The International Journal of Not-for-Profit
Law - Volume 2, Issue 1
A quarterly publication from The
International Center for Not-for-Profit Law
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Draft Law of Georgia on
Charitable Activity and Charitable Organizations By Petr Pajas for IJNL, Prague, August 1999 An inspiring draft of the Law on Charity Activities and Charity
Organizations, which deals also with the coordination of charitable activities
by a state agency similar to the Charity Commission of England and Wales has
been prepared by jurists of the Georgian Business Law Center in Tbilisi in
collaboration with several Georgian NGO leaders and with the International
Center for Not-for-Profit Law. Why is the draft inspiring? The draft deals with several important issues
of contemporary not-for-profit law: ·
the definition of a charity and activities of public benefit, ·
the rules governing economic activities, ·
the acquisition of tax and other fiscal benefits, and ·
a mechanism for state supervision of the compliance with the requirements and
duties stemming from charity
status. The draft, in its text as available to the author, contains some
provisions which might be considered unclear or incomplete.
However, the core of the draft seems to be one of the best examples ever
produced in such complexity in the region of the Central and Eastern Europe
and that of the Independent States replacing the former Soviet Union. Some aspects of the draft, as well as possible risks it may cause to the
not-for-profit organizations of Georgia are discussed in this short overview. Let us start with the definition of the charity and public benefit
activities, as provided in Chapter 1 of the draft law. Charity is limited to
voluntary and gratuitous assistance provided to persons in need. Therefore, any
planned assistance which may be provided by service centers, or an activity for
which a reasonable price covering the costs of necessary operations might be
excluded from the scope of charitable activities. This might be one of the weaker
points of the draft, unless the benefits provided by the state in support of voluntary charitable assistance will be defined to such an
extent as to make
the services possible and feasible. The draft law mentions the obligation of the
state, but remains silent on any concrete formulation of the scope of the
benefits concerned. Nevertheless, the definition of charity is specific as far as some types of
organizations are concerned. In
addition to assistance provided directly to persons in need of social protection
or social adaptation and poor persons, the draft considers as charitable
assistance / aid to: ·
religious organizations, ·
organizations taking care of orphans, elderly and disabled persons, ·
organisations which are active in the fields of human rights, education,
environmental protection, science, health care, fitness and sport, arts and
culture and those engaged in the establishment of democratic society. The draft law excludes the actions provided by
governmental bodies at both the national and local levels, as well as activities
of enterprises, political parties or those persons who take part in political
campaigns. In addition, any act in favor of relatives is not considered
charitable. The list of charitable activities may be considered comprehensive enough.
However, The International Center For Not-for-Profit Law justly recommended to
maintain the list explicitly open, so the
Charity Organizations
Commission
will have the right to add other kinds of activities to it. Similarly, the exclusion provisions are not totally clear and uniquely
interpretable, which might cause problems in implementing the law. The draft law introduces the notion of a status of a charitable
organization which may be claimed and granted to any non-entrepreneurial legal
entity whose main activity is the provision of charity in compliance with the
law. Specifically named in this context are resident foundations, societies and
associations,
not-for-profit organizations, or representatives in Georgia. What seems
to be missing in the draft law is a statement that would clearly provide the
right to be engaged in charitable activities without obtaining the status of a
charitable organization. Such a statement could certainly be included in the
draft, accompanied by a limitation of access to benefits to registered
organizations The draft law proposes the creation of a special Charity Bureau as a
state agency and a Charity Organizations Commission for the purpose of
coordinating charitable activities and state assistance to charitable
organizations, as well as granting and revoking the status of a charity
organization and maintaining a central register of these organizations. The President will nominate the head of the Charity Bureau. The Bureau is
conceived as an administrative organ, which should act pursuant to directives
issued by the President. The
Charity Organization's Commission is to be composed of seven natural persons:
the Director of the Charity Bureau - ex officio - as the chairperson, five persons
elected by conferences composed of different public interest constituent groups,
and one person nominated by foreign and international organizations, their
branches or representatives operating in Georgia. The five electing conferences should represent: ·
organizations defending the social rights of the disabled, veterans, the elderly,
children, women and similar persons, ·
organizations active in environmental field, ·
organizations acting in the fields of culture, health care, fitness and
sport, ·
organizations defending human rights, and ·
organizations supporting the establishment of democratic society. The conferences electing the members of the Commission are to be
initiated by the Charity Bureau. Any organization willing to participate in the
electorate, may do so by applying to the Bureau in a specified period of time.
Only one conference may be chosen from these applicants and a single vote is
given to a registered organization. At least one tenth of registered organizations must come up with a common
nominee for membership in the Commission. The nomination must take place within
30 days from the announced starting day. The election takes
place in a secret ballot during the conference proceedings. The draft law deals
with details such as: ·
required quorum (simple majority of registered organizations), ·
the composition and election
of an electoral committee (four elected persons plus one from the Bureau), ·
the majority required to win the election (simple majority of present
voters), ·
the sequence of voting routs in case of non-decisive vote, ·
a second chance at a vote by the conferences in case the first fails, etc. Even in the case when no conference for the field of activities was
summoned, the draft law indicates a default solution: the nomination of a member
for the vacancy by a simple majority of the elected members of the Commission. The term of office for a member of the Commission is three years, and the
same person may serve only for two consecutive terms. The member may resign or
s/he may be removed by the request of a majority of the organizations which
formed the conference. Even when the commissioner is found unable to perform
his/her duties, the Commission may, upon the initiative of its chairperson and
by a two-thirds majority of votes, decide to remove the Commissioner from
office. The Commission’s main activity is to decide upon granting, depriving or
revoking the charitable status of an organization. The Commission takes
decisions in sessions, which must be attended by at least two- thirds majority
of its members (five out of seven). The same majority is required to make a decision.
The members are not considered to be employees of the Bureau, but the latter may
determine the amount of the honorarium received by the Commissioner for
attending a Commission’s session. In order to be granted charitable status, an organization must prove at
least one year of experience in the specified charitable activity. The
organization must provide basic documents proving its registration as a legal
entity, the identification of its founders and members of the governing body, a
report describing its activity during the last calendar year, and a detailed
balance sheet certified by an independent auditor. Similar documents and data
are to be presented by a non-resident organization, branch or representative. An important provision of the draft law orders the Commission to decide
upon an organization’s status as a charitable organization within two months
of the submission of the application. If the Commission is unable to make a
decision within this time, the charitable status is presumed to be granted. Organizations granted the status obtain a certificate identifying the status, but they must prior to that amend their charter to become in full compliance with the law. This includes:
Upon recommendation of the Bureau, the Commission may require an
examination of the activities of a registered charitable organization. The draft
law limits this examination to cases of doubt concerning information reported
or where there has been a violation of the organization’s charter or the law.
The examination may be carried out by an expert nominated by the Commission but
acting on his/her own expense. However, the examination procedure should not
infringe upon the normal activities of the organization. Otherwise, the Bureau
has no right to intervene in the activity of the charity organization. The status of a charitable organization may be deprived upon violation of
the requirements of the law or in the case where the registration of the legal
body has been terminated. This apparently may be caused by a violation of other
laws concerning registration of legal entities. As far as supplementary economic activities are concerned, charity
organizations may not perform any entrepreneurial activity in their own name,
but they may set up a separate legal entity to do so. The limitation does not
include activities like performing educational, consulting and publishing
activities when related to the main goals of the organization. The draft law
permits lotteries, performances, sport and other similar activities
carried out by the organization in order to generate income. Setting up a separate entrepreneurial legal entity is possible only under
the special competence given in the charter to the supreme executive body of the
organization. The amount of money which may be invested by a charity
organization in its entrepreneurial entity must be limited to a maximum of fifty
percent of its income incurred during the same year. The Charity Bureau may
provide an exception to this rule, but only once within three years for the same
charity organization. As follows from the above discussion, the notion of charity organization
might become well defined in Georgia. Typically, the draft law provides many
details concerning registration rules, rules governing the provision of
charitable status, administrative and nomination tasks connected with the
creation of supervisory and regulating body.
However, no concrete and clearly defined benefits for the organizations
are included. The argument that such benefits belong to the sphere of other
types of laws (tax laws, customs law, court procedure law, civil code, commercial
code, etc.) should not be taken seriously. The answer is to include the
provisions that should be used to amend these other specific laws into the
draft. The omission of the Georgian draft law in this regard may be easily
remedied. It is of great interest
to see to what extent the Georgian government and Parliament are willing and
able to support the charitable activities of the country, once regulatory rules
are established when the draft law comes into effect. |
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