Introduction
As civil society in Guyana has taken – or rather been given – an increasing role in public-spirited tasks such as fighting floods, AIDS, poverty and discrimination – perceived and real – providing legal aid or cheap meals for the poor, those civil society organisations seeking to formalise and institutionalise themselves face more than the usual challenges of resource limitation and fundraising. Despite the fact that many of these organisations are in fact doing or complementing the work of the state, they come up with one formidable hurdle which could be so easily removed by the state. The sad fact is that there is no legislative enabling environment for the promotion of civil society, while the tax laws effectively discourage giving and fundraising through creative business initiatives. Just consider how the tax laws would treat a not-for-profit entity that decides to carry on a business to raise funds to be used exclusively in financing its charitable work. The laws will treat the surplus on the business in the same way as it would any for-profit organisation, while disallowing the expenditure on the charitable activity as not being “wholly and exclusively incurred in the production of income”!
By contrast, countries ranging from Azerbaijan and Afghanistan to Malta, Mexico, Uzbekistan, Venezuela and Zimbabwe have either enacted or advanced legislation to facilitate that type of entity known by such names as non-governmental or not-for-profit organisations. Guyana therefore lags behind all these countries in NGO/civil society legislation which for all practical purposes is simply non-existent, although the reality is less clear, certainly more confusing and does not lend itself to simple determination.
State of uncertainty
The Civil Law Act of Guyana passed in 1916 provides that the law relating to charities shall be the law of England. The problem is that the charities law of England has changed beyond recognition since 1916, and indeed, as recently as 2006 the House of Commons consolidated and updated the law into the Charities Act 2006. That act defines charities by reference to the provision of benefits to the public over some thirteen purposes, including the arts, education, health, animal welfare, sports, environmental protection and the promotion of human rights, and makes comprehensive provisions for such charities. It is unlikely that anyone would suggest that English charity law would now apply in Guyana, but that itself is a strong reason for our own National Assembly to fill this yawning gap in our legislation.
One of the results of this failure is the perennial question that often confronts the person considering the establishment of a not-for-profit organisation – whether to go the route of the Companies Act 1991 or the Friendly Societies Act Cap 36:04 of the Laws of Guyana. For the benefit of all those persons called on to make the decision, this column compares in a simple straightforward way these two principal pieces of legislation for their suitability as the appropriate vehicle to carry out their business as NGOs. Another vehicle, the Co-operative Societies Act, is excluded, since only societies for the economic advancement of their members may be established under that act.
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Friendly Societies Act
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Companies Act 1991
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1. Scope
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Limited to the types of society specified, or extended by Minister
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Generally unlimited
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2. Regulator
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Registrar of Friendly Societies
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Registrar of Companies
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3. Minimum Fees to Registrar
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$1,000
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Approximately $30,000
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4. Role of Minister in establishment
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May limit the application of the Act
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None
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5. Minimum number
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Seven
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One
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6. Age limitation
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Under 16 not allowed
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Anyone can be a member but an incorporator must be at least 18
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7. In case of refusal to register
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Appeal to Minister
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No provision
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8. Legal Status
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Body Corporate
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Body corporate
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9. Whether branches are permitted
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Yes
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Yes
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10. Constitution
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Must contain provisions relating to matters in Third Schedule of the Act
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Must meet the requirements of the Companies Act but otherwise may contain any other provision
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11. Audit
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Must submit accounts to Registrar for audit or other person appointed to audit
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Audit by person holding a practicing certificate from the Institutes of Chartered Accountants of Guyana
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12. Reserve Fund
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Mandatory
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No requirement
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13. Investment of surplus funds
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Government or Post Office Savings Bank or Commonwealth Government or Land + Buildings
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No restriction
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14. Ability to Enter into Contracts
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Yes
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Yes
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15. Loans
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Must be out of separate funds established by contribution
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Subject to rules set out in the Companies Act 1991
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16. Taxation on Income
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Automatic exemption under the Corporation Tax Act
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Fully taxable unless expressly waived in a Tax Act or subsidiary legislation
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An unsatisfactory winner
It would seem that there is a compelling case for organisations whose objectives fall within the Friendly Societies Act to register under that act rather than the Companies Act.
It is true that there have been far more complaints about the administration of the Friendly Societies Act compared with the Companies Act and that there is considerable scope for ministerial intervention under the Friendly Societies Act, but it is also true that there has been little evidence of any minister acting unreasonably under the act, rendering any fear baseless.
This however is not a reason for our legislature to continue to ignore the need for specific charities and related legislation that takes account of the increasing role and contribution of such organisations in the social sector in Guyana.
Such legislation ought to take account not only of the entity in its role as provider of charitable services and as a recipient of donations but also of the contributors – individuals and corporate – to such organisations.
For example, individuals who no doubt represent a significant element of total contributions can claim no deduction for any donations made for any charitable or public purpose.
On the other hand, companies are allowed to deduct donations under Deeds of Covenant and those made to the Government of Guyana for public purposes or to any prescribed organisation of a national or international character.
The retention of the status quo represents an insensitivity that is clearly undesirable and counterproductive.
Next week: The Private Sector Commission’s amazing position on the Value-Added Tax.
