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                                                                                                BUSINESS FORMS

Non-profit company (NPO) 


Definition  A non-profit company is an association incorporated not for gain. These companies are governed by the members and directors. The companies resemble business oriented (for profit) companies in their legal structure. 


Characterised of the Non-profit company:

  • 3 or more persons (including juristic persons) may incorporate and must complete and sign the MOI
  • The board of a non-profit company must comprise at least three directors (3 or more directors). 
  • With or without members i.e. an NPC without members can be incorporated. If it chooses to have members, it is permitted to have two classes of members, namely, voting members and non-voting members.
  • NPC can have voting or non-voting members.
  • Each voting member has at least one vote and the vote of each member is of equal value to the vote of each other voting member on any matter to be determined by vote of the members, except to the extent that the company's MOI provides otherwise. 
  • They are incorporated for a "public benefit purpose".
  • Income and property may not be distributed to the incorporators, members, directors or officers of a non-profit company, except for reasonable compensation for services rendered by them.
  • Membership can be held by juristic persons, including profit companies
  • The MOI will be amended by a special resolution. This requires agreement by 75% of the votes represented at a meeting, i.e. For Non-Profit companies who have members agreement by 75% of the members is required and For Non-Profit companies without members, the Board may amend that company's Memorandum of Incorporation
  • Upon its winding-up, no past or present member or director of a non-profit company is entitled to any part of the net value of the company after its liabilities have been satisfied.
  • Non-profit companies do not have a share capital and cannot distribute shares or pay dividend to their members. 
  • The company has an independent legal personality, but a director / directors  will be liable for any loss, damage or costs sustained by the company if he/she was acting in the name of the company
  • The name of a non-profit company will end with "NPC".
  • All of a non-profit company's assets and income must be used to advance its stated objectives, as set out in its MOI. 
  • Non-profit companies must prepare the financial statements at the end of the year, but are not compelled to audit the financial statements.
  • Non-profit companies are not compelled to attend the general annual meeting (AGM). 
  • A non-profit company is required to give 15 business days notice for shareholder meetings.
  • The structure is applicable to not for gain associations and the drive for these entities is not for profits 


Advantages of a non-profit company:

  • The company has an independent legal personality, but a director / directors  will be liable for any loss, damage or costs sustained by the company if he/she was acting in the name of the company
  • The assets of the company are in the name of the organisation, not its members
  • Non-profit companies continue to exist even if the membership changes. 
  • The assets and liabilities (debts) of the organisation are held separately from those of its members.
  • May make a profit, but may not share any of the profits with its members - profits can only be used to carry out the work of the organisation. All of a non-profit company's assets and income must be used to advance its stated objects, as set out in its MOI.
  • The members exercise power in general meetings in the sense that they can appoint or remove directors, amend the MOI of the company and dispose of the NPO's assets. 
  • Non-profit companies must prepare the financial statements at the end of the year and is not compelled to audit the financial statements.
  • Non-profit companies are not compelled to attend the general annual meeting (AGM). 
  • A non-profit company is a legal person and must exist in its own right and is not dependent on who its members are, who works for the organization etc.   


Disadvantages of a non-profit company:

  • The company and not the members and staff, is responsible for the debts, contracts and other legal responsibilities. 
  • Non-profit companies do not have a share capital and cannot distribute shares or pay dividend to their members
  • As the structure is applicable to not for gain associations, the drive for these entities is not for profits and members are not motivated in the running of this business.
  • The structure is applicable to not for gain associations and the drive for these entities is not for profits. Members are less motivated.
  • Non-profit companies are compelled to prepare annual financial statements
  • Upon its winding-up, no past or present member or director of a non-profit company is entitled to any part of the net value of the company after its liabilities have been satisfied
  • Non-profit companies do not have a share capital and cannot distribute shares or pay dividend to their members.