FORMATION OF NON-GOVERNMENTAL AND NON-PROFIT ORGANIZATIONS IN NIGERIA: LEGAL COMPLIANCE CONSIDERATIONS

1. INTRODUCTION

A Non-Governmental Organization ("NGO") refers to an organization established for purposes of advancing various societal causes, including religious, educational, literary, scientific, social/cultural development, sporting, and charitable causes independently from the government. In Nigeria, the establishment of NGOs is primarily governed by the Companies and Allied Matters Act, 2020 (CAMA) and regulated by the Corporate Affairs Commission (CAC). It is worthy to note that the formation of an NGO is distinct from the formation of business organizations due to the fact that the main objective for NGOs is not centered on profit-making. Hence, it is important for an intending NGO to set out their purpose and primary objectives to reflect their social impact rather than commercial gain before seeking to register an NGO. NGOs are typically registered as "Incorporated Trustees" under Part F of the Companies and Allied Matters Act, 2020. However, beyond the altruistic objectives, there lies a web of legal considerations that aspiring founders must navigate.

Establishing a non-profit organization requires careful attention to legal compliance to ensure transparency, accountability, and the organization's ability to achieve its objectives effectively. In this article, we explore key legal compliance considerations essential for the formation of a non-profit organization in Nigeria.

‍

2. WHEN TO REGISTER A NON-PROFIT ORGANIZATION

An organization should be registered as a non-profit organization if its objectives are aimed at promoting the public good, social welfare, and community development cutting across the following endeavors:

2.1. Charitable Activities

Organizations engaged in providing relief to the poor, distressed, or underprivileged individuals in society may register as non-profit. Such activities may involve providing food, shelter, and medical assistance to those in need.

2.2. Educational Initiatives

Non-profit organizations that focus on promoting education, providing scholarships, or enhancing educational opportunities within the community can seek registration.

2.3. Religious and Spiritual Objectives

Religious institutions and organizations with objectives related to the advancement of religion, spirituality, and community service may opt for non-profit status.

2.4. Philanthropy and Grant-Making

Foundations and grant-making organizations that provide financial support and resources to other charitable initiatives may register as non-profits.

2.5. Community and Civic Engagement

Organizations committed to fostering community cohesion, civic education, and citizen participation in governance may choose non-profit status.

2.6. Social Welfare and Development

Non-profit organizations dedicated to enhancing social welfare, fostering community development, poverty alleviation, and empowerment initiatives fall within the scope of non-profit registration.

2.7. Professional Associations

Associations formed to represent and advocate for professionals in a specific field, such as medical associations or bar associations, may seek non-profit status to advance the interests of their members.

2.8. Environmental Conservation

Organizations focused on environmental conservation, sustainability, and ecological preservation may register as non-profits to further their goals.

2.9. Arts and Culture

Non-profit organizations involved in promoting and preserving arts, culture, and heritage within the community can seek registration.

2.10. Human Rights and Advocacy

Organizations advocating for human rights, justice, and social equality may choose to register as non-profits to strengthen their capacity for positive impact.

‍

3. LEGAL CONSIDERATIONS IN THE FORMATION OF A NON-PROFIT ORGANIZATION

3.1. Availability Search and Name Reservation

The first step in the formation of an NGO is the registration of the organization under CAC, the principal governing body that provides the framework for NGOs in Nigeria. To register an NGO, an intending founder should consult an experienced legal practitioner to conduct a name availability search to ensure that the proposed name is not already registered under CAC.

3.2. Drafting a Constitution/Articles of Association

The NGO's constitution should be drafted by a legal practitioner and should typically set out rules that would govern the internal affairs of the NGO, the aims and objectives of the NGO, the governance structure, names of members of the Board of Trustees, and the organization’s statement of purpose.

3.3. Appointment of Trustees

This is a crucial requirement for the formation of an NGO in Nigeria. The CAMA 2020 requires that a person qualified to be appointed a Trustee must not be less than 18 years of age; or of unsound mind; or undischarged bankrupt; or convicted of an offence involving fraud or dishonesty within 5 years of his proposed appointment.

3.4. Registration of an Incorporated Trustee

Upon successful completion of registration, the NGO has acquired legal status to operate in Nigeria. Thus, the registered trustees of the organization can contract legally as an individual, sue and be sued. The organization will have perpetual succession and will continue to exist after the death or exit of the founder or trustees. They can also purchase property in the name of the organization. It is worthy of note that it is illegal for an unregistered NGO to buy, hold or sell land anywhere in Nigeria.

3.5. Registration of a Bank Account

To register a bank account in Nigeria, an NGO would require the particulars of its incorporation and its trustees. The NGO would also require a tax clearance certificate to be obtained from the Federal Inland Revenue Service (FIRS) as well as a Special Control Unit against Money Laundering (SCMUL) Certificate, to certify that the NGO does not engage in money laundering or terrorist financing activities.

3.6. Filing of Annual Returns and Statement of Affairs

According to Section 848 of CAMA, non-profit organizations are required to file annual returns with the CAC. This includes submitting financial statements, the annual report, and any other documents required by CAMA. Additionally, Section 845 of CAMA provides that registered trustees of NGOs must submit a bi-annual statement of affairs of the association to the CAC. This requirement ensures transparency and accountability in the operations of non-profit organizations.

3.7. Tax Exemption Status

Non-profit organizations in Nigeria typically seek tax-exempt status under Section 23(1)(c) of the Companies Income Tax Act (CITA). This involves applying to the FIRS for a Certificate of Exemption, which grants the organization some benefits.

Section 3 of the Value Added Tax Act (VATA) and the 1st Schedule to the Act on goods and services exempted and zero-rated goods, as well as Section 19 of the Personal Income Tax Act (PITA), create a tax exemption status for the income of ecclesiastical, charitable, or educational institutions.

3.8. Merger and Dissolution

At SHQ Legal, we provide bespoke services to our clients who require specifically tailored legal guidance on the formation and structuring of their non-profit organization. Should you require further clarification or support, kindly reach out to info@shqlegal.com and legal@shqlegal.com.

In addition to the registration process, non-profit organizations should be aware of the legal provisions governing mergers and dissolutions. Sections 849 and 850 of CAMA outline the procedures for mergers and dissolution of NGOs. Section 849 specifies that two or more associations with similar aims and objectives may merge under terms as prescribed by the CAC to ensure compliance with legal requirements and the proper handling of assets and liabilities. Section 850 provides for dissolution by a petition to the Court on certain grounds. The petition may be brought by the governing body, one or more trustees, at least 50% of the members, or the CAC.

‍

4. CONCLUSION

The formation of a non-profit organization in Nigeria is a delicate legal process. Thus, by understanding and addressing the legal compliance considerations outlined above, founders can lay a solid foundation for their non-profit organization, ensuring it is well-positioned to fulfill its mission and positively impact the communities it serves.

‍