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Breaking News:

NPOs


Published: Jul 29, 2017

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Dear Editor,

 

I write in reference to the recent notice in the press from the registrar general to all non-profit organizations (NPOs) operating in The Bahamas. I am rather surprised by the notice and its timing. The registrar asserts that she is performing her duties pursuant to the Companies (Non-Profit Organization) Regulations 2014 (“the Regulations”). Where has the registrar been these past three years since the enactment of the regulations?

Shortly after the regulations came to my attention in October 2014 I wrote to the then attorney general to express my view that the regulations were probably ultra vires the Companies Act. Subsequently, in November 2015 the registrar and representatives from the attorney general’s office requested our urgent comments on proposed amendments to the Companies Act and the regulations to remedy some of the concerns that had been expressed with the regulations. Notwithstanding the very short request for comments, the same was provided and hence I am surprised with the registrar’s attempt to rely on the regulations to seek the information requested in her notice. The mere fact that there was a proposed amendment to the Companies Act to validate the regulations, in my view, was an admission that the regulations were ultra vires.

The regulations are purported to be made under section 302 of the Companies Act. This section provides that the minister may make rules and regulations generally in order to give effect to the act.

Notwithstanding, non-profits are defined in the Companies Act, the 2014 regulations purport to expand the definition by defining non-profit organization to mean “an organization that primarily engages in raising or disbursing funds for purposes such as religious, charitable, educational, scientific, historical, fraternal, literary, sporting, artistic or athletic purposes not for profit”. The 2015 amendment to the Companies Act added new definitions for non-profit organizations and non-profit associations, and also provided that non-profit organizations had to apply to the registrar for registration. As far as I am aware the 2015 amendments were never enacted.

Section 14 and sections 160 to 169 of the Companies Act deal extensively with the requirements for NPOs. Section 14 provides that the minister can license any association which is to be incorporated as a limited liability company whose objects are charitable may be incorporated without “Limited” in its name. Subsection 4 of section 14 allows the minister to impose conditions or regulations on the issue of a license and may require that those conditions and regulations be inserted in the company’s memorandum of association.

Subsection 5 of section 14 provides that a company which has a license is entitled to enjoy all the privileges of limited companies and be subject to all of their obligations, except those of using “Limited” as any part of its name and of publishing its name and of sending lists of members and directors to the registrar.

Subsection 6 gives the minister the power to revoke the license and the word “Limited’ must thereafter be inserted in the name of the company, but before doing so the minister must give the company an opportunity to be heard.

Sections 160 -169 make administrative provisions for NPOs and their dissolution.

In her notice the registrar makes no distinction between NPOs incorporated under the Companies Act and NPOs who are not incorporated under the Companies Act. It is my submission that the registrar has no regulatory authority over NPOs that are not licensed under the Companies Act. In her notice the registrar asserts that it is requesting financial information pursuant to section 123 of the Companies Act. It must be noted that the request for such information must be made to the company and shall be in the approved form. The financial information that can be requested under section 123 is the financial information required to be maintained under sections 118-120 of the act. However, section 124 specifically states that sections 118-123 shall not apply to private companies. It must be noted that a new section 117(A) was inserted into the act by the Companies (Amendment) Act 2013, which requires a company to keep reliable accounting records in relation to sums of money received and expended etc. The requirement to maintain these records is only necessary if the company’s business turnover exceeds $50,000.00 per annum. The registrar’s power to request financial information is accordingly limited to sections 118-120 and does not apply to private companies.

It is my humble submission that the demand in the notice by the registrar general is unlawful, and for those NPOs licensed under the Companies Act the registrar should be in possession of the information required by section 14 and sections 160-169 of the act.

 

- Lester J. Mortimer, Jr., QC

 

 

 

 


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