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Report on Laws Affecting Civil Society in Vanuatu –
2004

Amelia Fasi Pasikala Faasau

© 2004 International Center for Not-for-Profit Law. All rights reserved.

2

1. INTRODUCTION

Geography
Vanuatu is a Melanesian Pacific Island country with about 199,400 people scattered
over 1,476,000 hectares (14769 sq km), on some 70 inhabited islands. About 98%
of the population are the indigenous people called Ni-Vanuatu; the remaining 2%
consists of Vietnamese, French, Australians , Chinese and Pacific Islanders etc. There
are three official languages namely Bislam a (pidgin), English and French, and there
are also more than a 100 local languages.

The Legal System
Vanuatu was a condominium territory jointly administered by Britain and France from
the year 1906 to 30 July 1980. Each of the administering countries made laws for its
own nationals and optants (nationals of ot her countries who opted to be subject to
either British or French laws) and togeth er they made laws for indigenous New
Hebrideans and for all other residents. Up on independence on 30 July 1980, the laws
of Vanuatu were as follows and in this hierarchy:
• Constitution of Vanuatu – the supreme law;
• Acts of Parliament of Vanuatu ;- the legislation
• Joint Regulations in existence on 30 July 1980 from the laws
made by the French and British that applied to all residents in
Vanuatu prior to independence – which continue in force until
repealed by the Vanuatu Parliament ( s. 95(1) Constitution );
• British and French laws in existence on 30 July 1980 – including
Acts of Parliament, subsidiary legislation and English common law and
equity, which continue in force until repealed by the Vanuatu
Parliament ( s.95(2) Constitution );
• Customary laws of Vanuatu (s.95 (3) Constitution).
These are the laws that affect th e existence of NGOs in Vanuatu.

2. PROVISIONS OF THE GENERAL LAWS

A. Consistency and Clarity of Laws

The various laws relating to the establishments and dissolution of non government
associations are simple and easy to follow. This is not only true of legislation
generally open for registration of NGOs but also of special laws for religious bodies,
trade unions or professional membership bodi es. The fact that the various laws also
rarely regulate the establishment, oper ations and governance of the NGOs, but
rather leave this to the hands of the NGOs to make their own rules or regulate their
internal procedures as embodied in a cons titution or memorandum of association,
contributes to the simplicity of the legislations.

In considering the pieces of relevant legislation as a whole and their workability for
the advantages of NGOs, the la ws are quite limited in its effectiveness in this area.
The legislation affecting the operations of NGOs is fragmented in the way they
deal
© 2004 International Center for Not-for-Profit Law. All rights reserved.

3
with the rights and entitlements of NGOs. This impedes the efficient administration
of NGOs not only by the statutory enacted administrative bodies but also for the
NGO governing bodies. The fact that each legislation operates independent of each
other leaves room for inconsistencies in th e decision making and treatment of NGOs
as well as doubles the work for the administ rative body in both the Government and
the NGO sector.

However, under the current legislative framework, it is still reasonable to assume
that NGOs can still operate independent of government at least in relation to its day
to day operation, thus achievin g the objectives of existence.

B. Constitution

The Constitution of Vanuatu (“the Constitu tion”) being the supreme law guarantees
the fundamental rights and freedoms of individuals including the right to freedom of
assembly and association. It is from this freedom that the right to found associations
is based.

Article 5 (1) of the Constitution states:

“The Republic of Vanuatu recognises that subject to any restrictions
imposed by law on non-citizens, all persons are entitled to the
following fundamental rights and freedoms of the individual without
discrimination on the ground of race, place of origin, religious or
traditional beliefs, political opinions , language or sex but subject to
respect for the rights and freedoms of others and to the legitimate
public interest in defence, safety, public order, welfare and health ….

(g) freedom of assembly and association.

As is stated above the freedom of association may be only restricted for reasons of
rights and freedoms of others, legitimate public interest in defence, safety, public
order, welfare and health.

An example of a restriction imposed by law on the freedom of assembly and
association is stipulated in the Public Or der Act [Cap 84] (“the Public Order Act”).
The Public Order Act defi nes an organisation as “includes an association or
combination or persons.”
1 The Public Order Act states that the President, on the
advice of the Prime Minister, has the power to declare by proclamation, an
organisation unlawful if he is satisfied that a substantial number of its members have
been involved in the commission or instigation of offences under the Public Order Act
or have incited others to commit the sa me. Any member who continues to act on
behalf of the association shall be guilty of an offence.
2

(C) Types of Organisation

There are a variety of NGO organisations in Vanuatu. They range from informal
organisations that have no legal status se parate and distinct from the relationship
between its members to organisations that adopt quite formal legal structures. All
types of NGOs acquire the status of legal entity upon registration under the relevant
1 Section 15 of the Public Order Act [Cap 84] 2 Ibid
© 2004 International Center for Not-for-Profit Law. All rights reserved.

4
Act which they ascribe to. However organisations are still allowed to exist and
operate without being juridical entities.

The following are the types of NGOs that are found in Vanuatu:

1. Unincorporated association : Most of these organisations are community based and
are commonly formed in the villages by gr oups of men, women and youth either for
sports, agriculture or religious purposes etc. An unincorporated society is not a legal
entity and its creation rests on an agreem ent, written or oral between its members;
usually its governing instrument is its constitution or rules. It has no legal
personality and therefore no capacity, indepe ndent of its members to enter into legal
relations with other bodies.

Political parties in Vanuatu are unincorporated associations as there is no legislation
governing the existence and operation of political parties. The Supreme Court of
Vanuatu in the case of Vohor v Adeng [1996] VUSC 14; Civil Case No 075 of 1996
(27th August, 1996) stated that “ A political party…. is an unincorporated Association
and, as such, is not in the ordinary sense, a trader. ”

2. Charitable Association :
Most of the registered NGOs in Vanuatu take the form of Charitable Association. Its
governing instrument is its Constitution and its executive power rests with the
Committee or members who are appointed in accordance to the provisions of the
Constitution. The incorpor ated association becomes a legal personality upon
registration pursuant to the Charitable Associations (Incorporation) Act [Cap 140] (“the Charitable Act”) and therefore has capacity to enter into legal relations with
other bodies. The rules to these NG Os are the governing instrument.
3 The register
currently registers 87 charitable associations.

3. A company limited by guarantee : A NGO can be formed as a Guarantee Company
pursuant to the Vanuatu Companies Act [Cap 191] (“the Companies Act”) , whose
governing instruments are the memorandum and articles of association. A guarantee
company becomes a legal entity once it is registered. It is therefore able to enter
into contracts, to institute and defend suits and other lega l proceedings and to do all
things necessary to achieve its objectives.

There are also special laws on churches and religious bodies, trade unions and
professional associations.

4. Other organisations :

a) Religious Bodies
Religious Bodies have the choi ce to be either registered as a Charitable Association
or as a Religious Body under the Religious Bodies Registration Act No. 9 of 1995. A
religious body attains legal status upon regi stration and therefore has the capacity to
enter into contract, to institute and defend proceedings.

b) Unions
Trade Unions in Vanuatu are made possible by the Trade Unions Act [Cap 161] {the
“Trade Union Act”). They become legal persons upon approval of their founding
documents by the Registrar of Trade Unions.
3 Charitable Associations (Incorporation) Act [Cap 140] © 2004 International Center for Not-for-Profit Law. All rights reserved.

5

c) Foreign Organisations
Although the laws of Vanuatu make no special provisions for foreign organisations
that are founded on international agreemen t, there are a few foreign organisations
from the Pacific region such as the Foundation for the People of the South Pacific as
well as international organisations such as the Australia Volunteer International (AVI)
and Volunteer Services Overseas (VSO). They may operate in Vanuatu upon
submission to the Ministry of Foreign Affairs of their founding act and other proof of
fulfilment of their internationally agreed upon obligations. These foreign
organisations operate under a Memorandum of Understanding (“MOU”) with the
Government of Vanuatu. These MOU’s usually contain the rights and obligations
normally afforded local NGO bodies. Some of the foreign organisations may come
under any existing MOU between it’s Head Organisation or their Home Government,
with the Government of Vanuatu (where available) and can commence operation
prior to receiving its own separate MOU.

d) Establishments
These are the educational inst itutions, sports faculties, health care establishment
which are private establishmen ts whose founders are private groups such as schools
formed by Church organisati ons. All of which are public persons upon registration
pursuant to their relevant legislation. For example non government educational
institutions are registered under the Educ ation Act 2001 and thereafter become legal
entities.

e) Membership Organisations
The membership organisation of professional bodies such as medical practitioners
and legal practitioners exist solely for the benefit of their members. They are
statutory bodies whose activities are go verned and regulated by the enacting
statutes.

The laws of Vanuatu do not make any distinction between NGOs acting for the public
benefit and NGOs acting for the mutual benefit of their members. The distinction
however is apparent in the tax laws whereby the NGOs providing for public benefit
are given special tax exemptions than those providing for mutual benefit of its
members.
4

D. Purposes
The underlying rule for any NGO’s purpose is that it is not for financial profit. Its
general purpose may fall under one of the following purposes which include objects
of a religious, educational, cultural, scientifi c or sporting nature or for general social
welfare and any other object – the main purpose of which is not for financial profit.
E. Registration or Incorporation Requirements

Registration is not mandatory for all NG Os, activities are allowed before the
registration is complete. NGOs acquire the status of legal entity on the date of
registration.

Charitable Associations
4 Section 2 of the VAT Act 1998.
© 2004 International Center for Not-for-Profit Law. All rights reserved.

6
Pursuant to the Charitable Associatio ns (Incorporation) Act [Cap 140], (“the
Charitable Act”) an organisation shall be come a body corporate upon registration
with the Registrar of the Vanuatu Financial Services Commission.
5

The minimum number required to register a charitable association is at least six
committee members. 6 The application for registration must be made by not less than
half of the committee memb ers of the organisation. 7

An application must be in the prescribed form as stipulated under Schedule 1 of the
Charitable Act which requires information on the name of the association, the
registered office, the names and addresses of memb ers, the objects of the
association as well as a statement of assets and liabilities of the association although
there is no certain amount of base capital required to form an NGO.
8

This application must be lodged with the Registrar of Companies whom the Minister
of Finance has to be the Registrar of Charitable Association. The application
documents must be accompanied by a copy of the Articles of Association as well as
other documents setting up the asso ciation such as a constitution.

An obvious reason for rejection of an app lication for registration has been and would
be the failure to comply with the registrati on requirements under the Charitable Act.
Once any non-compliance is rectified then the application is again lodged with the
Registrar accompanied by a total fee of VT10, 000.
9

An appeal from the refusal of grant of in corporation by the Registrar lies to the
Minister of Finance. The deci sion of the Minister in considering the appeal is final,
whether it is a refusal of the appeal or an Order for the Registrar to grant a
Certificate of Incorporation. The Minster may impose conditions where she/he deems
fit if she/he decides to grant th e Certificate of Incorporation.

Company Limited by Guarantee 10
Pursuant to the Vanuatu Companies Act, the requisite number of founding members
for a company limited by guarantee is at least seven. 11 A company limited by
guarantee is not to create issue or be registered with any shares 12. Founding
members can either be ni-Vanuatu or foreigners and there no provisions in the
Companies Act against non-natural legal persons being founding members. An
application for a permit for incorporation must be lodged with the Minister of Finance
who has the power to grant or refuse a pe rmit without giving any reason for his
decision.
13 The most obvious reason for a rejection of a permit application would be
failure to comply with the statutory requir ements regarding registration. However, if
5 Section 2 (3) of the Charitable Associations (Incorporations) Act Cap 140 6 Ibid s. 2 (1) 7 section 4 (1) 8 Schedule 1 (Section 4) 9 Pursuant to Charitable Associations (Incorporation) (Fees)Order 24 of 1982 The fee breakdown is as
follows: Certificate of incorporation VT5,000 , Certificate of incorporation VT5,000.
10 A company limited by guarantee is defined in the Companies Act as a company having the liability of its
members limited by the memorandum to such amount as the members may respectively thereby undertake
to contribute to the assets of the company in the event of its being wound up.
11 section 2 of the Companies Act [Cap 191] 12 section 2(3) of the Companies Act [Cap 191] 13 section 16 of the Companies Act [Cap 191] © 2004 International Center for Not-for-Profit Law. All rights reserved.

7
the Minister rejects any permit, the decision is not subjected to be questioned in any
court proceedings whatsoever. 14

The general procedure for registration of a company limited by guarantee is as
follows: An application for a permit for incorporation is lodged with the Minister of
Finance using the prescribed form in th e Act; Preparation and execution of the
memorandum and article association in acco rdance to the requirements of the Act;
Lodgement of an endorsed permit from the Minister of Finance together with the
memorandum and articles of associat ion with the Registrar of Companies.
15 There is
then the registration and issuing of the Certificate of Regi stration by the Registrar of
Companies. Upon the granting of the ce rtificate of registration, a Guarantee
Company achieves the status of legal entity and is able to enter in to contracts under
its own name as well as sue and sued just like any other legal entity.
16 The
documents lodged with the Registrar are ava ilable for viewing by the public for the
payment of a prescribed fee.

The Companies Act in section 29 makes special provisions for companies limited by
guarantee that are “formed for promoting commerce, ar t, science, religion, charity or
any other useful object, and intends to apply its profits, if any, or other income in
promoting its objects, and to prohibit the payment of any dividend to its members”
17
These guarantee companies are granted with a licence to exempt them from adding
the word “ limited” to its name. This licence can be repealed by the Minister of
Finance after granting an opportunity to the company to oppose any decision to
revoke this particular exemption licence.

Trade Unions
The minimum number of membership of a Trad e Union before they can be registered
in pursuant to the Trade Union Act is twenty. The application is done by the
committee of management and the applicat ion must be signed by at least 7
members. The general registration procedur es are as follows: An application is
lodged with the Registrar who will determine whether or not the forms and rules of
the trade union comply with the provisions of the Trade Union Act and also that the
name is not identical to any registered Trade Union. Upon satisfaction of the
statutory requirements, the Registrar can re gister the Trade Union. A refusal by the
Registrar to register a trad e union can be appealed to the Supreme Court of Vanuatu
within 1 month of the date of the refusal. In hearing such an appeal the Supreme
Court has all the powers as it has in hearing a civil suit.
18 The fee for registration is
VT5, 000. 19

NGO umbrella organisations are permitted. There are no special provisions for
umbrella organisations under law. They ar e to be registered just like other NGO
organisations. There are a few umbrella organisations in Vanuatu like Vanuatu Non-
Government Organisation (VANGO) and the Vanuatu National Council of Women
(VNCW), operating in this umbrella capacity . Both are registered together with other
NGOs as Charitable Associations pursuant to the Charitable Act. International
umbrella NGOs operate pursuant to a MOU with the Government of Vanuatu.
14 section 409 of the Companies Act [Cap 191] 15 section 10 of the Companies Act [Cap 191] 16 section 20 of the Companies Act [Cap 191] 17 section 29 of the Companies Act [Cap 191] 18 Section 11 of the Trade Unions Act [Cap 161] 19 Trade Unions Fees Regulation, Order 46 of 1983
© 2004 International Center for Not-for-Profit Law. All rights reserved.

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F. NGO Register
There is a no designated NGO register wh ich registers all NGOs in Vanuatu. Each
NGO is required to comply with the legal structure of the particular legal structure
that it subscribes to. A Re ligious Organisation for exam ple has to comply with the
registration requirement specific to religiou s bodies as prescribed under the Religious
Bodies Act and also register s with the designated Regist rar of the Religious Bodies.
Evidently, there are registers for all registered NGOs but there is no central register
which collates all NGOs.

The only register that records incorporated NGO’s that do not belong to any specific
legal framework is the Vanuatu Financial Services Commission (“VFSC”) register.
This is a registry for all NGOs that are re gistered as Charitable Associations under
the Charitable Association Act. The Associatio ns under this Act must be for charitable
purposes.

The VFSC register displays only the names of the associations as entered into the
registry. Information on this register as we ll as all of the association’s documents are
available for viewing by any member of the public upon the payment of the
prescribed inspection fee of VT500.
20

The statutory rules for Charitable Associations’ operations under the Charitable Act
seldom being enforced, thus there is rarely any a disciplinary action taken against a
charitable association. Defunct associations are purged from the register once the
Registrar is informed by letter by the Charitable Association that it has ceased to
exist. There is no formal list kept by VFSC of the defunct companies, although the
computer program for registration can genera te a list of the Charitable Associations
that have been purged from the records of currently existing Charitable Associations.

G. General Powers
Incorporated organisations are entitled to exercise the general rights and powers of
juridical entities such as the right to sue and the right to be sued, owning properties
and entering into contracts. The only limit for an incorporated organisation would be
operating within the ambit of th eir organisations’ objectives.
Unincorporated NGOs have those powers that are provided in its governing
instrument but only in their members indi vidually. Proceedings can be brought by
any member of the organisation in both incorporated and unincorporated
organisations.

In the case of unincorporated organisations, it has been demonstrated in the case of
Vohor v Adeng [1996] VUSC 14; Civil Case No 075 of 1996 (27th August, 1996)
where the Supreme Court of Vanuatu held that “it is necessary for the Court to
intervene in the internal governance of an unincorporated society such as a political
party.” The Chief Justice in his judgemen t went on further to say that “people who
join an unincorporated Association … and subscribe to its Constitution and by-laws
should be taken to intend to be bound by them and should be entitled to invoke the
Courts in appropriate circumstances to have their disputes settled and the
limitations, if any, to be placed on the right is, no doubt, to be worked out on case to
20 Charitable Associations (Incorporation) (Fees) Order 24 of 1982
© 2004 International Center for Not-for-Profit Law. All rights reserved.

9
case basis. A Court can therefore interf ere in the internal workings of an
unincorporated association …”
This is not the first time that the Vanuatu Courts have dealt with disputes between
individual members of unincorporated associ ations, such as Political Partie. Certainly
the cases of Mataskelekele -v- Abbil (1991): Kalpokas -v- Lini Civil Case 127 of
1991; Korman & Jimmy -v- Mensul Civil Case No 106 of 1995 indicate that Courts in
Vanuatu are willing to assist in resolving disputes with such organisations in which
members have deliberately adopted formal rules to govern their relations.
It is apparent that beneficiaries of NGO’s ha ve the right to go to Court to seek action
against an NGO. Following the Court’s approach in the above cases, one can expect
that the Court would only be more vigila nt in cases of registered NGOs whose
governing instruments are regi stered pursuant to law.
H. Membership Organisations
Membership organisations like profession al bodies of lawyers and the health
practitioners are established by enacting legislation, respectively, the Legal
Practitioners Act [Cap 119] (“the Legal Practitioner’s Act”) and the Health
Practitioner’s Act [Cap 164] (“the Health {Practitioner’s Act”). The legislation
regulates the standards of practice of its members.

Each of these professional bodies has it s own disciplinary body responsible for the
discipline, exclusion or removal of any me mber of their profession. The Disciplinary
Body of the Legal Practitioners has the same power as the Supreme Court. The
disciplinary proceedings of the Disciplinary Body for legal practitioners are set out in
much detail in the subsidiary legislation – Legal Practitioner’s Regulation [Cap 119].
An appeal from the decision of either the Legal Practitioner’s Disciplinary Body or the
Health Practitioner’s Disciplinary Body lies to the Supreme Court of Vanuatu.

III. GOVERNANCE

Vanuatu law does not contain any elaborate provisions for the governance of NGOs.
As previously indicated, each type of NGO is governed according to the provisions of
the legislative framework that it ascribe to.

Unincorporated NGOs will naturally be governed by the rules found in their individual
governing instruments. The governing instrument specifies how members are
elected/ appointed, rules of voting, duties and responsi bilities. The members remain
responsible for all debts and lia bilities of the organisation.

NGOs that are registered as incorporated bo dies are governed by the rules set out in
their constitution regarding the issue of go vernance. These rules can be enforced at
the suit of a member of th e incorporated body. The gove rning body is the Committee
(or Board depending on the name specified in the governing instrument) whom the
assets of the organisation is vested and has the power to enter into contracts. Like
unincorporated organisations th e rules on voting powers, duties, and responsibilities
of the Committee are stipul ated in the governing instrument, the constitution.

In respect of companies limited by guarantee, both the provisions of the Companies
Act as well as the articles of association govern the operation of the NGO. It has a
separate legal identity from its members. The Companies Act sets out in much detail
© 2004 International Center for Not-for-Profit Law. All rights reserved.

10
the responsibilities and duties of the di rectors as well as the quorum and voting
powers and the extent of the directors’ pers onal liability. A director’s liabilities are
outlined in the Companies Ac t [Cap 191]. A director is also liable at common law for
breach of fiduciary duties as well as breach of due skill and care.

It is the duty of the direct or of a Company to disclose, at a director’s meeting, any
interest he has on any Company contracts, intended contracts or contracts which the
director later become interested. Failure to declare such interest results in the
director being fined for no t more than VT50, 000.

The director (and anyone in the Company) may also be liable for fraudulent dealings
such as actions with the in tention to defraud creditors of the company. The company
or any person in the company is also pers onally liable for reckless dealings such as
making false or inaccurate informatio n regarding the company’s shares and
debentures. Such a person is fined for no more than VT100, 000 or a term of
imprisonment for no more than 6 months.

IV. DISSOLUTION, WINDING UP AND LIQUIDATION OF ASSETS

The Act under which an NGO subscribes to determines how its dissolution may be
conducted, unless the NGO in unincorporated.

Unincorporated organisations
Unincorporated organisations are governed by the governing instruments whether it
be the constitution or memorandum of ag reement entered into by the members of
the organisation. If the dissolution is not dealt with in the governing instrument then
usually the members may meet and orally agree to dissolve their association.

The Courts of Vanuatu is case laws such as Vohor v Adeng [1996] VUSC 14; Civil
Case No 075 of 1996 (27th August, 1996) and Kalpokas v Vohor [1998] VUSC 55;
Civil Case No 122 of 1997 (14th Septem ber, 1998), have demonstrated the
willingness of the Courts to in tervene and enforce principles of equity in the affairs of
the unincorporated associations where it is warranted. In this case, it is anticipated
that an involuntary dissolution may be im plemented by members lodging petitions of
the majority to dissolve the unincorporated society.

Charitable Associations
The non-profit organisations that are regi stered under the Charitable Associations
Act are dissolved by the cancellation of the certificate of incorporations by the
Registrar. The grounds upon which such canc ellations can take place are stipulated in
section 10 (1) of the Charitable Act as follows:

(a) an incorporation was obtained by fr aud, misrepresentation or mistake;
(b) any unlawful objects of an association or committee;
(c) a committee discriminates against any pers ons, group of persons or class of
persons;
(d) an association or committee is being used for an unlawful purpose;
(e) a committee or association is not f unctioning or has become dissolved;
(f) failed to comply with the provisions of the Charitable Associations
(Incorporations) Act. 21

21 Section 10 (1) of the Charitable Associations (Incorporation) Act [Cap 140] © 2004 International Center for Not-for-Profit Law. All rights reserved.

11
Procedure for cancellation
The Registrar may require members of the Committee by notice in writing to show
cause within 30 days as to why its incorporation should not be cancelled. 22 If the
Committee fails to respond satisfactorily then the Registrar may cancel the
incorporation by notice published in the newspapers. A cancellation will then take
effect 42 days from the date of pu blication of the cancellation notice.
23 The
Certificate of Registration must be returned to the Registrar. Failure to do so will
result in imprisonment or a fine up to VT20, 000.
24

Appeals against any cancellati on can be made to the Supreme Court within 42 days
of the cancellation. The Court may conf irm, set aside or vary the order of
cancellation or make such order as it may consider just.
25

Upon dissolution of an NGO under the Charitable Act, the assets which are not
disposed of adequately in the governing instrument of the Association will be
subjected to the discretion of the Minster of Finance who will make such order as he
shall consider proper.
26

Company Limited by Guarantee
The statutory provisions for winding up of unlimited companies also apply to
guarantee companies. A company may be wo und up voluntarily or by the court by
the application of the members as contributo ries, the company Creditors; the official
receivers or by the company itself. The property of a comp any that is winded up by
the court is vested in the Liquidator upon a Court order. The Creditors’ interests in
the company in a case of insolvency ar e well represented from the time of any
Creditor lodging a petition to wind up a company, to making a decision whether or
not to appoint a committee of inspections during the process of winding up, to the
Creditor’s proving of their debts, to the inspection by Creditor’s of a Company’s
books in the possession of the Liquidator . The decisions of the Supreme Court of
Vanuatu to wind up a company involuntarily can be challenged in both the Supreme
Court and the Court of Appeal of Vanuatu. The relevant sections outlining the details
and rules for winding up of companie s are contained in sections 217 – 349.

Other bodies
a. Religious Bodies
They may be dissolved by cancellation of their registration on the ground of:
i) Registration obtained by fraud;
ii) Any of the objects of a religious body have become unlawful
iii) A religious body is being used for an unlawful purpose; and
iv) Failure to comply with the provis ions of the Religious Bodies Act.

The religious body is given 30 days to sa tisfy the Registrar that the licence should
not be cancelled. If the Registrar is not sa tisfied then the licence may be cancelled.
Within 30 days of cancellation the religiou s body must return to the Registrar the
certificate of registration. Failure to do so attracts a fine of VT 20, 000 upon
conviction.

22 section 10 (3): ibid 23 section 10 (4): ibid 24 section 10 (6) 25 section 11: ibid 26 section 12: ibid
© 2004 International Center for Not-for-Profit Law. All rights reserved.

12
b. Other Membership Organisations
Other organisations which exist for the bene fit of its members such as trade unions
and professional bodies are dissolved acco rding to the provisions stated in their
relevant enacting Act.

V. REGULATION

As has previously indicated, there is no centralised regulatory system. It is only
when an NGO subscribes to a particular structure then it will be obliged to comply
with the regulatory requirements specific to that type.

(i) Registrar of Charitable Asso ciations and of Companies
In the case of registered incorporated organisations, the Registra r must be satisfied
that the Associations meet all the requirem ents in the Charitable Act [Cap 140]. The
Associations are required to register th e changes to the associations registered
office, the resignations, re movals and appointment of committee members; changes
to the articles, rules or constitution of the association. These are public documents
which can be viewed for the payment of a prescribed fee. Failure to comply may
ultimately result in the cancellation and return of the Certificate of Registration by
and to the Registrar of Associations. Failure to return the certificate attracts a fine of
VT 20,000. There has been no incident of an involuntary cancellation of an
organisation’s certificate by the Registrar of Charitable Associations.

For Companies Limited by Guarantee, th e Registrar ensures that the Guarantee
Company complies with th e requirements under the Companies Act [Cap 191].
Following registration a company must subm it annual return at least once a year
within 42 days (or more upon the Regist rar’s approval) of the annual general
meeting for the year. The re turn shows information of address of the registered
office of the company; in a case in which the register of members are kept elsewhere
than at that office, the addr ess of the place where it is kept; in a case in which any
register of holders of debentures of th e company or any duplicate of any such
register or part of any such register is , under the provisions of this Act, kept
elsewhere than at the registered office of the company, the address of the place
where it is kept; details of the directors and secretary of the company. Failure to file
the annual returns within the stipulated ti me period subjects the company and every
person responsible for a default fine not exceeding VT 1,000.

The Director of Inland Revenue and Customs
The Director of Inland Revenue and Customs has some general regulatory function
such as assessing whether or not tax relief is granted to Not-for-Profit organisations
as well as assessing the activities of the Not-For-Profit organisations. Where there
are NGOs who are involved in taxable activities that are more than 4 million vatu,
the only report is a VAT Return form which is filed monthly. Failure to submit the
VAT Return form results in an additional imposition of 10% and a 2% added for each
month during which the failure continues. Th e VAT Return form of any organisation is
not publicly available information.

Enforcement Agencies -The Courts and the Police
The Courts have demonstrated (see Complia nce section above) their willingness to
get involved in the affairs of the NGO to ensure that members adhere to the
governing instruments to which they have bound themselves to. The Police interfere
only when members/organisation commit pu blic order offences or allegation or
commission of criminal acti vities such as theft, fraud and misappropriation.
© 2004 International Center for Not-for-Profit Law. All rights reserved.

13

VI. FOREIGN ORGANISATIONS

A. Registration

There are many foreign organisations carrying out activities in Vanuatu although
they are not required to register pursuant to any legislation. As previously indicated,
they operate pursuant to a Memorandum of Agreement with the Government of
Vanuatu.

Where there is a bilateral or multilate ral agreement which exists between the
organisation’s home government or its head organisation, like New Zealand High
Commission or UNESCAP, with the Govern ment of Vanuatu, an NGO can operate
immediately under this Bilateral/Multilateral Agreement, until they receive their own
MOU with the Vanuatu Govern ment. The mandate, activities and entitlements such
as tax exemptions of these foreign or ganisations are set out in the MOU.
There are no special rules for the regi stration, regulation or dissolution.

Any foreign organisation which does not come under an existing bilateral/multilateral
agreement may choose to either register und er the Charitable Act or the law which
their organisation’s activity fall under.

B. Foreign Grants
Foreign grants that are received by NGOs from a source outside Vanuatu are not
subjected to any special rules by the Government of Vanuatu.

To apply for foreign grants is a long proce ss full of bureaucratic discretion as well as
it is time consuming. The government pr ocedures and policies imposed on grants
from foreign organisation de pend on the amount sought by an NGO. The maximum
amount applied for dictates whether or not the Ministries are involved and the
maximum amount varies amongst donor agencies.

If the amount sought is at the minimum level then the NGO directly deals with the
bilateral/multilateral donor agency from the initial application to the receipt of the
funds if successful. Once it exceeds a cert ain amount, then it must go through the
Government of Vanuatu. This procedure is set out below.

The NGO must obtain the endorsement of th e relevant Ministry whose objectives are
analogous to the activity of the NGO. For example, the Vanuatu National Council of
Women (an umbrella organisation for wome n organisations) needs the endorsement
of the Ministry of Women Affairs. For an NGO’ whose activities do not fall under any
specific Ministry, like the Vanuatu Non Government Organisation (VANGO) which has
general activities as an umbrella orga nisation, the endorsement of the Chief
Executive Officer of the Mini stry of Internal Affairs is required. The ministry of
Internal Affairs is has the NGO portfolio.

Following the endorsement of the relevant Ministry, the applications are submitted to
the Department of Economic and Sector Planning (DESP) which is part of the Ministry
of Finance. The DESP checks that the purpose for which the grant is sought is in line
with the national objectives for develo pment for the year. For unusually large
amounts, a Committee comprising of the Ca binet Ministers decide on the issue of
compliance with national objective further. If the application is approved then it is
passed on to the Ministry of Foreign Affa irs which is the channel of communication
© 2004 International Center for Not-for-Profit Law. All rights reserved.

14
with bilateral/multilateral donor agencies . Once a donor is found, the funds are
released from the donor to the Finance Sector of the Ministry of Finance, which will in
turn release the funds to the NGO.

Most NGOS desire that this process be re moved and that NGOs have direct access to
donor organisations avoidi ng the bureaucracy which can be time consuming.

VII. MISCELLANEOUS

a. Mergers and Split Ups

There are no special laws governing mergers and split ups of NGOs in Vanuatu.
Again each NGO conducts merges and split ups according to the legal provisions of
the Act that is subscribes to.

The Charitable Act requires that changes to the registered office; registration,
removals and appointments of committee me mbers and the changes in the articles,
rules or constitution or association shall be lodged with the Registrar within 30 days
from the date such changes took place. Similarly, changes resulting from mergers
and split ups such as changes to the governing body and the rules must be
registered with the Registrar of the Charitable Associations.

As for Company Limited by Guarantee, the provisions of the Companies Act regulate
mergers and split ups. Likewise for any othe r organisation registered pursuant to a
particular Act, the provisions of the Act regulate mergers and split ups. Of course
with unincorporated bodies, it is the governing instrument which dictates the
mergers and split ups.

b. Dealings in Property
There are no special rules for dealings in property by NGOs in Vanuatu. The general
law dealing with property (the Property La w Act) shall be followed in this regard.

However in relation to the vesting of assets and liabilities of the NGOs registered
under the Charitable Act, th e Committee which is formed up on the registration of the
association is vested with all assets and liabilities belonging to the association.
Section 8 (1) & (2) of the Charitable Act provides that the assets and liabilities held
for the benefit of the Association named in the certificate including any interest in
land referred to in its application shall vest in its Committee. The Committee is to
register any interest in land by lodging a copy of the certified application
accompanied by a Certificate of Incorp oration with the Director of Lands.

c. Investment Abroad
As there are no laws regulating the activi ties of an NGO organisation, there are no
restrictions preventing NGOs registered in Vanuatu from making investments abroad.

d. May NGO’s engage in political or legislative activities?
There is nothing to stop NGOs from engaging in legislative or public policy advocacy
or even in endorsing candidates for public office. In practice however, there has not
been any political activities by NGOs which directly lobby with respect to the
elections of a particular candidate or a party.

The recent Memorandum of Understanding signed on 24 August 2004, between the
Government of Vanuatu and the Vanuatu NGOs is the first official step towards the
© 2004 International Center for Not-for-Profit Law. All rights reserved.

15
Vanuatu Government and NGOS making de cisions acknowledging and involving the
participation of the NGOs in the development of Vanuatu.

VIII. TAX LAWS
Vanuatu has no taxes on income, capital gain s, inheritance or other forms of direct
taxation. Hence the only form of tax that is available in Vanuatu is indirect taxes on
consumption, such as the VAT, import and custom duties. These are the taxes that
therefore affect the NGOs in Vanuatu.
A. Value Added Tax (VAT)

There is no tax exemption for donors who contribute towards not for profit
organisations. Any donations of money, such as gifts of money, are not subject to
VAT [1], unless it is a grant of money. A donation is clearly distinguished from a
grant in that it carries no conditions and is not given in return for good and services
or rights for example, rights to membership of an organisation. Donations include
bequests and donated cash prizes.
27

VAT is also not imposed on goods which are listed in the Import Duties
(Consolidation) Act [CAP. 91], to be exempt ed from import duties. The list of goods
includes goods relating to charities. “Cha rity” however is not defined under the VAT
Act nor is it defined in the Import Duties (Consolidation) Act [Cap 91]. (See below).

Zero Rating
The Third Schedule of the Act also provides that the Director of Customs makes the
decision on zero rated supplies of goods and services. 28 Zero rated means that VAT
is charged at a rate of 0% on a sale.

The most common category of goods which are zero rated are exports of goods,
which is an activity that Not-for- Profit organisations are rarely involved. However,
some NGOs may have overseas members for whom they will be providing goods and
services to such as news letters, clothes to such as missionaries etc. The supply is
zero rated, VAT is not charged. The member must not be resident in Vanuatu at the
time the services are performed.
29

Imported Products and Customs Excises
The Imported Duties (Consolidation) Act [C ap 91] (the “Imported Duties Act”) lists
the goods that are exempted from Import Duties. These goods are categorised under
the heading “ Charitable Reliefs for Non-Profit Making Groups and Organisations ”
30
and they are as follows: charities, churches, privately funded schools (not wholly or
mainly funded by the government) as well as community groups.
31 Although there is
no specific definition in the Imported Duties Act of what “ charitable” or “non-profit
organisation” mean, the underlying requirement in each of the listed organisations
suggest that an organi sation for charitable relief or non-profit organisation is one
that is set up for the purpose of relief of poverty, advancement of education or
religion or any other matter beneficial to the community.
27 Section 2, VAT Act 1998 28 Third Schedule, VAT Act 1998 29 Third Schedule, VAT Act 1998 30 Schedule 3, Section 3 of the Imported Duties(Consolidation) Act [Cap 191] 31 Section 3 of the Imported Duties (Consolidation) Act [Cap 191] © 2004 International Center for Not-for-Profit Law. All rights reserved.

16

The authority for determining exemption under the Imported Duties Act is the
Director of Inland Revenue and Taxation . The Minister responsible for Social
Development can also write a letter to the Director of Inland Revenue and Taxation
requesting that relief for a community group.

International NGOs are also exempted from VA T and Import Duties if this is provided
for in the MOU signed between the Government and that particular organisation.

B. Donor/Donations

There is no tax exemption for donors who contribute towards not for profit
organisations. However donati ons are subjected to taxation such as VAT. Donations
of money are not subject to VAT
32 i.e. Gifts of money are now subject to VAT. A
donation is clearly distinguished from a grant in that it carries no conditions and is
not given in return for good and services or rights for example, rights to membership
of an organisation. Dona tions include bequests and donated cash prizes.

Donated Goods and services
The supply of donated goods and services to a Not-for- Profit organisation is
exempted from VAT. 33 Donated goods and services is defined under the Act as goods
and services that are gifted to a non-profit body and are intended for use in carrying
on or carrying out of the purposes of that non-profit body. VAT is also not charged
on goods imported for charities, although there is no definition of what charity or
charitable purposes is in the VAT Act.

The sale of donated goods and services by a non-profit body is exempt from VAT. For
example book sale or cake stall are exempt from VAT if the goods sold are donated.
Similarly funds are not taxable if they ar e raised for example by a club through
washing cars or mowing lawns, where thos e services are performed by volunteers.

A grant made to an organisation by the government will generally be regarded as
payment for services performed by that organisation for its members, the
community or a particular interest group. Government grants will therefore also be
subject to VAT and registered recipients of grants will have to account to 1/9
th of
their value the VAT office.

C. Commercial/Business /Economic Activities

NGOs can engage in commercial activities so long as these activities do not become
the main activities. An organisation may engage in profit making activities if such
activities are connected with and for th e furtherance of the objectives of the
association.

The most common commercial activities ca rried out by NGOs in Vanuatu are as
follows:

Rental Property
32 section 2 of the VAAT Act 1998 33 section 10(3)(a) of the VAT Act 1998
© 2004 International Center for Not-for-Profit Law. All rights reserved.

17
VAT is not paid on rental properties used for residential accommodation. Rent tax is
also not paid where the amount received from such rental does not exceed the
amount of VT300, 000 per annum.

Market Stalls
Sales in retail outlets of donated goods su ch as second hand clothing and household
items are exempt from VAT if the sh ops are run by non-profit bodies.

Fees charged by churches
Any set fee charged for membership of a chur ch for provisions of particular services
such as weddings, funerals, baptisms, access to reading rooms etc will be subject to
VAT if the church is registered.

Overall in regards to taxes, an economic activity may not be the main activity of the
NGO but if it becomes predom inant then the NGO must pay the required taxes or is
ordered to cease such activities or must become a business.

Reporting
The only tax reporting required is the VAT Returns forms which are lodged at the end
of every taxable month with the VAT office of the Inland Revenue Department. Cash
contributions are not subjected to VAT or any form of taxation; however
contributions from the Government of Vanuatu to an NGO, 1/9
th must be accounted
for with the VAT office.

It is apparent that the determination of the tax exemption status of an NGO is not
dependent on the legal structure the organisati on adopts; rather it is the purposes of
the organisation and the types of activities it pursues.

IX. COMPLIANCE

Generally, the statutory rules applicable to NGOs are understood by most groups as
they are quite simple to follow in regards to the registration of NGOs. The Registrar
is able to discipline an association due to failure to comply with their obligations
under the relevant Act. The non-compliance that commonly occurs and is rectified is
the filing of returns within the specified time limit. However, to date there is no
known disciplinary action ta ken against any NGO organisa tions by the Registrar.
There have been no studies undertake n on NGO compliance with the law.

Given that there are no special tax exempt ions on any donor’s contribution to an
NGO as well as tax exemption for NGO for membership benefit NGOs, there is no
perception that NGOs are used for tax avoi dance. There is no evidence to indicate
that Politicians are involved in NGO for direct financial gains. What is common
however, are politicians funding the uni ncorporated NGOs activity with the
expectation that the member s of the NGO will support the politician as a candidate
during election.
The Courts in Vanuatu have held that where an organisation fails to comply with its
own rules or its constitution or has failed to observe the rules of natural justice then
a member can bring a court action against the association. Kalkot Mataskelekele -v-
Iolu Abbil and Donald Kalpokas Civil Case 99 of 1991 and the corresponding Appeal
as Civil Appeal Case No. 7 of 1991.
© 2004 International Center for Not-for-Profit Law. All rights reserved.

18
A potential form of regulatory intervention with NGO activities are the tax authorities
who carry out random auditing of the NGOs registered for VAT and even those that
are not registered. Tax authorities randomly evaluate the activities of NGOs for VAT
purposes by random checks is to ascertain whether the NGO’s activities correspond
to the purposes or objectives of the organi sation as stipulated in their governing
instruments. The NGOs however rarely get audited by the VAT officers.

The other form of regulatory intervention that generally all NGOs are likely to
encounter is the police investigating pursuant to a complaint to the police by a
person from the NGO organisation complaining of alleged criminal activity (ies).

X. GOVERNMENT FUNDING AND PROCUREMENT

There are no laws to regulate the app lications or entitlements of NGOs for
government funds, all types of NGOs whet her for public or membership benefit may
request for government funding. There ar e government policies however, in place
which regulate the distributi on of government funds and funds which come available
under bilateral or multilateral agreemen ts between the Vanuatu Government and
other countries or organisations (s ee Overseas Organisation above)

There are no government funds within the Government’s annual budget which are
set aside specifically for incorporated NGOs. What is provided for under
government’s budget is the Rural Economic Development Initiative Funds otherwise
known as the REDI funds which is open to all types of NGOs incorporated and
unincorporated, local and overseas NGOs . The REDI Funds is divided equally
amongst the 6 provinces in Vanuatu (San ma, Malampa, Penama, Shefa, Tafea and
Tolba) with the current REDI fund amount be ing 2 million vatu per province annually.

The general procedure for application for funds is for an NGO to a lodge a completed
REDI Funds application form with the Department of Provincial Affairs’ REDI Unit.
The REDI Unit makes the decision on whether or not to grant an application. The
Department of Provincial Affairs is under the Ministry of Internal Affairs. The REDI
Unit works closely with the DESP of the Ministry of Finance to ensure that NGOs do
not receive double portions for any one project.

XI. PRIVATISATION

There are no laws that say that NGOs cannot get shares in Government enterprises.

XII. CONCLUSION

What is needed is a harmonisation of the different aspects of the laws that affect
NGOs into an independent piece of legislation specifically addressing the setting up,
management and entitlements of NGOs in Vanuatu. This legislation is needed to
strengthen their structure an d to have clear machinery for the operation of NGOs.

Currently there is no clear protection fo r NGOs operations and much is leave to
chance – the wide discretionary power of authorities (with capacity for arbitrariness)
and also the relaxed manner in enforcing statutory requirements on NGOs obligation
to file returns.

The current laws affecting NGOs are fragme nted in the sense that each piece of
legislation has its own criteria of what an NGO is. Having these separate
© 2004 International Center for Not-for-Profit Law. All rights reserved.

19
determinations with no reference to other relevant NGO legislation, means that there
is room for inconsistencies as well as inefficiency in the administration of the NGOs.

The NGO’s heavily rely on the donation or funds from donors for their operation.
Thus there is a need to make allowance fo r NGO’s to operate economic activities to
assist in financing its operations and even to the extent of self-sufficiency. The
separation of public benefi t NGOs from membership NGOs can be a differentiating
point for NGOs who operate economic activities to survive and those that carry out
economic activities for prof it making. Currently, economic activities other than
further of NGO activities, of public benefit NGOs are subjected to taxation, which
impedes the potential for raising money for survival by NGOs. As stated earlier the
tax benefits of NGOs are awarded according to the function of the organisation rather
than their status as either public or membership benefit NGO. The independent piece
of legislation should ensure that public be nefit NGOs should be fully exonerated from
any tax for the survival.

There is a strong desire from NGOs to be freed of the bureaucracy in accessing funds
from bilateral and multilateral donors. To ensure the autonomy of NGOs and their
efficiencies, a removal of the governmental procedures would benefit the NGOs. At
the same time, legislation should put into place mechanisms to impose statutory
obligations on NGOs to account and audit any funds injected to any NGO as well as
ensure accountability and transparency in the NGO activities.

Where there are obligations th ere should also be effective enforcement. Part of the
reasons for non-compliance by NGOs in keeping to their statutory obligations is the
lack of enforceability by the necessary authority. As such it is vital that the
legislation should establish a body responsible for determining the status of NGOs,
the enforcement of NGO’ s statutory obligations and rights under law.

The legislation and any machinery it sets up for NGOs in Vanuatu, will have to give
due consideration to the limited resource s of NGOs from the drafting of the
legislation to financing the implementation of the legislation. Any legislation that
affects the interests of NGOs would have to be initiated and driven by the NGOs, if
this is to become a reality. A further crucial consideration is the nature of the
relationship between the NGOs and the Government of Vanuatu, which can
determine the time for the legislation to come into force.

© 2004 International Center for Not-for-Profit Law. All rights reserved.