Which founding document clauses should a charity review before applying for PBO status?

Start with the legally effective document

For an NPC, obtain the Memorandum of Incorporation and amendments. For a trust, obtain the relevant trust instrument; for a voluntary association, obtain the adopted constitution. Check the organisation’s name and identifying records so that the review concerns the applicant that will approach SARS.

A folder can contain a template, signed original, later resolution and clean working copy with different wording. Establish which provisions currently apply before marking up changes. If the amendment history is unclear, resolve it with the organisation’s authorised office-bearers and adviser.

The SARS exemption application guidance requires the appropriate supporting documents. A well-organised review pack helps the adviser distinguish a missing clause from a missing record of an amendment already adopted.

Keep a separate working copy for comments. Record page and clause references against each issue instead of editing a scan of the signed document. This preserves a clear distinction between what the organisation currently provides for and what its reviewer recommends changing.

Use a clause matrix to organise the review

This matrix is a preparation tool, not model legal wording. Note the existing clause, the concern and who will resolve it. A blank answer is more useful than a tick unsupported by an identified provision.

Connect the objects to the actual work

The SARS PBO overview explains the public benefit framework. Identify the activities relied on and compare them with the stated objects. Broad wording such as supporting good causes should be unpacked into the work actually carried on.

Prepare a short description of each programme: what happens, who benefits, how people qualify and how the organisation pays for it. Flag programmes that are only planned. The reviewer needs to understand the real operation, including activities that management thinks may fall outside the main charitable purpose.

For example, a fictional community organisation runs a food programme and sells training packages. Its review pack should describe both activities and their funding. Hiding the trading activity would prevent a useful assessment of the objects, income treatment and controls.

Do not add every possible activity to the application merely to preserve future options. Explain current priorities and proposed changes coherently. If the organisation later expands, the board should review whether its documents and approval still fit the facts.

Review the people and the decision rules together

The SARS PBO guide describes the general requirement for at least three unconnected natural persons to accept fiduciary responsibility, with a testamentary-trust exception. It also explains the prohibition on one person controlling decision-making directly or indirectly.

Collect appointment records and disclose relevant relationships for assessment under the statutory connected-person test. Having different surnames is not a reliable test. Ask the reviewer to consider eligibility and disqualification issues as well as the number of people listed.

Read the voting, quorum, appointment and removal provisions together. A board may appear independent until another clause gives one person power over every important decision. A founder’s historic role should be recorded accurately rather than treated as an automatic exemption from the applicable conditions.

Compare the wording with minutes and actual practice. If decisions are routinely made outside the documented process, improving the clause alone does not resolve the operational problem. Allocate responsibility for proper meetings, records and approvals after the application.

Examine how funds and benefits can be used

Review clauses governing distributions, financial powers and payments to people connected with the organisation. Identify wording that could allow charity assets to be applied for private purposes. Distinguish authorised programme expenditure from a provision allowing members to share the organisation’s surplus.

Do not assume that every payment to a founder or employee is prohibited, or that every payment labelled a salary is acceptable. Keep actual service agreements, approval records and the basis for remuneration available for the reviewer. The question concerns both the applicable conditions and the real transaction.

A useful practical check is to trace a proposed payment from its purpose to the decision authorising it and the evidence supporting it. If nobody can explain who approved a connected supplier or what was delivered, the board has a record problem even before the tax treatment is considered.

Include conflict declarations and recusal records where relevant. Do not rewrite old minutes to create an approval that never occurred. Explain historical gaps and obtain advice on the appropriate response.

Read the less frequently used clauses carefully

Dissolution provisions matter before the charity closes. Review where remaining assets may go and whether the proposed destination satisfies the applicable PBO requirements. Wording that permits distribution to members on closure needs attention even if the board has no present plan to dissolve.

Check the founding document alongside donor agreements. Donation conditions concerning repayment, private benefits or control can require specific review. Do not treat an unrestricted right for a donor to reclaim money as harmless merely because the charity has never been asked to repay it.

Record unusual restrictions separately: a named project, a return condition, a promised benefit or a proposed transfer to another institution. The adviser can then assess the actual terms without having to infer them from a short bank description.

If section 18A approval is also sought, examine the relevant activity and fund-use conditions separately. The section 18A guide explains why a compliant PBO document alone does not authorise every donation receipt.

Adopt changes through the correct process

1. List each identified gap with its clause reference.
2. Obtain wording appropriate to the entity and applicable law.
3. Check who has authority to approve the amendment.
4. Follow the required notice, meeting and voting process.
5. Complete any necessary filing or other formalities.
6. Keep the decision, effective document and supporting evidence together.
7. Ensure the application describes the version actually in force.

A reviewer’s draft is not evidence that the organisation has amended its rules. Do not submit it as an adopted document because an application deadline is approaching. If formalities are pending, state that position and establish how it affects the application.

The SARS compliance guidance also addresses continuing obligations. After approval, changes to the founding document require attention beyond the organisation’s internal adoption process.

Give the adviser a complete review pack

For Vatco’s PBO registration support, provide the effective founding document, amendment history, registration records, office-bearer details and programme summary. Include existing SARS decisions and the clause matrix with unresolved points clearly marked.

Where different people prepared the records, include a short index identifying the source and date of each document. Ask the secretary to confirm the adopted version, the treasurer to describe financial practice and the programme lead to verify activity descriptions. Resolve contradictions before the authorised representative signs the application. For example, a constitution may name one governing committee while recent minutes show another. Establish whether there was a valid appointment or an undocumented change, rather than choosing whichever version appears easier to submit. Keep the resolution of that discrepancy in the review file.

Ask for a review of the document and operating facts together. The intended result is a properly supported application and a governance process the organisation can follow. Approval is determined by SARS; copying another charity’s clauses cannot guarantee the same outcome.