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International Standards


      Recommendation CM/Rec(2007)14 on the legal status of NGOs in Europe, Paras. 9, 14, 50, 51, 52, 53, 54, 55 and 56

I. Basic principles

(...) 9. NGOs should not distribute any profits which might arise from their activities to their members or founders but can use them for the pursuit of their objectives. (...)

II. Objectives
(...) 14. NGOs should be free to engage in any lawful economic, business or commercial activities in order to support their not-for-profit activities without any special authorisation being required, but subject to any licensing or regulatory requirements generally applicable to the activities concerned. (...)

VI. Fundraising, property and public support
 A. Fundraising
  50. NGOs should be free to solicit and receive funding – cash or in-kind donations – not only from public bodies in their own state but also from institutional or individual donors, another state or multilateral agencies, subject only to the laws generally applicable to customs, foreign exchange and money laundering and those on the funding of elections and political parties.
 B. Property
  51. NGOs with legal personality should have access to banking facilities.
  52. NGOs with legal personality should be able to sue for the redress of any harm caused to their property. 
  53. NGOs with legal personality can be required to act on independent advice when selling or acquiring any land, premises or other major assets where they receive any form of public support.
  54. NGOs with legal personality should not utilise property acquired on a tax-exempt basis for a non-tax-exempt purpose.
  55. NGOs with legal personality can use their property to pay their staff and can also reimburse all staff and volunteers acting on their behalf for reasonable expenses thereby incurred.
  56. NGOs with legal personality can designate a successor to receive their property in the event of their termination, but only after their liabilities have been cleared and any rights of donors to repayment have been honoured. However, in the event of no successor being designated or the NGO concerned having recently benefited from public funding or other form of support, it can be required that the property either be transferred to another NGO or legal person that most nearly conforms to its objectives or be applied towards them by the state. Moreover the state can be the successor where either the objectives or the means used by the NGO to achieve those objectives have been found to be inadmissible.

Explanatory Memorandum

I. Basic principles
(...) Paragraph 9
32. The freedom to establish NGOs is essentially civil and political in character rather than an economic right. So NGOs should not be established with the principal objective of making profits from their activities. Any profits accruing from those activities should be ploughed back into the pursuit of their objectives rather than be distributed to their members or founders. Nevertheless this does not mean that membershipbased NGOs cannot exist to advance the interests of their members, securing economic as much as moral, physical, social or spiritual benefits for them. (...)

II. Objectives
(...) Paragraph 14
40. The fact that NGOs are non-profit-making is one of their essential characteristics, distinguishing them in particular from commercial enterprises. However, NGOs will be unable to pursue their objectives without some source of income and this can be provided not only by fees, grants and donations but also through undertaking economic, business or commercial activities.
41. There should, therefore, be no obstacle to them undertaking such activities subject to the prohibition on the income thereby derived being distributed to their members and founders (see Paragraph 9 of the Recommendation) and to the licensing and regulatory requirements generally applicable to those activities.
42. The ability to undertake economic, business or commercial activities should also not preclude a requirement that certain modalities be followed, such as the formation of a subsidiary company for this purpose. (...)

VII. Fundraising, property and public support
 A. Fundraising
Paragraph 50
100. The ability of NGOs to solicit donations in cash or in kind will, notwithstanding the possibility of them also engaging in some economic activity, always be a crucial means for them to raise the funds required in order to pursue their objectives. It is important that the widest range of possible donors can be approached by NGOs.
101. The only limitation on donations coming from outside the country should be the generally applicable law on customs, foreign exchange and money laundering, as well as those on the funding of elections and political parties. Such donations should not be subject to any other form of taxation or to any special reporting obligation.

 B. Property
Paragraph 51
102. Access to banking facilities will be essential if NGOs with legal personality are to be able to receive donations and to manage and protect their assets. This does not mean that banks should be placed under an obligation to grant such facilities to every NGO seeking them. However, their freedom to select clients should be subject to the principle of non-discrimination and the ability to operate bank accounts should be a necessary incident of the grant of legal personality to NGOs.
Paragraph 52
103. The possibility of NGOs protecting their property rights, as well as any other legal interests, through being able to bring and defend legal proceedings is essential since any taking of, the loss of control over or damage to their property could frustrate the pursuit of their objectives; see the finding of a violation of the right to peaceful enjoyment of possessions under Article 1 of Protocol No. 1 to the European Convention in The Holy Monasteries v. Greece, nos. 13092/87 and 13984/88, 9 December 1994 which concerned a religious entity that had lost the right to bring legal proceedings in respect of its property.
Paragraph 53
104. The fact that assets of some NGOs have come from public bodies and that their acquisition has been assisted by a favourable fiscal framework are reasons to ensure that these assets are carefully managed and that the best value is obtained when buying and selling them. It would, therefore, be appropriate to adopt a requirement in these cases that NGOs be guided by independent advice when engaging in some or all such transactions.
Paragraph 54
105. It is a corollary of the adoption of a special tax regime to facilitate the acquisition of property for certain purposes that that property should not be utilised for other purposes. In the event of an NGO not being in a position to use the property for such purposes, it could thus be required to return the property concerned to the donor, to transfer it to another NGO that can use it for those purposes or to retain it on payment of the applicable taxes.
Paragraph 55
106. Most NGOs are unlikely to be able to pursue their objectives without employing some staff and/or having volunteers carrying out some activities on their behalf. It should, therefore, be recognised that it is a legitimate use of NGOs’ property to pay their employees and to reimburse the expenses of those who act on their behalf. While market conditions and/or legislation will influence the level of payments made to staff, the need to ensure that property is properly used for the pursuit of an NGO’s objectives would justify imposing a criterion of reasonableness for the reimbursement of expenses.
Paragraph 56
107. National law should permit an NGO to designate, whether in its statutes or by resolution of its highest governing body, another NGO to receive its assets in the event of its termination. This should, however, only apply to assets left after all the liabilities of the NGO being terminated have been met and this would include the fulfilment of a condition in a donation that funds unspent on the purpose for which it was given should either be returned to the donor or transferred to an NGO specified by the donor.
108. The freedom otherwise left to the NGO to determine who should succeed to its assets will, however, be subject to the prohibition on distributing any profits that it may have made to its members (see Paragraph 9 of the Recommendation) and may also be constrained by an obligation to transfer assets obtained with the assistance of tax exemptions or other public benefits to other NGOs pursuing objectives for which such exemptions or benefits are granted. In addition an NGO whose objectives or activities have been found to be inadmissible for reasons set out in Paragraph 11 of the Recommendation should not have any right to determine the successor to its assets but these should instead be applied by the State for public purposes.]


      Fundamental Principles on the Status of Non-Governmental Organisations in Europe, Principles 4, 13, 50, 51, 52, 53, 54, 55 and 56

Scope
4. NGOs do not have the primary aim of making a profit. They do not distribute profits arising from their activities to their members or founders, but use them for the pursuit of their objectives. (...)

Objectives
13. An NGO with legal personality may engage in any lawful economic, business or commercial activities in order to support its non-profit-making activities without there being any need for special authorisation, but always subject to any licensing or regulatory requirements applicable to the activities concerned. (...)

Property and fund-raising
50. NGOs may solicit and receive funding – cash or in-kind donations – from another country, multilateral agencies or an institutional or individual donor, subject to generally applicable foreign exchange and customs laws.
51. NGOs with legal personality should have access to banking facilities.
52. NGOs with legal personality should be able to sue for redress of harm caused to their property.
53. In order to ensure the proper management of their assets, NGOs should preferably act on independent advice when selling or acquiring any land, premises or other major assets.
54. Property acquired by an NGO on a tax-exempt basis should not be used for a non-exempt purpose.
55. An NGO may designate a successor to receive its assets, in the event of its termination, but only after its liabilities have been cleared and any rights of donors to repayment have been honoured. Such a successor should normally be an NGO with compatible objectives, but the state should be the successor where either the objectives, or the activities and means used by the NGO to achieve those objectives, are found to be unlawful. In the former case, and in the event of no successor being designated, the property should be transferred to another NGO or legal person that conforms most with its objectives or should be applied towards them by the state.
56. The funds of an NGO can be used to pay its staff. All staff and volunteers acting on behalf of an NGO can also be reimbursed for reasonable expenses which they have thereby incurred.

Explanatory Memorandum

17. As indicated in paragraph 4 of the fundamental principles, the main character of NGOs is the fact that profit-making is not their primary aim. All NGOs have in common their self-governing, voluntary nature and the fact that they do not distribute profits from their activities to their members but use these for the pursuit of their objectives. (...)
27. Pursuit of economic activities is a special case, since it is in fact NGOs’ non-profit-making nature that distinguishes them from commercial enterprises. In this connection, the text lays down the principle that an NGO is free to carry on any economic, business or commercial activity, on condition that any profits are used to finance the pursuit of the common- or public-interest objectives for which the NGO was set up. National legislation governing NGOs should therefore stipulate that none of their earnings or net profits is to be distributed, as such, to any person whatsoever. Such legislation might also prescribe particular modalities for carrying out economic or commercial activities, for example, the formation of a subsidiary company. Subject to this general restriction, no requirements should be imposed on NGOs other than the general rules governing the economic activities in question. (...)
56. The possibility for NGOs to solicit donations in cash or in kind is a fundamental principle, a national consequence of their non-profit-making nature. Such contributions, along with the proceeds of any economic activity, are NGO’s vital means of financing the pursuit of its objectives. However, this possibility for NGOs to collect funding is not absolute and may be subject to regulation, with a view to the protection of the targeted audience.
57. Donors may be natural or legal persons – companies or institutions – and may be national or foreign. In general, foreign and national funding should be subject to the same rules, in particular as regards the possible uses of the funds and reporting requirements.
58. The provisions of paragraphs 51, 52, 53 and 55 are designed to safeguard the assets of NGOs and ensure that they are properly managed.
59. The principle set out in paragraph 51 does not imply that banks are under an obligation to provide banking facilities to every NGO requesting it. Subject to the principle of non-discrimination, individual banks are free to choose their clients.
60. The law should permit an NGO to designate, in its statutes or by resolution, another compatible body to receive its assets, after clearing of its liabilities, in the event of its dissolution. This is a principle of good practice, which should be encouraged. In some cases contractual clauses, in particular concerning major donors, may require the return of funds to a donor in the event of the NGO’s dissolution. The successor may also be the state, particularly where no compatible body exists or where the NGO’s objectives or activities have been found to be unlawful. However, this should not give rise to a financial windfall for the state.
61. Paragraph 56 sets out the principle according to which it is perfectly appropriate for an NGO to use its funds for paying its staff and reimbursing staff and volunteers for the costs incurred while acting on its behalf, even if the funds used were obtained by means of public support. ]

      Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief, Article 6 (f)

In accordance with article 1 of the present Declaration, and subject to the provisions of article 1, paragraph 3, the right to freedom of thought, conscience, religion or belief shall include, inter alia, the following freedoms: (...)
To solicit and receive voluntary financial and other contributions from individuals and institutions.


      Declaration on the Rights and Responsibility of Individuals, Groups and Organs of Society to Promote and Protect Universally Recognised Human Rights and Fundamental Freedoms, Article 13

Everyone has the right, individually and in association with others, to solicit, receive and utilise resources for the express purpose of promoting and protecting human rights and fundamental freedoms through peaceful means, in accordance with [A]rticle 3 of the present Declaration.



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