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The classifications NPC, PBO, NGO and NPO as well as EI all refer to entities that are not intended to make profits for their shareholders, but the acronyms certainly cause a lot of confusion. Here’s what they mean and how they relate to each other.

The term Non Profit Company (NPC) came with the new Companies Act of 2018. It replaced what were know as s21 companies, which were formed under section 21 of the old Act. It is a company registered with CIPC and its essential features are

  • There must be at least three independent incorporators
  • It must be formed to perform some altruistic function
  • It is not allowed to declare dividends either in kind or in specie. This means that upon being wound up, its assets must be passed on to a similar NPC and cannot be distributed to its members.
  • Its members or directors may draw reasonable remuneration for services rendered
  • Its company name ends with NPC (not Pty Ltd)
  • Its rules are contained in its Memorandum of Incorporation, a standardised document contained in the Companies Act

A Non-Government Organisation (NGO) is like a Non Profit Company that is not registered as a company at CIPC. This would typically be a church, a sports club, charity or the like.

  • There are no universal rules regarding its founders
  • Its rules are contained inits Constitution

A Public Benefit Organisation (PBO) is either a NPC or a NGO which has registered under s30 of the Income Tax Act at SARS as a PBO, in order to do which it must satisfy these conditions

  • There must be at least three independent incorporators
  • It must be formed to perform a qualifying altruistic function accessible to members of the general public
  • Its members or directors may draw reasonable remuneration for services rendered

      Having been registered, it benefits in the following ways

  • It will have also registered at SARS as an Exempt Institution (EI) so is exempt from Income Tax
  • Any donations made to the PBO may be treated as tax deductible expenses by the donor. This is an important incentive to donate.

A Non Profit Organisation (NPO) is either a NPC or NGO which has registered with the Department of Social Development, in order to do which it must satisfy these conditions

  • There must be at least three independent incorporators
  • It must be formed to perform a qualifying altruistic function accessible to members of the general public
  • Its members or directors may draw reasonable remuneration for services rendered

      Having been registered, it benefits in the following way

  • It may now apply for donations from certain entities, such as the National Lottery and the Department itself
  • Interestingly, if a NGO registers as a NPO at the department, their certificate states NGO and not NPO. 

Here’s a summary

NonProfit

 

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