The Non-Profit Company

Lorette Terry
 September 15, 2017
Comments (1)

What you need to know...


Non-Profit Companies are considered to be incorporated for public benefit, a cultural or social activity, or a communal or group interest. It is required to apply all of its assets and income, however derived, to advance the stated objectives set out in its Memorandum of Incorporation (MOI).
Unlike the ‘old’ Section 21 Company, the Non-Profit Company is not treated as a public company. This means that the obligations on public companies that automatically applied to Section 21 Companies in the past do not necessarily apply to Non-Profit Companies classified under the new Act.
The new Companies Act simplifies the registration process and this aims to increase accessibility to form enterprises and non-profit organisations.
Under the old Companies Act the phrase Association incorporated under section 21 was subjoined to the NPC’s name. However, under the new Companies Act the name of the Non-Profit Company, irrespective of its form or language must end with the abbreviation “NPC.” This name must be reserved before the entity is registered. This process requires that the name first be lodged with the Companies and Intellectual Properties Commission for approval, before the registration application is submitted.
Comparing the founding documents
The old Companies Act referred to an organisation’s founding documents as the Memorandum and Articles of Association. In terms of the new Companies Act, this is now termed the Memorandum of Incorporation or MOI for short.
The Memorandum of Incorporation must contain the organisation’s objective/s which should reflect the public benefit intention of the Non-Profit Company or that should relate to either the communal or group interests or the cultural or social activities which it sets out to advance.
Organisational structure of a Non-Profit Company?
In terms of the new Act a Non-Profit Company has the prerogative to choose whether it will have membership and a board of directors, or, simply just a board of directors.  The Memorandum of Incorporation must contain a provision that stipulates the choice.  juristic persons.
The Board of Directors
Under the old Companies Act a Section 21 Company was required to have at least two directors. The new Companies Act requires that the Non-Profit Company have at least three directors. 
In accordance with the Income Tax Act at least three of the office bearers/directors should not be related/connected to each other. People are considered to be connected if they are close relatives to one another.
Matters with SARS
It needs to be borne in mind that registration as a non-profit company under the 2008 Act (as with registration as a section 21 company under the 1973 Act) does not automatically quality the company for tax exemption. It is only where the company satisfies the criteria laid down in the Income Tax Act as a "public benefit organization" and is given formal approval by SARS as such, that there will be any exemption from tax.
Other matters
Upon dissolution, the entire net value of an NPC must be distributed to another NPC, voluntary association or non-profit trust with objectives similar to its own. Directors or members of the NPC are not entitled to any part of the net value of the NPC after its obligations and liabilities have been settled.
NPCs may not amalgamate or merge with profit companies. The disposal of any part of an NPC's assets or business to a profit company is limited to the extent that it must be for fair value and within the NPC's regular course of business. Where an NPC has voting members, their approval must be sought for an amalgamation or merger with another NPC, or the disposal of all or a greater part of the assets or undertakings of the NPC.

NPCs that are not required to be audited may opt for an independent review instead of an audit. A formal audit is, however, required if an NPC's public interest score (PIS) is 350 points or more; or if its PIS score is 100 points or higher, and the NPC's annual financial statements were internally compiled.

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Musa Magwaza
November 18, 2022
We want to dissolve npc at a very new born stage being approximately one month of existence and has less than R2000.00 in a closing balance, do we approach the court to dissolve it or any alternative legal framework to dissolve it to be legally binding.

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