Can a non-governmental organization “live” with the old Charter?

The legislation regulating the activities of non-governmental organizations has been changed several times over the past decade. Especially in the field of taxation.

Frequent changes are not always noticed on time, and therefore a large number of non-governmental organizations (NGOs) still operate with charters that have not been amended accordingly.

Today we will talk about whether such a charter is considered valid, whether there is any responsibility for not amending the charter of non-governmental organizations and what to do for the NGOs that want to make the corresponding changes.

Historical background

By the end of 2012, the activities of non-governmental organizations  and other public organizations were regulated by the Law of Ukraine "On the Association of Citizens."

But from January 1, 2013 the law "On non-governmental organizations" entered into force. It:

  • canceled the distinction of associations by status;
  • canceled collective membership;
  • changed the spelling of the name;
  • changed the registration procedure, etc.

At the same time, all organizations that had already been registered at that time were given five years to bring their constituent documents in line with the new law. That is, it had to be done before the end of 2017.

In July 2015, amendments were made to the Tax Code regarding the regulation of activities and registration of non-profit organizations (and most NGO’s are just that).

Related article: Helped to replace management and amend charters of two NGOs in Ukraine

In July 2016, the Cabinet of Ministers of Ukraine Resolution No. 440 was issued, which then caused quite a stir. The Cabinet of Ministers approved the procedure for maintaining the register of non-profit organizations, incl. the order of their inclusion in the register. In short, the tax authorities were obliged to send “chain emails” to all non-profit organizations with a notification about the need to bring their charters in line with the requirements of the new tax legislation. And non-profit organizations were given only a month for all of it, from the moment of receipt of such an e-mail, incl. to hold a general meeting, register a new charter and provide the tax authorities with copies of the new charter. Although, at the end of the year, the term was significantly extended.

In May 2019, the above Procedure was again amended.

All of the above acts obliged the NGOs to amend their constituent documents. What to do if you, for whatever reason, missed the deadline for making changes?

Related article: Helped to change the charter of an NGO that hadn't been amended since 1996

What will happen if you do not reckon with changes in the legislation?

The Law of Ukraine “On non-governmental organizations” established that over the next five years, non-governmental organizations must amend their constituent documents, bringing them into line with the new law.

It should be noted that no sanctions are provided for those who do not. But such organizations will limit themselves.

Here are some examples.

All-Ukrainian status. Organizations whose charters provide for local status could long have been operating throughout Ukraine.

NGOs, in whose charters collective members are still provided for. Collective membership was canceled, but no transition mechanism was provided. Therefore, there is a practice when the first general meeting, held after the entry into force of the above law, must be attended by both individual and collective members.

The decision at this meeting is made by all together. But in the future, the question should be decided who, on behalf of the collective member (i.e., on behalf of the legal entity) will join the organization as an individual member. As a rule, managers of legal entities are selected.

Important! Such "delegates" will speak at the meeting not on behalf of the legal person who delegated them, but on their own behalf. That is, collective members, in fact, simply lost their membership in the organization. And if you do not take into account the requirements of the law and still leave the collective members, the bodies of the Ministry of Justice may refuse to register the changes adopted at the meeting, where the collective members were present.

Non-profit status. In the field of taxation, everything is somewhat clearer and tougher. If the Law “On non-governmental organizations” simply provided five years for changing the constituent documents and did not provide for sanctions, then Decree No. 440 established that those who did not meet the deadline would be excluded from the register of non-profit institutions and organizations. And this means that you have to pay income tax, and absolutely on a common basis.

Organizations that did not bring their constituent documents in line with the new requirements of the law may not even know that they have long been excluded from the above register and that they had to file income statements, and in case of doing business, they also had to pay income tax.

Therefore, if your organization falls under this category, you should check whether it still has a non-profit status. And if you did not find it in the register of non-profit organizations, you should take all measures as soon as possible to join it. Unless, of course, the goal of the organization is to make a profit and pay taxes on it.

Related article: We registered an NGO in newly formed Ukrainian non-profit register

We can help you understand the situation, provide legal advice on this matter or make changes to the statutory documents for you.

Publication date: 28/08/2019

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Name: Marina Losenko

Position: Associate

Education: National Aviation University

Knowledge of languages: Russian, Ukrainian

Email: [email protected]

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