What is a founding document & why does a NGO need one?
In the NPO Act, the founding document is simply referred to as “the constitution”. But, in fact, there are three different names for the founding documents of each of the three legal structures, which we described earlier:
|Legal Structure||Founding Document|
|Non-profit Trust||Trust Deed|
|Non-profit Company||Memorandum of Incorporation|
The most important thing to know about the founding document is that it is a legal document which defines the terms in which the organisation was established.
But, in addition to outlining the philosophy of the organisation, it also
- guides members on the objectives of the organisation (what the organisation hopes to achieve); and
- regulates how the organisation is to be administered; how it should be run, its structure, the duties of the Managing Committee/Board of Directors/Incorporates.
Particularly important, is that banks will ask for a copy of the founding document before allowing a bank account to be opened in the name of the organisation. It is important, therefore, to ensure that the organisation’s founding document is duly signed, and that all conditions and constraints that determine how the organisation will be administered and run (such as conditions of membership; procedures that need to be followed should the organisation be dissolved) be clearly outlined in the document.
If you are considering applying for tax exemption (registering as a Public Benefit Organisation with the South African Revenue Service), you must align the objectives of your organisation – within your founding document – to the requirements of the Income Tax Act, 1962 (Act No. 58 of 1962 as amended), i.e. “The sole or principle object of the organisation must be to carry on one or more of the Public Benefit Activities listed in the Ninth Schedule”.