LEGAL ASSESSMENT QUESTIONNAIRE

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LEGAL ASSESSMENT QUESTIONNAIRE This legal assessment questionnaire has been developed by ICNL. It sets out a list of questions that will help us to evaluate the legal, fiscal, and regulatory climate for the operation of not-for-profit organizations (NPOs) in countries around the world. By NPOs we mean foundations, associations, societies, and not-for-profit corporations or companies.

Political parties, trade unions, profit- distributing cooperatives, and churches are not included. Please complete the questionnaire and return it to ICNL. The questionnaire attempts to be fairly universal, asking questions that are appropriate in some countries (e.g., Brazil and Philippines have special provisions in their constitutions regarding NPOs -- see question 1; Kenya has a mandatory "self"-regulation system for NPOs -- see question 23; Bolivia has special laws regarding "participácion" -- see question 17), but are not applicable in others.

When questions or parts of questions are not applicable in a given country, they should simply be ignored. Lawyers making the assessments should, of course, try to make their answers as complete as possible. Copies of relevant laws (e.g., the associations and foundations laws of a given country) and portions of laws (e.g., the national tax laws governing NPOs) as well as examples of application and reporting ... more. less.

forms and codes of ethics should be assembled and returned with this questionnaire. If the country has a federal system, copies of national and local laws and regulations should be supplied if possible. In formulating appropriate answers to the questions, reference should be made to the World Bank Handbook on Good Practices for Laws Relating to Nongovernmental Organizations (May 1997). Fundamental Freedoms 1. Constitutional protections . Does the constitution adequately safeguard the freedoms of speech, peaceful assembly, and association? Are there other constitutional provisions that are directly relevant to NPOs? 2. Informal associations . Is it permissible for individuals to join together to engage in lawful activities without having to register a formal NPO? 3. Media Access . Are there any legal impediments preventing NPOs from having access to the media to publicize their work? Are there any special media access provisions for NPOs? All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved. 4. General procedural safeguards . Are adverse decisions of governmental organs with which NPOs interact subject to judicial review by independent courts? Legal Existence of NPOs 5. Quality of NPO laws . Are the laws that relate to NPOs consistent, clear, and understandable? Are they easily and widely available to the public in languages the public can understand? 6. Establishment requirements . Is it relatively quick, easy, and inexpensive for founders to establish an NPO as a legal person? What are the costs of establishment? Must NPOs seek legal advice to assist them in establishing an NPO? 7. Founders . Are both natural and legal persons permitted to establish NPOs? How many founders are required? 8. Organizational forms . Do the laws permit a variety of different kinds of NPOs to be formed, including membership and non-membership organizations? Are there special rules regarding the establishment of grant-making organizations? Are there special rules for qualification of an NPO as a public benefit organization? 9. Foreign organizations . Are the rules for establishment that apply to foreign NPOs the same as those that apply to domestic ones? Are any differences in the rules more favorable to foreign NPOs? Less favorable? 10. Establishment organ . What is the organ of the state that is vested with responsibility for giving legal existence to NPOs? Is it adequately staffed with competent professionals and even-handed in fulfilling its role? 11. Voluntary termination and liquidation . Is the highest governing body of an NPO permitted voluntarily to terminate its activities, dissolve it as a legal person, and liquidate its assets? If not, what restrictions exist on its ability to do so? 12. Involuntary termination and liquidation . Under what circumstances is an involuntary termination of an NPO permissible? What are the procedural safeguards allowed in such circumstances? Are involuntary terminations subject to judicial review? Purposes and Activities of NPOs All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved. 13. General activities . Are NPOs permitted to engage in any legally permissible activities? May those activities be for the benefit of their members and/or for the benefit of the public? 14. Public policy activities . Do NPOs have the right to speak freely about all matters of public interest or debate, including criticism of current or proposed policies or actions of the state? 15. Grant-making . Are special restrictions or other rules (e.g., limits on permissible investments, minimum annual expenditure requirements) applicable to grant-making organizations? 16. Licensing . Are NPOs that engage in an activity that is subject to licensing or regulation by the state (e.g., health care, education, social services) subject to the same generally applicable licensing and regulatory requirements and procedures that apply to similar activities of individuals or business organizations? 17. Participation in policy development . Are there any special provisions in law regarding the participation of NPOs in economic and social policy development processes of the state? Integrity and Good Governance 18. Basic requirements for governing documents . Are minimum provisions necessary and appropriate for the sound operation and good governance of NPOs stated in the law? What requirements are stated? How often must governing bodies of NPOs meet? What are the rules regarding membership in membership organizations (associations)? 19. Additional provisions . Does the law confer upon the founders of an NPO or the governing body broad discretion to set and change the governance structure and operations of the organization within the minimum requirements imposed by law? 20. Internal reporting and supervision . Is the highest governing body of an NPO given authority to set policies for the organization? Is it required to receive and approve appropriate reports on the finances and operations of an NPO? Are there special internal governance rules applicable to grant making organizations? 21. Prohibition on the distribution of profits . Does the law preclude the distribution of an NPO's earnings or profits to founders, members, officers, board members, or employees? All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved. 22. Prohibition on misuse or distribution of assets . Does the law prohibit the use of the assets of an NPO for the special benefit of its founders, members, officers, board members, or employees? Does it prohibit the distribution of any such assets to any such person upon the termination of the NPO? 23. Prohibition on conflicts of interest . Does the law provide for a prohibition on conflicts of interest involving NPOs and their founders, members, officers, board members, and employees? 24. Access to self-regulation . Does the law allow NPOs to develop their own standards for self-regulation? Are there procedures in the law for mandatory "self-regulation" 25. Self-regulation mechanisms . Have NPO umbrella bodies adopted NPO codes of ethics? Are there adequate enforcement mechanisms for such codes? Are there "watchdog" organizations that monitor the governance and performance of NPOs? Accountability and Transparency 26. Reporting to supervisory organ . Are NPOs with significant public benefit activities or that receive substantial support or benefits from the public or the government required to file appropriate reports on their finances and operations with the organ of the state that is responsible for general supervision of NPOs? How often must such reports be filed? What must such reports contain? 27. Reporting to and audit by tax authorities . Are NPOs that receive tax benefits required to submit reports to the taxing authority? What must such reports contain? 28. Sanctions . What sanctions apply if an NPO fails to file reports or to comply with other provisions of law? Are adequate warning and an opportunity to correct available before sanctions are applied? Under what circumstances, if any, may an organ of the government interfere with the internal workings of an NPO (e.g., freeze assets, replace directors)? Are such actions of the government organ subject to judicial supervision? 29. Disclosure or availability of information to the public . Are NPOs that have significant activities affecting the public interest or that receive substantial support or benefits from the public or the government required to publish or make available to the public a report of their general finances and operations? How are such reports made public? What are the rules, if any, that protect confidentiality of beneficiaries, etc.? All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved. 30. Public registry . Is there a register of NPOs that is open to the public? What information does it contain? Financial Sustainability 31. Fund-raising activities . Are NPOs permitted to engage in all legally acceptable fund-raising activities, including door-to-door, telephone, direct mail, and media solicitations, lotteries, raffles, etc.? Are these fund-raising efforts subject to regulation that assures protection of the public without placing undue constraints on NPOs? 32. Tax exemption for grants, dues, and passive income . Are NPOs exempt from income or profits taxation on moneys or other items of value received from members, contributors, foundations, governmental organs, or bilateral or multilateral international institutions? Are NPOs exempt on their passive investment income (interest, dividends, rents, and royalties)? 33. Tax benefits for contributors . Are individuals or business entities that make contributions or donations to a public benefit NPO entitled to a tax benefit (e.g., deduction or credit) with respect to their taxes? 34. Economic activities . Are NPOs entitled to engage in economic activities as long as those activities do not constitute the principal purpose or activity of the organization and profits are used for the not-for-profit purposes of the organization? 35. Taxation of profits from economic activities . What is the tax treatment of the profits that an NPO earns from an active trade or business? 36. VAT exemption or beneficial rating . Are public benefit activities of NPOs entitled to exemptions or preferential treatment with respect to a value added tax (VAT)? 37. Other taxes . Are NPOs subject to exemption or special treatment with respect to other taxes (e.g., local taxes such as real property taxes or service fees)? 38. Procurement and other financial relationships between NPOs and government . Does the law provide mechanisms for national and/or local governments use the services of NPOs on projects (e.g., for social welfare services or economic development)? Are contracting and grant-making procedures defined under law or regulations? 39. Social sector privatization . Have laws been adopted permitting privatization of social sector assets (e.g., health, educational or cultural institutions) to the NPO sector? All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved. 40. Foreign funding . Are properly established NPOs generally allowed to receive contributions or donations in cash or in kind from foreign sources as long as all generally applicable foreign exchange and customs law are satisfied? What are the restrictions or special rules, if any, applicable to foreign grants? 41. Customs duties . Are there special customs rules applicable to the import of goods for use by NPOs? Are they restricted to certain items (e.g., humanitarian goods)? Are exemptions clearly provided by law or are they within the discretion of the customs authorities? 42. Currency import restrictions . Are there any mandatory currency conversion rules pr other foreign exchange rules that are adverse to NPOs? Miscellaneous 43. Other laws . Are there provisions of other laws that are relevant to the legal situation affecting NPOs (e.g., bankruptcy laws, administrative procedures, court rules)? International Center for Not-for-Profit Law 1126 16th St., NW Suite 400, Washington, DC 20036 USA, Ph. 202-452-8600, Fax 202-452-8555 E-Mail: infoicnl@icnl.org All contents Copyright © 1998, International Center for Not-for-Profit Law. All rights reserved.

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