FAQ: What are the requirements and conditions that the founding document of an organisation must comply with?

The requirements are set out in section 30(3)(b) of the Income Tax  Act, and are summarised as follows:
  • At least 3 persons who are not connected persons must accept fiduciary responsibility for the organisation.
  • No single person is permitted to directly or indirectly control the decision-making powers of the organisation.
  • Funds must be used solely for the object for which the organisation is established and no funds may be directly or indirectly distributed to any person, unless this occurs in the course of undertaking an approved PBA.
  • On dissolution, the remaining assets must be transferred to a PBO which has been approved under section 30(3); an institution, board or body exempt from income tax under section 10(1)(cA)(i) that has as its sole or principal object the carrying on of any PBA; or the government of the Republic in the national, provincial or local sphere; or the National Finance Housing Corporation, which entities are required to use the assets solely for the purpose of carrying on approved PBAs.
  • In case of a branch of foreign organisation, it is required on termination of its activities in the Republic to transfer the assets of such branch to any public benefit organisation, institution, board, body, department or administration if more than 15% of the receipts and accruals attributable to the branch during the period of three years before the termination are derived from a source within the Republic.
  • No donation may be accepted that may be revoked by the donor or where conditions are imposed that will entitle the donor or any connected person to obtain a direct or indirect benefit there from, or where there is any misrepresentation with regard to the tax deductibility thereof under section 18A.
  • A copy of all amendments to the founding document must be submitted to SARS.

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