New manual helps NGOs understand laws and regulations

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According to open data released by the Ministry of Civil Affairs in May, the total number of charitable foundations in China has reached 9,061. Most of them do not have a long history, with less than 10 percent established before the promulgation of the Regulations on the Administration of Foundations in 2004.

In the past decade, many laws and regulations involving foundations have been implemented, such as the Charity Law, the Regulations on the Management of Foundation Names, and the Notice on Regulating the Behavior of Foundations.

To help NGO practitioners better understand the laws and regulations, China Foundation Forum (CFF) and Beijing Zhicheng Law Firm jointly released the 100 Q&A Frequently Asked Questions About Foundations (the manual) three years ago, and released the second edition recently.

Although the manual has retained its name, the second edition has a total of 180 questions divided into 15 chapters, covering the whole process of foundation operation.

The manual not only answers basic questions, such as “What is a foundation?”, it also contains answers on a number of practical issues.

Take question 14 in the first chapter as an example, “Can the net assets of the foundation be lower than the original fund at the end of the year?” The manual gives a negative answer, pointing out the risk of the foundation being downgraded by the Ministry of Civil Affairs. It is suggested that if the original fund changes, the foundation must go through relevant procedures.

Question 23 from the second chapter asks if a foreigner or resident of Hongkong, Macao or Taiwan can serve as the person in charge of a foundation. The answer is yes, but the individual in charge must stay in mainland China for at least three months each year. In addition, the legal representative of public fundraising foundations or any foundations whose original funds come from mainland China should be citizens of mainland China.

Following the revision of the Social Organization Registration Management Regulations in 2016, many people came to believe that foundations were not allowed to establish their own regional branches. The manual devotes a whole chapter to explaining branch issues in Chapter 5.

It gives the definition of a branch of a foundation, which refers to an organization set up by a foundation in its activity area, outside the registered place, to carry out activities on behalf of the foundation and undertake the tasks assigned by the foundation.

It emphasizes that branches do not have legal status, do not have civil subject qualification, cannot carry out activities in their own name, and cannot open independent accounts or engrave official seals. All income and expenditure should be included in the accounts of the Foundation — no other unit, organization or individual account may be used.

The manual also points out that the common type of foundation branch is a special fund, the establishment of which does not need to be filed with the registration management authority. According to Notice No. 2016-9 issued by the State Council, the administrative examination and approval requirement has been canceled for the establishment of branches and representative offices of non-profit social organizations. Foundations can set up and terminate special funds on their own in accordance with their bylaws and internal management systems.

Fundraising is another topic of great concern, and in Chapter 6, the manual gives definitions related to this issue and emphasizes that once a donation is made, the donor no longer has any right to possess, use or dispose of the property. It is prohibited from taking rebates from charitable donations and returning them to the donor or to any individual or organization that helps raise the donation.

In addition to the above content, intellectual property rights, sexual harassment prevention, and labor protection, are also important parts of the manual.

According to Tan Hongbo, deputy secretary general of CFF, to complete the revision of the second edition, they solicited feedback from secretary-level leaders of nearly 600 different foundations. Dozens of NGO practitioners have been involved in the editing and writing of this edition.