The Difference Between NPC And NPO In South Africa
The difference between an NPC and NPO is not immediately apparent, even in my post where I compare NPO types. Let’s make an attempt to delve a little deeper into the meaning of each, and then compare the differences.
What is an NPC?
The Companies Act, 2008 (Act No. 71 of 2008) replaced the previous Companies Act (Act No. 61 of 1973) and came into operation on 1 May 2011. With the act, previous “Associations Incorporated Under Section 21” were automatically deemed to have amended their Memorandum of Incorporation (MOI) to reflect that they were now Section 10 NPCs, compliant with the new law and required to append NPC to their names. NPCs are regulated by the Companies and Intellectual Properties Commission (CIPC)
NPCs are subject to the Companies Regulations, 2011, which can compel them to subject to auditing of financial statements if they meet certain criteria, instead of an independent review. Most NPCs conduct annual audits, despite the provision to only submit an independent review of financial statements.
An NPC has limited choices in how it structures itself and functions, since much of it is regulated by law.
What is an NPO?
The Nonprofit Organisations Act, 1997 (Act No. 71 of 1997) replaced the previous Fundraising Act (Act No. 107 of 1978) and came into operation on 1 September 1998 and was amended by the Nonprofit Organisations Amendment Act, 2000 (Act No. 17 of 2000). Since 2012, there has been a draft NPO Policy Framework in the making, aimed in part at increasing regulation of the nonprofit sector. NPOs are administered by the Nonprofit Directorate of the Department of Social Development (DSD).
Most NPOs are Voluntary Associations (VAs), but an NPC or Trust may register as an NPO in addition to their registration with CIPC (NPCs) or the Master of the High Court (Trusts) if they choose to.
While some choices of NPOs are limited by law, they are generally free to choose how they structure themselves and function.
What is the Difference Between an NPC and an NPO?
| Criteria | NPC | NPO |
|---|---|---|
| Registration | CIPC | DSD |
| Minimum Unrelated Founders | 3 | 3 |
| Ownership | Belongs to the public | Belongs to the public |
| Annual Returns | Annual – CIPC | Annual – DSD |
| Institution Records | Kept for at least 7 years at public office | Unspecified. Kept for at least 5 Years if registered with SARS. |
| Accounting Records | Kept for at least 7 years at public office | Unspecified. Kept for at least 5 Years if registered with SARS. |
| Auditors | Regulated by Law | Dependent on Constitution |
| Financial Statements | Dependent on MOI and PIS | Dependent on Constitution and PIS |
| Solvency and Reckless Trading | Directors may be personally liable | No members liable |
| Obligations to Notify of Changes | Regulated by Law | Regulated by Law |
Summary
The main differences between an NPC and an NPO are the laws they are guided by, the organisations they report to, how long records are kept, whether audits are mandatory and the personal liability of board members.
Disclaimer: Information provided here is for information only and is not intended to be, nor does it constitute, legal advice.
Sources
- Companies Act, 2008 (Act No. 71 of 2008)
- Companies Regulations, 2011
- Nonprofit Organisations Act, 1997 (Act 71 of 1997)
- Nonprofit Organisations Amendment Act, 2000 (Act No. 17 of 2000)
- CIPC NPC Compliance Obligations Page
- SAICA Guide on the Retention of Documents
- Ricardo Wyngaard Attorneys: A Basic Guide to the NPO Act
- Inyathelo Information Page on the NPO Policy Framework
- Online MOI Article on NPCs
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