NPC vs NPO

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

  1. Companies Act, 2008 (Act No. 71 of 2008)
  2. Companies Regulations, 2011
  3. Nonprofit Organisations Act, 1997 (Act 71 of 1997)
  4. Nonprofit Organisations Amendment Act, 2000 (Act No. 17 of 2000)
  5. CIPC NPC Compliance Obligations Page
  6. SAICA Guide on the Retention of Documents
  7. Ricardo Wyngaard Attorneys: A Basic Guide to the NPO Act
  8. Inyathelo Information Page on the NPO Policy Framework
  9. Online MOI Article on NPCs
Registering an NPO in South Africa

How to Register an NPO Online in South Africa

NPO registration in South Africa is free and easy to do yourself, whether online or at a DSD office. The provisions of the Nonprofit Organisations Act, 1997 (Act 71 of 1997) are simple to follow while drafting the constitution.

Skip to How to Register an NPO in South Africa

What To Consider Before Registering

  1. Will you be the only organisation in your area doing the work that you want to do? If not, find out who the other organisations are and approach them to see if you could rather add your ideas to what they’re already doing. Why? In the 2015-2016 reporting year, the DSD received an average of 124 applications per day. Of the 32452 applications received during the year, 46% did not meet the requirements to be registered. During the year, 241 NPOs were deregistered for non-compliance.1
  2. What is your single focus area? If you have more than one focus area, rethink it. Why? When you apply for tax exemption, you will have to choose a sole or principal public benefit activity. Spreading your activities too wide will complicate your application.Apart from that, we all set out to save the world, and very often realise somewhere along the line that we do not have the time or resources to actually do that in a meaningful way across too many activities or focus areas. Why set yourself up to fail? Start small – you can always add things to do later.
  3. How will you fund your organisation? Why? If you think you’ll just send some letters to donors and get funding, think again! Has some government official / public servant told you to start a NPO because “government has funds available for it?” Be wary! Government funding objectives change – what will you do when they change?
  4. What legal form will your organisation take? Why? Depending on your answer in 3, you will want to consider whether you want to start a social enterprise2, which could take various for-profit or not-for-profit forms. If you don’t want to start a social enterprise but a pure NPO, your choices are between a Voluntary Association (VA), Non-Profit Company (NPC) or Trust. Read our post about the different types of organisations for more.

Once you’re satisfied with your answers, you can start your NPO registration with the DSD, or your NPC registration with the Companies and Intellectual Property Commission (CIPC), or your Trust registration with the Master of the High Court.

How to Register an NPO in South Africa

In the following 6 easy steps, you will submit an online application to register as an NPO in South Africa.

What You Need to Register an NPO in South Africa

  • A laptop or computer with internet (for online NPO registrations)
  • Your organisation’s constitution or founding document, signed and in .pdf, .doc or .docx format.
  • Certified IDs of office bearers in .pdf, .doc or .docx format and contact details, including residential and postal address, phone numbers and e-mail addresses

Steps for Online NPO Registration in South Africa

Step 1: Open the online NPO Registration page.

Step 2: Complete the required information:

  • Organisation Name
  • Organisation Type
  • Financial Period
  • Contact Person Name in the format Title, Initials, Surname (eg. Mr S Smith)
  • Contact Person Cellphone Number
  • Organisation’s Physical Address
  • Organisation’s Postal Address

When complete, click on next.
NPO Registration Page on DSD Website

Step 3: In the section for office bearers, click on “Add a Office Bearer.” A form to complete details for each office bearer will appear. After adding all the office bearers, be sure to type in the number of office bearers above the office bearer names. There has to be a minimum of 3 office bearers, with a maximum set by your constitution. When complete, click on next.

Section to add office bearers for registration of NPO

Step 4: This section requires uploading the Founding Document (Constitution, Trust Deed or MOI) and Supporting Documents (ID Copies or any other documents relevant to the registration) in .pdf, .doc or .docx format. When complete, click on next.

Section to upload documents during registration of NPO

Step 5: The last section of the application is a declaration of authorisation to apply and correctness of the information provided in the application. Tick the box next to “I Agree,” and click on the “Submit” button.

Section to make declaration of correctness and authority during NPO registration

Step 6: A reference number for the application will be provided. Keep this for any future enquiries on the status of your application. The reference number will also be sent to the Contact Person’s e-mail address or cellphone.

If you’re not comfortable completing the process on your own, HGG NPO Sustainability Solutions, Ricardo Wyngaard Attorneys and others can assist at a fee, or you can visit your closest DSD office for free assistance.


1State of the South African Non-Profit Register 2015-2016 from the Department of Social Development. Back to reference.
2Guide to Legal Forms for Social Enterprises in South Africa from the Bertha Centre for Social Innovation & Entrepreneurship. Back to reference.

Comparing NPO Types

Comparing NPO Types

One of the questions that is often asked is the difference between various types of NPOs. What is an NGO? What is a CBO? How does an NPO and an NPC differ? What is the difference between an NGO and an NPO?

Community Based Organisations (CBOs)

CBOs work on ABCD principles, particularly that of Community-Driven Development (CDD). Instead of “experts” from outside of the community coming into the community and deciding what the community should have to solve their problems, in a CBO, the community sets its own objectives and works toward those objectives with or without outside help.

These organisations are usually informal structures, but in South Africa may decide to take on a legal structure and register as a voluntary association, non-profit company or trust if they want to (or are forced to do so by outside agencies), unless they decide to embark on a Social Enterprise, in which case for-profit legal structures are also available to them.

If the CBO is faith-based, it may also be called a Faith Based Organisation (FBO).

Non-Profit Organisations (NPOs / NPCs)

NPOs are different from CBOs in that their solutions are not necessarily driven by the members of the community in which they work. The organisation’s governing structure sets the objectives for the organisation, usually in response to a perceived need in the community, with or without community consultation. NPOs generally don’t have programmes, or if they do, there are not a wide range of them, with most work performed routinely or through projects.

NPOs in South Africa are registered as either an NPO (Department of Social Development), NPC (Companies and Intellectual Property Commission) or Trust (Master of the High Court).

The main difference between these legal entities is in their compliance requirements.

In South Africa, the vast majority of NPOs are Voluntary Associations.

Comparison Chart

Criteria CBO NPO NPC Trust
Required Members 3+ 3+ 3+ 1+
Registration with Master of the High Court Required N N N Y
Registration with CIPC Required N N Y N
Registration with DSD Required N Y N N
Registration with DSD Encouraged Y Y Y Y
SARS Income Tax Registration Required Y Y Y Y
SARS PBO Registration Required N N N N
SARS PBO Registration Encouraged Y Y Y Y
SARS S18A Exemption Application Required N N N N
SARS S18A Exemption Application Encouraged Y Y Y Y
Annual Financial Audit Required N N N N
Annual Financial Audit Encouraged Y Y Y Y
Annual Returns to SARS Y Y Y Y
Annual Report to DSD if Registered Y Y Y Y
Annual Report to CIPC N N Y N
Annual Report to Master of the High Court N N N Y
Governance Requirements Low Low High Low

Non-Governmental Organisations (NGOs)

NGOs are different from NPOs in that their objectives are aligned to international objectives on a national scale, rather than regional or local requirements, even though they often overlap.

Another large difference is that NGOs are more structured and institutional than NPOs, in that they often have various programmes with projects that span a large geographical area.

NGOs often fund NPOs who implement projects aligned to their programmes, and have easier access to IAOs than NPOs or CBOs due to their capacity.

In South Africa, NPO and NGO are often used interchangeably, with the reasoning that all NPOs are by nature non-governmental (not of or initiated by government).

International Aid Organisations (IAOs)

IAOs differ from NGOs in that they are exclusively driven by international objectives on a global scale. They could be government instituted (e.g. SIDA, GIZ, USAID) or private (e.g. Greenpeace, Michael & Susan Dell Foundation, Rockefeller Foundation, Aga Khan Development Network). Their objectives could be broad-singular (health, in the case of the Bill & Melinda Gates Foundation) or very broad (Aga Khan Development Network).

IAOs work with all entities, but due to their large budgets, often rather work with NGOs than NPOs and CBOs, who may have a capacity shortage to implement high-value programmes and projects efficiently.

So What’s Special About Foundations?

Foundations are usually organisations that are set up by wealthy families with their own funding and own objectives. In South Africa, there is no legal entity for a foundation, so a foundation may register as any of the entitities available, and any entity can call itself a foundation. If an organisation did call itself a foundation and did not actively raise and distribute funds, it would seem hypocritical to call itself a foundation.

Summary

Organisational Type Description
International Aid Organisations (IAOs) IAOs are government instituted or private foundations and make funding available to governments and NGOs. Their programmes are usually global in nature. The Bill & Melinda Gates Foundation and Oxfam are examples of IAOs.
Non-Governmental Organisations (NGOs) NGOs are professional-driven organisations that receive funding from IAOs and governments, either using it themselves in their broad spectrum of programmes, or redistributing it to NPOs and CBOs. Their programmes are usually country-specific in nature, with a global view. loveLife Trust and Childline are examples of NGOs. In South Africa, their legal form can take that of a Voluntary Association, Non-Profit Company or Trust.
Non-Profit Organisations (NPOs) NPOs are professional-driven organisations that receive funding from NGOs and governments for specific programmes. Their programmes are usually regional to local in nature. Ikhala Trust is an example of an NPO. In South Africa, their legal form can take that of a Voluntary Association, Non-Profit Company or Trust.
Community-Based Organisations (CBOs) CBOs are community-driven organisations that receive funding from any source for specific programmes. Their programmes are usually local in nature. In South Africa, their legal form can take that of a Voluntary Association, Non-Profit Company or Trust, if they choose to formalise their relationship.