Non-profit organisations (NPOs) in South Africa commonly take one of three legal forms, namely the voluntary association, non-profit trust and non-profit company.

VOLUNTARY ASSOCIATION

A voluntary association (VA) is governed by the common law (as opposed to statutory law as in the case of a NPC) and is created when three or more people enter into an agreement to form an organisation to achieve a common non-profit objective. The VA may choose to be treated as an independent legal entity (on the same legal footing as a NPC) if its constitution specifically provides that the organisation will continue to exist despite changes in membership, and that its assets and liabilities will be held separately to those of its members. A VA does not have to register with a public authority (like the NPC with the CIPC). In order to ensure regulation of its conduct or affairs, the constitution should set out governance and accountability requirements. A VA is usually appropriate for small community based organisations that do not need to manage substantial amounts of money or valuable property or equipment in order to carry out their activities. The VA is the most popular legal entity being used for setting up a NPO in South Africa because it is fairly quick, inexpensive and easy. Some view the VA as the ideal legal vehicle for community based organisations.

NON-PROFIT TRUST

The Trust Property Control Act regulates trusts in South Africa. The Act is flexible and not complicated, but it allows for some oversight by the Master of the High Court and the standard of care for Trustees is captured in the Act. Registering a trust is generally a prudent option and registration takes place locally. There are a number of offices spread across South Africa. Trusts are not required to submit annual reports to the Master of the High Court.

NON-PROFIT COMPANY

A formally registered non-profit company (NPC) is governed by the Companies Act, which sets out ongoing regulatory requirements, such as the submission of annual returns to the Companies and Intellectual Property Commission (CIPC), updating the register of directors and members (where the NPC requires there to be members), maintaining a registered address, keeping proper minutes of meetings, and keeping financial and accounting records in the prescribed form. It is a separate legal entity distinct from its members or directors, and any assets are registered in the name of the NPC. The NPC is an appropriate vehicle for larger NPOs with complex programmes, a large employee base, or large budgets.

There are many factors to consider when deciding which structure is best suited to your organisation, such as its size, capacity and complexity, as well as donor and regulatory requirements. The choice of structure, however, will not influence your eligibility for tax-exempt status and donor deductible status. Rather, the purpose, objectives and activities of your organisation will.