The International Journal
of Not-for-Profit Law

Volume 8, Issue 1, November 2005

A publication of the International Center for Not-for-Profit Law

Toward an Enabling Legal Environment for Civil Society

Statement of the Sixteenth Annual Johns Hopkins International Fellows in Philanthropy Conference Nairobi, Kenya 1

Preamble

Though they pursue public purposes, civil society organizations are fundamentally private organizations. Yet, the ability of these organizations to carry out their special functions depends importantly on the legal environment within which they operate, and this, in turn, depends on actions by the state. Indeed, establishment of an enabling legal environment is one of the most important contributions governments can make to the development of civil society organizations.

In many parts of the world, however, the legal framework for civil society activity is uncertain and incomplete at best, burdened with contradictions or out of date in light of current civil society needs. While some organizations have managed to thrive despite an unfavorable legal environment, improvement of the legal environment for civil society has become a growing priority around the world.

Clearly, there is no single “right” way to design civil society laws and regulations. Legal traditions, as well as traditions of civil society activity, differ widely among countries. Significant variations can thus be expected in how legal systems handle the crucial issues that civil society operations entail.

Despite such variations, however, it is possible to identify some general principles or rules of good practice that can usefully guide the development of civil society law around the world. The purpose of this Statement is to articulate these general principles or guidelines. The Statement emerged from the work of the Sixteenth Annual Johns Hopkins International Fellows in Philanthropy Conference held in Nairobi, Kenya, in July 2004. Over 100 civil society activists and experts from East Africa and more than 30 other countries around the world took part in the deliberations that led to this Statement. The present Statement represents a synthesis of their work. More specifically, after articulating some fundamental caveats and assumptions, the Statement addresses four issues that are especially critical to the development of civil society organizations: first, the basic legal standing of civil society organizations and the registration procedures that help to define it; second, the tax treatment of civil society organizations and philanthropy; third, transparency, disclosure, and accountability standards for civil society organizations; and fourth, the involvement of civil society in advocacy and civic engagement.

I. Caveats and Assumptions

Certain fundamental convictions and assumptions have guided the thinking embodied in this Statement. Among these are the following:

• While the state and its laws are ultimately responsible for ensuring an enabling legal environment for civil society organizations, responsibility for such an environment does not rest with the state alone. The business community, development partners, other stakeholders, and the civil society sector itself also have important roles to play in creating an environment conducive to effective civil society operations.
• A healthy and vibrant civil society sector requires a healthy and vibrant state committed to the rule of law and to basic democratic processes. The guidelines outlined here will work best in the presence of such democratic conditions. In addition, however, adherence to these guidelines can help promote the rule of law and basic democratic processes where these are not yet fully in evidence.
• A well-designed system of civil society law and regulation requires a reasonable balance between the privileges these organizations are accorded and the responsibilities they are expected to exercise. Legal structures that impose excessive restrictions can undermine the freedom that civil society organizations need and deserve, whereas those that provide insufficient safeguards can undermine the public trust on which these organizations ultimately depend.
• For the purposes of this Statement, we define civil society organizations broadly as any organizations, whether formal or informal, that are not part of the apparatus of government, that do not distribute profits to their directors or operators, that are self-governing, and in which participation is a matter of free choice. Both member-serving and public-serving organizations are included. Embraced within this definition, therefore, are private, not-for-profit health providers, schools, advocacy groups, social service agencies, anti-poverty groups, development agencies, professional associations, community-based organizations, unions, religious bodies, recreation organizations, cultural institutions, and many more.2

II. Formation and Legal Status

The right to form civil society organizations is a fundamental human right that belongs to individuals and is not bestowed by government. This right derives from the basic rights to free speech and association, which should be enshrined in the fundamental law of a country. As such, this right cannot be conditioned on the consent of a public authority and cannot be subject to undue restrictions, such as restrictive asset or membership requirements.

While civil society organizations have an inherent right to exist and operate as informal organizations, however, a crucial part of the enabling legal environment for civil society organizations involves arrangements for such organizations to incorporate and thus acquire formal “legal personality.” Such incorporation and its resulting grant of “legal personality” status to civil society organizations protects the principals of such organizations from personal liability for the affairs of the organizations and allows the organizations to enter into contracts, incur debt, sue and be sued, and engage in other transactions in the name of the organization without putting the personal assets of their trustees, directors, or officers at risk.

Governmental action is crucial to the extension of legal personality status to civil society organizations and is often accompanied by some form of registration and regulation. A number of crucial principles should govern the design and execution of these incorporation and registration procedures. Most important among these are the following:

• Legal provisions allowing civil society organizations to incorporate and thus obtain legal personality status should be made easily available. The criteria for obtaining legal personality and limited liability should be clear and unambiguous and not be unduly restrictive.
• While provisions for civil society organizations to incorporate should be made easily available, these provisions should not be mandatory. Informal, unincorporated organizations also make important contributions and should be allowed to operate.
• The right to associate and to form civil society organizations carries with it the right of these organizations to the fundamental rights that apply to natural persons, such as the rights of freedom of speech and association, and the right to petition the government.
• Governments may choose, as a condition of incorporation, to register civil society organizations. Such registration can help clarify the status of these organizations and bolster public confidence in them. Any such registration provisions should adhere to the following guidelines, however:
• Registration should be conducted by independent authorities not bound by the policies of particular governments, which may change from time to time. Examples of such independent bodies include courts, chambers of commerce, and special registration bodies.
• Registration procedures should be uniform wherever conducted, and registration with one competent authority should suffice for the entire country.
• Procedures and criteria for registration should be publicly available, clear, and straightforward; fees should not be prohibitive; registration processes should be expeditious; and registration should not be refused if all requirements for registration are met.
• Any denial of registration must be subject to court review.
• Registered organizations may be required to present by-laws specifying the governance structure of the organization and the responsible officials. Requirements for such by-laws can usefully specify minimum numbers of board members, rotation of officers, and other features of good governance as appropriate.
• Governmental authorities should maintain a record of registered organizations that contains information that is useful to the public. This record should be publicly accessible and reliable and therefore should be kept updated.

III. Tax Privileges

Because of the contributions civil society organizations often make to community life, to the resolution of public problems, and to the strengthening of democratic processes, it is in the government’s interest to encourage such organizations. One efficient way to do this is through special tax concessions made available to the organizations themselves and to those who make voluntary contributions to them. The following principles can usefully apply to the design and operation of such tax concessions.

• All types of civil society organizations should be eligible for tax relief, though the form and extent of such relief may vary by type of organization. To avoid arbitrary exclusions, however, any such variations in tax relief should apply to broad classes of organizations (e.g., more generous tax concessions to organizations serving a broad public interest rather than to those serving the mutual interests of particular members).
• As a general rule, all forms of civil society organization income, including that from commercial activities, should be exempt from income taxation so long as such income is used to support the basic purposes for which the organization was granted tax exemption. In the event commercial income becomes significant, however, countries may choose to exempt from taxation only that portion derived from activities closely related to the exempt purpose of the organization. Income earned from “unrelated businesses” would then be subject to taxes at rates equivalent to those paid by regular business enterprises.
• In addition to exempting the income and purchases of civil society organizations themselves from taxation, special provisions should be made to allow deductions for charitable contributions to such organizations. Preferably, this should be done through a system of tax credits, in which tax liabilities are directly reduced by some proportion of the amount of the charitable gift. Alternatively, the more indirect method of tax deductions can be used, in which taxable income is reduced by the amount of the gift before applying the applicable tax rate.
• Charitable tax concessions can be limited to a reasonable share of the income of affected taxpayers. Limitations ranging from 20 to 50 percent of income have generally been considered reasonable.
• Tax concessions for charitable contributions should be available to corporations as well as individuals, though the share of profits against which such concessions can be claimed may be lower than those applicable to individuals.
• Charitable tax concessions should be available for contributions of both cash and property, though valuation methods for property contributions must be worked out in advance.
• Charitable tax concessions should be available for a wide variety of charitable giving mechanisms (e.g., payroll giving, donor advised funds, telephone solicitation). Charitable giving laws and tax concessions should be designed to facilitate and encourage these various forms of giving.
• The administration of the tax concessions for civil society organizations, both those affecting the income and purchases of the organizations themselves and those applicable to charitable contributions to these organizations, should be clear, widely disseminated, and as automatic as possible, with limited discretion left to administrative officials and some form of independent appeal procedure in case of disputes.

IV. Transparency, Reporting, and Accountability

To retain public trust, civil society organizations must be transparent in their operations. Such transparency can be achieved voluntarily by organizations through regular reports and communication with their various stakeholders. However, public authorities may legitimately mandate such transparency by requiring regular reports from registered civil society organizations. Several principles should apply to the design of such public reporting requirements, however:

• Reporting requirements should serve valid public purposes, not be unduly burdensome, and, where possible, be harmonized with reporting requirements from other public and private bodies.
• Government should establish procedures for receiving and storing required reports from civil society organizations, and for making such reports available to the public in an easily accessible manner. The latter can include village notice boards, web sites, and information centers through which information on civil society organizations can be accessed easily by all organizational stakeholders.
• Coordinating bodies, such as NGO Councils, should be encouraged to assist organizations in meeting public registration and reporting requirements. In addition, public authorities should look to such bodies for help in providing access to such reports and should consider compensating them for this service.

V. Advocacy and Civic Engagement

Civil society organizations are not simply service providers. They are also, very critically, vehicles for advocacy and civic engagement. This function derives from the fundamental right of association and free speech and as such should be enshrined in the fundamental law of a country. The advocacy and civic engagement functions of civil society organizations raise particularly sensitive legal and political issues, however. The following principles should guide the resolution of these issues:

• The basic right of nonprofit organizations to engage in advocacy and lobbying should be confirmed in substantive legislation. Such legislation should make clear that this right should be broadly construed to embrace a wide variety of forms of civic engagement and involvement in the policy process; and to include advocacy and lobbying on the part of civil society organizations not only vis-à-vis public authorities but also vis-à-vis private and quasi-public institutions, such as private corporations and communal institutions like the traditional Kadhi Courts.
• While confirming the basic right of civil society organizations to engage in advocacy and lobbying, governments can limit civil society advocacy to nonviolent means, encourage credibility on the part of civil society organizations, and restrict civil society organizations from engaging in political campaign activity on the part of particular parties or candidates.
• No limits should be placed on the resources that civil society organizations can devote to advocacy and lobbying activities.
• To facilitate civil society organization advocacy and lobbying, civil society organizations should be ensured reasonable access to government decision-making processes and information.
• Countries may choose to distinguish between advocacy and lobbying, and between organizations receiving and not receiving charitable contribution tax concessions, in setting the conditions for civil society organization lobbying and advocacy. Any such differentiation should still preserve the basic rights of all civil society organizations to engage in advocacy and lobbying to a meaningful extent, however.
• To safeguard the fundamental right of civil society organizations to engage in advocacy and lobbying, specific mechanisms should be put in place. Among other things, civil society organizations should have standing to challenge public authorities in courts of law over access to government information and to the processes of policy decision-making.

Conclusion

Civil society organizations perform important public services by responding to human needs and promoting the health of communities. Regrettably, however, the legal position of such organizations is often highly precarious or unclear. Too often, government perceives civil society as a threat and acts to limit its discretion and role. But government has an important responsibility to create the legal conditions that enable civil society organizations to perform their important missions. This requires a balance between equipping civil society organizations with privileges and burdening them with responsibilities. It is our hope that the principles outlined here will help governments strike this balance in a responsible yet enabling way.

Agreed to this 8th day of July 2004, Nairobi, Kenya

Signatories

The following individuals took part in the deliberations that led to the development of this Statement and generally concur with its observations and conclusions. They do so in their individual capacities and not as the representatives of any organizations with which they may be associated or that may have supported their work.

Australia
Neilma Gantner, The Myer Foundation
Helen Morris, Civil Society Consultant
Genevieve Timmons, Genevieve Timmons & Associates

Chile
Marcela Jimenez De La Jara, Ministry of Planning

India
Pankaja Kulabkar, Researcher

Italy
Elena De Palma, ISTAT: Italian National Institute of Statistics

Kenya
Dr. Pius S. Achola, NGO Council
Elijah Agevi, IDG
Francis Angila, NGO Council
Erika Anttila, Chambers of Justice
Donald Deya, East Africa Law Society (EALS)
Dennis Kabaara, Independent Consultant
Karuti Kanyinga, IDS
Wangui Kibe, Consultant
Sophie Kiguta, Kenya Youth Group
Leah Wambura Kimathi, Africa Peace Point
Alice Kirambi, Christian Partners Development
Faith Kisinga, Ufadhili—Centre for Philanthropy and Social Responsibility
Mwalimu Mati, Transparency International
Dorothy McCormick, IDS-- University of Nairobi
W. Milan, WOWESOK
Winnie V. Mitullah, IDS (Institute for Development Studies)
Abby Muricho, NGO Council
Wangombe Muthoga, Pana Press
Njeri Mwangi-Kinyoho, Action Aid Kenya
Mwenda Mwongeda, Kenya National Commission for Human Rights (KNCHR)
Mavis Nathoo, CIDA
Philip Ndeta, Learning and Development Kenya
Haron M. Ndubi, Kituo Cha Sheria
Elkanah Odembo, Ufadhili Trust
Hilda A. Orimba, WOWESOK
Janet Ondieki, African Institute for Health and Development
Jonathan Ondieki, African Institute for Health and Development
George Onyango, Slums Information Development and Resource Center (SIDAREC)
Aloys Opiyo, UNDUGU Society
Lernard Ouidei, UNDUGU Society of Kenya
Ambassador Orie Rogo-Manduli, NGO Council Acting Chairperson
Abdul Hamid Slatch, Young Muslim Association
Richard Wamai, University of Helsinki

Poland
Leslaw Werpachowski, Marshal Office of the Province of Silesia

Netherlands
Wino J.M. Van Veen, Amserdam Baker & McKenzie

Mexico
Paula Parra Rosales, Bradford University, UK
Rosa Maria Fernandez, Corporate Social Responsibility Consultant

Romania
Mihai Lisetchi, Agency for Information and Development of Non-governmental Organizations (AID-ONG)
Cristina Nicolescu, Pro Vobis National Volunteer Center
Dana Nicolescu, Opportunity Associates Romania

Russia
Elena Abrosimova, TACIS Corporate Governance Facility Project
Alexei Bodungen, Golubka Training Center
Oleg Kazakov, Nonprofit Sector Research Laboratory
Marina Nikitina, Aids Foundation East and West (AFEW)

Tanzania
Olive Luena, Tanzania Gatsby Trust
Dennis Muchunguzi, AFREDA
Ruta Mutakyahwa, Romme Centre
Mary J. Mwingira, TANGO
Veronica Shao, Kilimanjaro NGO Cluster on HIV/AIDS and RH Interventions

Turkey
Ayla Goksel, Mother Child Education Foundation

Uganda
Nakirya Roselyn Etyono, ICSW
Cannon Grace Kaiso, Uganda Joint Christian Council
Professor Kwesiga, DENIVA
Peace T. Kyamureku, The National Association of Women Organisations in Uganda (NAWOU)
Enock Mugabi, Uganda National NGO Form
Jane Nabunnya, DENIVA

United Kingdom
Tony and Frances Myer, The Myer Foundation
Samuel Obeng-Dokyi, Fullemploy
Judy Wilson, Consultant

United States
Joyce Moody, Johns Hopkins University
Lester Salamon, Johns Hopkins University
Howard Schoenfeld, PricewaterhouseCoopers
Sandra Schoenfeld
Carol Wessner, Johns Hopkins University 

 

International Fellows in Philanthropy Program: Other Conference Action Statements  

Building the Organizational Infrastructure of Civil Society
Istanbul, Turkey, 2002

The Nonprofit Sector and the Reduction of Poverty
Santiago, Chile, 2001

Strengthening Communities: The Role of the Third Sector
Melbourne, Australia, 2000

Building Civil Society: A Guide to Action
Bangalore, India, 1999

The Nonprofit Sector and the Transformation of the Welfare State
Rome, Italy, 1997

Nonprofits and Development: The Challenge and the Opportunity
Mexico City, 1996

Toward a Vital Voluntary Sector II: The Challenge of Permanence – An Action Statement
Tallin, Estonia, 1995

Toward a Vital Voluntary Sector I: An International Statement of Principles
Lille, France, 1991; Jerusalem, Israel, 1992; Accra, Ghana, 1993

Notes

1 Copyright 2005 by Lester M. Salamon, Director of the Center for Civil Society Studies, Institute for Policy Studies, Johns Hopkins University.

2 Political parties are also often considered to be civil society organizations, especially when they embody social movements and are not simply campaign organizations seeking political office. Such organizations are not covered by this statement, however.

 

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