What is a Non Profit Organisation?
A non profit organisation is basically a group of people with a common objective, it is a democratic organisation where the activities are non profitable and it is independent from the State, political parties and companies. It is regulated by the constitutional law 1/2002 of the 22nd March. As there are no profits, any benefits that are received cannot be divided between the partners; however there can be economic surpluses at the end of the year, there can be work contracts within the association and there can be economic activities which may generate an economic surplus. Obviously these surpluses should be reinvested to help achieve the aims of the organisation. These associations can be differentiated from Federations which are run by legal entities and these differences will be specified in the company statutes or articles of association.
The statutes are the basic rules for the correct functioning of the organisation and are binding for the company officers. The articles of association contain the regulations set up by the partners and the obligatory information such as the name and address of the organisation, their activities and the length of time the organisation is to be constituted for. They will also contain the requirements for admission and expulsion of company officers, obligations of the company officers and the criteria to guarantee the correct workings of the organisation. The statues should also show who the board members are and their functions, how they are to be elected and substituted, how long each position is held for, how their decisions are adopted and implemented, along with the administrative and accountancy system, the initial capital invested and the disposal of assets where needed which will not undermine the non profit organisation.
The Organisation should be made up of at least three people and the first thing to do is draw up the deeds to constitute the organisation then the statutes are drawn up at the Notary Public’s office. Once this is done one of the founding members has to complete the application for the statutes to be included in the registry and pay the taxes, and then registered at the commercial registry. The organisation has to have a Fiscal number which is applied for from the Ministry of the Interior and the books have to be legalised.
Article 11 of the Constitutional Law of 1/2002 of 22nd March regulates the administrative bodies, how often there should be a General meeting, how many votes are needed to make any fundamental changes within the organisation etc., and the functions of the Management Committee. Once the organisation has been set up, it is important that the fiscal obligations are adhered to. The books need to be legalised at the commercial registry. These books contain the basic day to day running of the organisation and are the legal reference for the partners and any third parties; they should always be kept up to date. The information in these books is very important and shows the agreements made by the organisation and where the money comes from and where it goes to. Basically there are three books Minute Book (Libro de Actas), Company Officers Book (Libro de Socios) and Accountancy Books (Libros de Contabilidad). The minutes should contain all the data regarding when the meetings take place, who is present at the meeting, the agenda, the agreements made during the meeting and should be signed by the Secretary and the President. The minutes of the previous meeting are read at the beginning of each meeting. The company officers book shows the registry of the partners, of when they join and when they leave the organisation. The accountancy books have to comply with article 14 of the Constitutional Law 1/2002 of 22nd March, which is qualified in the third additional provision of the Royal Decree 1497/2003 of 28th November. At least two of the following have to be met at the year-end:
- the total assets do not exceed 150,000 euros.
- the annual revenue is less than 150,000 euros.
- the average number of employees during the year does not exceed 5.
Organisations can be declared as ‘Public Interest’ as per Article 32 of Constitutional Law. This allows the organisation fiscal benefits but it is necessary to comply with certain minimum requisites. These include being an organisation whose activity promotes welfare, education, development, environmental or voluntary matters that tend to be of general interest. The activity should not be solely beneficial to its members and the benefits should not be distributed among the partners. The board members should perform their work free of charge and the organisation should have the appropriate resources to be able to comply with the statutory objectives. The application for the fiscal benefits can only be made after two years of continuous work of the organisation and as long as it complies with the previously mentioned requisites.
There are certain declarations that need to be presented by public interest organisations every year. The previous year’s accounts have to be presented along with a report of the activities that have taken place.
Every year before the 1st July, public interest organisations have to present to the Ministry of the Interior the verification of the constitution of the organisation and the inscription in the corresponding Registry.
The donations received from private individuals and companies have to be declared, and the data of the donor and the amount have to be included. The declaration is for the Treasury and there is no additional payment of any kind. These declarations have to be presented between the 1st and 30th January in a form 182, ‘Declaración de Donaciones Recibidas’ referring to the previous year.