VOLUNTARY ASSOCIATION: QUICK, EASY AND CHEAP

What is a VOLUNTARY ASSOCIATION (VA)? A VA can be defined as three or more individuals or corporations entering voluntarily into an agreement to form a private, non-government organisation which will work together for a mutual, lawful purpose, which is not primarily to gain profit. Often membership fees are payable.

How do I form a VA? A VA is formed by verbal or written agreement, the latter being preferable to avoid disputes. It is governed by Common Law and founded on a contractual basis, usually in written form. This contract is crucial in outlining the VA’s activities, as well as the powers of the committee and the rights of the members.

What are the advantages of a VA?          

  1. A VA is a separate legal entity, which means inter alia, that the members are not liable for the association’s debts.
  2. It may acquire and dispose of property.
  3. It has perpetual continuity, in other words its existence is not affected by member changes.
  4. It may exercise the same rights and powers as any other corporate entity, for example a company or trust.
  5. It does not have to be registered, so less formality is required than for bodies like trusts or Section 21 companies.
  6. It may appoint employees on a part-time or full-time basis.

Are there disadvantages?

The lack of formality is the main disadvantage, which could affect the VA as follows:

  1. When its objective is to collect donations for charity, many donors prefer dealing with a registered organisation. However, this stumbling block can be overcome by registering under the Non-Profit Organisations Act.
  2. Especially in bigger organisations, an established set of legally binding rules enhances clarity.
  3. The VA may earn more trust from stakeholders if it is registered.
  4. If it is not properly drafted, the VA’s members may not be protected adequately.

How is a VA managed? The management of a VA is usually carried out by a regularly elected executive committee, of which the powers and duties are set out in the constitution.

Does a VA pay income tax? Income tax exemption will be granted if the VA is registered as a non-profit organisation in accordance with SARS requirements. The deciding factors are the objectives and activities of such an organisation.

If carefully drafted and well managed, a VA could be the answer to many people’s questions regarding which enterprise to opt for.

 

By: Celeste Roux