Comment on new Act of Ukraine “On non-governmental organizations”

Igor Samokhodskyi, a lawyer of our firm wrote an article about Law of Ukraine “On non-governmental organizations”. The article contains analysis of key changes brought by the law. The article was published on UBR.UA (Ukrainian Business Resource) under the link - http://ubr.ua/business-practice/laws-and-business/biznes-soobshestvu-dali-pravo-golosa-164042. 

Briefly about the changes in the slide:

Unabridged text of the article (translation):

“Since January of 2013 legal entities will be able to become founders and members of voluntary associations. Along with this organizations will be entitled to protect not only interests of their own members but also interests of general public. The territory of organization activities will not be limited by its territorial status.

Igor Samokhodskyi, lawyer of law firm “Pravova Dopomoga” for UBR.UA

On January 1, 2013 Law of Ukraine “On public organizations” will be invalidated and along with it a new Law of Ukraine “On non-governmental organizations” (hereinafter – the law) will enter into force. It will become the main act regulating NGO.

The law is three times as big as the previous one and this is exactly the case when bigger amount of text is justified by positive innovations and detailed regulation of relations.

And the most important thing – changes in name of the act. The new law doesn’t contain old ideas in a new guise; wording of new name really reflects changes to the essence of voluntary organizations understanding.

Entry into force of the new law will bring significant changes into regulation of voluntary organizations activities which will appear in the form of organizations powers extension and simplification of registration procedures

At the same time like any other regulation it has a number of both little and significant drawbacks.

Since 2013 non-governmental organizations can be founded by and have as members not only individuals (individual or collective members) but also legal entities of private law. Thus the business will become the full participant of public relations and will be able to protect its interests by using the same right as citizens. This innovation of the Law significantly expands the understanding of the constitutional right of freedom of association which is guaranteed by the Constitution of Ukraine in Article 36. This is without any doubt a positive innovation but its implementation method is not completely clear. The law divided voluntary organizations into two organizational forms:

• Non-governmental organization (only individuals can found and be members);
• Public association (only legal entities can be founders, individuals as well as legal entities can be members).

Taking into consideration the fact that rights of two forms are equal after registration, the only difference we have – possibility of membership. Thus it is difficult to understand the motivation for these two forms of organizations.

Legal entities will be entitled to found organizations (associations) the membership in which can be obtained by individuals and legal entities. Individuals will be able to found non-governmental organizations the membership in which will be available only for individuals. At the same time if legal entities give up their membership in public association there will be only individuals left and such association will actually be no different from a non-governmental organization.

Authors of the bill did not follow the principle of Occam’s razor (created a new term without need for such) which caused not only unequal treatment of individuals and legal entities but also inconsistencies with terms of the Constitution of Ukraine which describes non-governmental organizations.

Not less important is that acceptable fields of NGO activities have been amended. The law contains provisions which cancel major limitations for voluntary organizations activities which existed before:

• According to stipulations of the law “On public organizations” organizations could conduct activities only within territory which correlated with their status (it distinguished all-Ukrainian, local and international status of organizations). The Law cancels limitations in regard to territory of organization activities and introduces the principle of free choice of territory for activities. The logical continuation of the principle is cancellation of “local” status of organizations but it is not apprehensible why “international” status disappeared as well. It is quite interesting that cancellation of such limitation is stipulated for charitable organizations by the bill “On charity activities and charitable organizations” which was sent to President to be signed.
• According to the law “On public organizations” organizations were established for protection of rights and interests of their members which was directly stipulated by the definition of voluntary organization (“…for common realization of rights and liberties by citizens”) and non-governmental organization (“organization for satisfaction and protection of their legal social, …, interests”). The Law on contrary has a new definition: “Voluntary organization is a free will organization of individuals and/or legal entities of private law for realization and protection of rights and liberties, satisfaction of society and in particular economic, social, cultural, ecological and other interests”. The absence of word “their” in the definition completely changes not only the permitted field of organizations activities but also opportunities for activities purposes wording in charter documents of voluntary organizations.

Along with entry into force of the law the procedure of non-governmental organizations registration also faced some significant changes:

• Previously registration application of all-Ukrainian non-governmental organization was considered for a month and additional 10 days were provided for results notification. The law stipulates that the decision is to be made and notified about within 7 days. If a decision on documents revision is made such decision is to be notified about not later than the next day after decision is made (thus the maximal term in this case is 8 business days);
• Registration denial based on inconsistency of charter documents with the requirements can now be only motivated by inconsistencies with provisions of laws (Subsection 2 of Section 14 of Article 12 of the Law) and not with legislation as it was before (this eliminates any chances of registration denial based on inconsistency of charter with bylaws which used to be a common practice). But it is still too early to expect decrease in number of negative decisions. Abilities of state authorities representatives related to motivation of denials are well known to everyone. All that is required is a political will;
• Section 5 of Article 1 of the Law stipulates that “voluntary organization with a status of legal entity is a non-commercial company the main purpose of which is not obtainment of profit”. Most likely this provision will end frequent problems of organizations related to obtainment of “non-commercial status”;
• Less important but still a positive aspect is cancellation of payment for primary registration of voluntary organizations which could previously reach 170 UAH (10 untaxed minimal incomes). The only primary registration action which must be paid for is accreditation of unit of foreign non-governmental organization (340 UAH – 20 untaxed minimal incomes).

Positive changes affected the expansion of rights of voluntary organizations by the Law.

For example in accordance with Subsection 2 of Section 2 of Article 21 of the Law voluntary organizations with status of legal entity have the right to conduct business activities directly if this is stipulated by the charter. Previously in order to do so a voluntary organization had to establish an enterprise (this opportunity is still available but now it is a right and not an obligation).

Also the Law provides the right for voluntary organizations “to address in accordance with the law to state authorities, authorities of the Autonomous Republic of Crimea, local authorities, their officials and officers with proposals (comments), statements (petitions)”. Taking into consideration the ability of organizations to protect interests of unlimited circle of people, such right is a really positive innovation. The only thing that is not quite clear in this wording is “in accordance with the law”. Most likely the authors of the Law meant the Law of Ukraine “On citizens' application” but we can’t say for sure that the provision will be interpreted this way.

The Law turned out to be loyal not only from the perspective of significant amount of positive innovations in the field of freedom of association regulation but also from the perspective of bringing charted documents of already existing organizations into compliance with new regulations: 5 years are provided for bringing charters in compliance with the Law and further registration. At the same time the registration will be free of official payments (Subsection 4 of final and Transitional provisions of the Law).

The answer for the question “What's in my name for you?” in context of the law characterizes one of the most significant changes: the legislator changed the very essence of regulated relations. Previous law regulated rights to freedom of citizens. Now the law regulates the right to association itself and procedure of voluntary organizations existence and from now on business may also be a spokesman of society opinion.”