which the members choose the directors of the company. Should any of the directors be elected by the voting members, the MOI must provide for the election each year of at least one-third of those elected directors.

Where there are voting members each voting member has at least one vote and generally, the votes of voting members carry equal weight on any matter unless the MOI provides otherwise. In other words, the voting rights in an NPC may be loaded disproportionally in terms of its MOI. Section 58 and section 65 of the Act, which deal with holders and the governance of companies, only apply to the NPC if it has voting members.

It is important to note that an NPC in terms of the 2008 Act may acquire and hold securities issued by a profit company or directly or indirectly, alone or with any other person, carry on any business, trade or commercial undertaking consistent with or ancillary to the NPCs stated objects.

If an NPC has no members, the MOI must set out the basis on which directors are to be appointed by its board, or other persons. Unless otherwise stated in the MOI, a minimum of three (South African) directors is required on the board of an NPC.

There are two manners that you chose in how to appoint a director:

  1. During an annual general meeting held within six months after a financial year end
  2. During a general directors meeting held or a round robin approval by directors, within 10 working days after resignation or death of any director.

Just a quick examples of members to clarify: The members of a non-profit company are persons who participate in the activities of the non-profit company, such as members of a church or a pension fund. But if you have more voting members than directors, you can lose the original idea and control of your Non Profit through voting as they might have the swing votes. This is one of the reasons they changed the Acts. As well as to lessen the absurd amount of red tape it used to require to register an NPO. That is why most people opt to register without members.

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