5 April 2004

Different forms an NGO may take

A South African based NGO can choose between three types of legal forms.

  • A voluntary association
  • A trust
  • A section 21 company

The choice of the appropriate legal entity will depend on the nature of the NGO. The requirements and legal nature of each of these entities differ.

Voluntary Association

A Voluntary Association (Association of Persons) consists of a group of people who have decided to co-operate in furthering what the organisation is set up to do, and who have certain parts to play in its administration.

The trustees are usually called the Executive or Management Committee members. As a Voluntary Association is governed by Common Law, any disputes will be settled in terms of Common law.

The founding or governing document of a Voluntary Organisation is called a Constitution. The objectives (the cause/s that the organisation supports or undertakes) are clearly stated and identified in the Constitution.. The appointment, powers and responsibilities of the members and executive members who would administer the association are recorded.

A voluntary association does not have a legal personality of its own i.e. it cannot own assets in its own name but in the names of its office bearers in a representative capacity. However, should the NGO register with the Directorate of the Nonprofit Organisations Act, it would attain legal personality and could then own property in its own name.

 

Trust

A trust is established by means of a written document called a trust deed.. The objectives (the cause/s that the organisation supports) of the trust are clearly stated and identified. The appointment, powers and responsibilities of the Trustees who would administer the trust are recorded.

A trust is administered in terms of the Trust Property Control Act (Act 57 of 1988). This Act, to a large extent supervises the trustees and to a lesser extent , the activities of the trust.

Once a trust deed has been executed, it is registered with the regional Office of the Master of the High Court (the Master). The appointment of the Trustees has to be approved by the Master. It may be necessary for the trustees to provide the Master with a financial guarantee (normally in the form of a Bond of security) that they will properly carry out their functions as trustees.

The Master has the power to override any of the clauses of the rust deed and has the final say in matters in dispute.

A trust does not have a legal personality of its own i.e. a trust cannot own land or sign documents in its own name. Assets will be registered in the names of the trustees “acting in their capacity as trustees of the trust”.

However, should the NGO register with the Directorate of the Nonprofit Organisations Act, it would attain legal personality.

 

Section 21 Companies

A company registered under section 21 of the Companies Act (Act 61 of 1973), as amended , commonly known as a section 21 company, is a special type of company – a company not for gain. The income and property of a section 21 company has to be applied for non-profit purposes.

The company has a membership and a board of directors. In small organisations these two functions normally overlap. The governing or founding documents of a company are its memorandum and articles of association.

The advantage of a section 21 company is that it is “incorporated”, i.e. the law considers it to be a juristic or legal person, in the same way as individual is. Therefore a company, like an individual, can own land and can sue and be sued in its name and is a legal person quite separate from its members and directors.

A section 21 company is regulated by the Companies Act, consequently there are certain duties which must be observed.

It is put into operation by being subscribed by at least seven and by registration with the Registrar of Companies in Pretoria who will issue a Certificate of Incorporation.

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