is often said that South Africa law is becoming too complicated. This
is debatable, it certainly seems to be proving a challenge for the
Minister of Sport and Recreation and his department.
|Employees of Sport and Recreation South Africa: |
start by sketching some background. The Companies Act, 2008 provides
for the creation of a company known as a Non Profit Company (also
known as an NPC). (The equivalent provision in old Companies Act was
the Association Not For Gain or s 21 Company.)
Non-Profit Organisations Act, 1997 on the other hand deals with the
registration and regulation of Non-Profit Organisations (or NPOs).
NPOs are in many cases voluntary associations which are registered in
terms of the Act.
are completely types of organisations and are dealt with differently.
There are even different government departments which look after
is no provision in the Companies Act for a company to become a
Non-Profit Organisation (and vice versa). The Companies Act only
provides for a company, under very narrow circumstances, to become a
Co-operative, but other than there is no provision in that Act for a
company to become something other than another type of company.
a good reason for that – a member of the public dealing with a
company needs to know who they are dealing with. If the company is
allowed to chop and change what type of legal entity they are there
would be no protection for creditors, etc. You enter into a contract
with a company based on the provisions of the Companies Act and
suddenly you find it is no longer registered with the CIPC because it
has decided to become something else with different rules applying.
You may not have entered into the contract if you knew the
organisation was not a company.
is also important to understand that if a Company is wound up in
terms of the Companies Act it is dissolved and ceases to exist. If a
new organisation starts up using the same name, it cannot be regarded
as the same organisation.
give an example, ABC Company employs staff and is registered for
Income Tax, VAT, Employees’ Tax, etc and has all the relevant
registration numbers. The owners decide to wind up and start over
again as DEF Company. They have to retrench their staff, pay off any
debts, and have the company deregistered. Then they have to register
with SARS all over again as DEF Company. They also aren’t the
employers of the staff at ABC Company. That all seems obvious.
only way ABC can transfer everything to DEF is to pay all of ABC’s
debts, transfer all left over assets to DEF, transfer the staff to
DEF in terms of the Labour Relations Act, and then close ABC down. It
is not possible for ABC to transfer it’s debts to the DEF without
all the creditors’ agreement. Also, any court cases with which ABC
is involved will end with its dissolution, unless the court grants it
leave to substitute DEF as a new party in its place.
properly trained lawyer will tell you this. But it seems the Minister (Fikile Mbalula) and his department (SRSA) do not have access to any of them. Or at least his
response to a question asked in Parliament by Mr MS Malatsi (DA) last
year would indicate that to be the case.
asked where he was aware
that the non-profit company of SA Sports Confederation and Olympic
Committee (SASCOC) had indicated its dissolution in its 2014
financial statements, the
Minister responded that he and his department were “fully
aware that SASCOC was converting from an NPO (sic) registered in
terms of the Companies Act to a Voluntary Association” and further
that “the SASCOC membership took a resolution at its Special
General meeting on 9th November
2013 to dissolve the NPO (sic) SASCOC as of the 31st March
2014 and adopted a constitution and the formation of SASCOC as
Voluntary Association. The Assets and Liabilities of the NPO SASCOC
will be transferred to SASCOC the Voluntary Association.”
we have seen, an NPO is registered in terms of the Non-Profit
Organisations Act, and not the Companies Act. SASCOC is also a Non
Profit Company, not an NPO.
seems to be no consideration of the fact that debts can’t just be
transferred. Otherwise anyone could just call a bank up and tell them
that they have transferred their overdraft to their friend. Try that
and see how far you’d get.
response to further questions the Minister clearly refers to SASCOC
NPC being wound up in terms of s 80(2) of the Companies Act.
the Minister further states that a body called SASCOC is still
recognised as the macro sports body, claiming that it is still in
existence as a voluntary association now and no longer a company. As
we have seen, once a company deregisters it ceases to exist and any
new organisation has to start from scratch. It is not the same
of course, has far reaching consequences, which need to be dealt with
otherwise it will create a legal headache in years to come.
a company cannot ‘convert’ to a voluntary association, if SASCOC
has formed itself as a new organisation it will have to have done, at
the very least, the following:
afresh with the tax authorities.
new leases on all property and equipment it rents.
all its staff from the company to the association, in terms of the
Labour Relations Act.
all its debts or obtained the agreement of its creditors to allow
the new organisation to accept the liability to pay the debt.
any court cases with which it is involved or obtained the leave of
the court to substitute the new organisation in place of the
company. It is known that SASCOC NPC is involved with several court
case, including a high profile defamation case against Graeme Joffe.
With SASCOC NPC dissolving, that will have to end, as it is
inconceivable that someone can sue for defamation on behalf of
the Minister to end the recognition of SASCOC NPC as the macro
sports body in terms of the National Sports and Recreation Act and
recognise the new body in its place.
Minister and his department, and SASCOC (whether the company or the
voluntary association), seem to burying their heads in the sand and
not dealing with a legal dilemma they have created by the hasty
decision to deregister as a company, after they found the provisions
of the Companies Act to be too onerous. If nothing is done to correct
the mistaken which have been and are being made, future generations
of sportspeople and administrators could find themselves paying for
a matter of interest, SASCOC NPC is still registered with the CIPC as
being in business, over year after it was supposed to be wound up.
Even more interestingly, SASCOC was registered as a Non-Profit
Organisation on 25 April 2006 and is still registered. So we have a
SASCOC which is an NPC, one which is an NPO and one which is a
voluntary association. Confused? You are not the only one.