Landscape of NPOs in Malaysia
Company Limited By Guarantee – Companies Act 2016 [Act 777]
Charitable Corporation Formation
Societies, organizations, associations – Societies Act 1966 [Act 335]
Constitutional basis registered society
Incorporation of Trustees – Trustees (Incorporation) Act 1952 [Act 258]
Establishment of Trustees Incorporation by founder (associations of person / body corporate)
Trust Company and Labuan Foundation – Labuan Trusts Act 1996 [Act 554] and Labuan Foundation Act 2010 [Act 706]
NPO - Underlying Concept
Legal persons or arrangements or organization
Primarily engages in raising or disbursing funds
Includes charitable, religious, cultural, educational, social or fraternal objectives, or for the carrying out of other type of “good works”
Categories of NPOs Incorporated
Cahritable
Religious
Education
Social
Literary
Scientific
Arts & Culture
Concept of Trust
The trust assets constitute a separate fund and are not a part of the trustee's own estate.
A trust is that it permits the separation of legal ownership and beneficial interest: the trustees become the owners of the trust property as far as third parties are concerned, and the beneficiaries are entitled to expect that the trustees will manage the trust property for their benefit.
The trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed on him by law.
Legal title to the trust assets stands in the name of the trustee, or in the name of another person on behalf of the trustee.
Act 258
Trustees (Incorporation) Act 1952
The trustees of certain bodies or association of persons can be incorporated under the Act.
Trustees Incorporation in Malaysia
Trustees Incorporation in Malaysia is governed by the Trustees Incorporation Act 1952 [Act 258] overseen by the Legal Affairs Division of the Prime Minister’s Department
The “act” stipulates among others, powers of the Minister, liabilities of trustees, revocation of the certificate of incorporation, dissolution, consequences of revocation and other requirements
Application of Trustees for Certificate as a Body Corporate
Trustees may be appointed by any body or association of persons established for any religious, educational, literary, scientific, social or charitable purpose, and such trustees may apply to the Minister for a certificate of registration of the trustees of such body or association of persons as a body corporate.
Upon issuance of the certificate, the trustees shall be incorporated as a body corporate with the name specified in the certificate. This body corporate shall have perpetual succession, possess a common seal, and enjoy the capacity to:
Sue and be sued in its corporate name.
Acquire, purchase, receive, hold, and possess both movable and immovable property.
Dispose of movable and immovable property currently or in the future belonging to or held for the benefit of the body or association of persons by instruments bearing the common seal. Such dispositions may include selling, conveying, assigning, surrendering, yielding up, mortgaging, charging, demising, reassigning, transferring, or otherwise dealing with the property.
These rights and capacities shall be exercised subject to any restrictions or provisions that would apply to the trustees acting without incorporation for the purposes of the body or association of persons.
Particulars in Application for Incorporation
To apply for a certificate under this Act, you must submit a written application containing the specific details listed:
The objects of the body or association of persons, and the rules and regulations of the same, together with the date of, and parties to every deed, will or other instrument, if any, creating, constituting or regulating the same.
A statement and short description of the land, or interest in land, which at the date of application is possessed by, or belonging to, or held on behalf of such body or association of persons.
The names, residences and descriptions of the said trustees of such body
The proposed title of the body corporate, of which title the words “trustees” and “registered” shall form part.
The proposed device of the common seal.
The regulations for the custody and use of the common seal.
This application must be signed by the applicant.
Additional supporting documentation may be requested, such as a statutory declaration or other evidence verifying the information provided in the application. The specific requirements will depend on the nature of your application.
WHO IS WHO IN A TRUST
Founders
Founders = Individuals / group of individuals / organisations
Founders can also be Trustees
Founders are people who contribute funds / ideas / initiatives
Trustees
Conform to the Trust Deed and objectives stated therein
Number of trustees – between 3-15
Malaysian OR Permanent Resident
Trusteeship is non transferable to third party
Changes in Trustees need to be lodged to the Minister
Trustees be appointed by the Board of Trustees
Independent and non independent trustees
Tenure : 3-5 years
Trust fund may be used for administrative expenses
Meetings to be held for a minimum of 2 time in a year
General Duties of a Trust (Incorporated under Act 258)
Perform duties in an honest manner
Ensure objectives are achieved
NPOs well managed
Regular reporting & power of supervision
General rule a trustee sufficiently discharges his duty if he takes in managing trust affairs all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own.
Ensure all transactions are well recorded within reasonable time frame
Promote transparency and ease the referencing process by having all information, i.e donors, beneficiaries
Record keeping includes supporting doc. deem appropriately & in an accordance with relevant laws.
Nomination of Trustees and Filling Up Vacancies
Before the trustees are granted a certificate of incorporation, they must all be effectively appointed in accordance with the body or association's constitution, settlement, or any stipulated conditions or directives.
Any vacancies in the trustees' number must be filled promptly using the same legal means available for appointing new trustees without incorporation, or as otherwise mandated by the aforementioned conditions or directives.
Upon completion of each new appointment, the trustees or their designated representative must certify the appointment.
One month after the end of each year, following the issuance of a certificate of incorporation, the current trustees must file a return. This return must include the names, residences, and descriptions of all trustees as of the end of that year.
Estate to Vest in Body Corporate
The certificate of incorporation shall automatically transfer all property, including movable and immovable assets of any nature, belonging to or held in trust for the body or association of persons, to the newly formed body corporate.
Any person holding stocks, funds, or securities in trust for the body or association of persons must then transfer these assets into the name of the body corporate.
Importantly, all existing covenants and conditions relating to any immovable property, enforceable by or against the trustees before their incorporation, remain fully enforceable after their incorporation. This ensures continuity and legal protection for all involved parties.
Trustees to Keep Accounts and to Render Annual Returns of Accounts
Any incorporated body or association's trustees must keep accurate records of all income and expenses in dedicated books. These records should be entered regularly and reflect the true financial situation of the body or association.
By June 30th of each year, or on another designated date, the trustees of the body or association must prepare and submit the following financial reports:
Income: A detailed account of all income generated from endowments during the previous year (ending December 31st or on another designated date). This should include both the actual income received and any income that should have been received but wasn't.
Finances: A statement of all available funds at the beginning of the year and all income received during the year on behalf of the body or association.
Expenditures: A record of all expenses incurred during the year.
Accounts Payable/Receivable: A comprehensive overview of all outstanding debts owed to or by the body or association, as accurately as possible.
The prescribed accounts must be certified as follows:
Signed by one or more trustees of the body or association.
Audited by the body or association's auditor, if one exists.
The trustees must deliver or transmit a copy of these accounts within fourteen days after the designated date for their completion to the Ministry. This copy should be accessible for inspection by any interested party during reasonable hours. Additionally, individuals may request a copy of the entire account or specific sections for a prescribed fee.
When submitting the prescribed financial accounts to the Ministry for the first time after receiving a certificate of incorporation under this Act, the trustees must also provide a detailed account of all endowments currently held by the body or association. This account should include:
For immovable property not physically possessed: A description of how the property is currently leased or occupied.
For movable property: An overview of how the property is currently invested or utilized, including the names in which any investments are held.
From then on, with each subsequent submission of the financial accounts, the trustees must also provide:
A similar account of any new endowments acquired since the previous submission.
An account of any disposal, encumbrance, or transfer of movable or immovable property belonging to the body or association.
This ensures that the Ministry remains informed about the financial status and assets of the incorporated body or association.
Applications and Certificates to be Stamped
Every application for a certificate of incorporation under this Act, and every such certificate, is subject to a stamp duty of thirty ringgit.
This duty must be paid by having a stamp denoting the payment of thirty ringgit impressed or affixed upon the application or certificate.
How Bestar can Help Trustees Incorporation of Non-Profit Organizations in Malaysia
Bestar offers a comprehensive suite of services that can significantly benefit trustees incorporating non-profit organizations in Malaysia. Here's how:
Incorporation and Registration:
Streamlined incorporation process: Bestar can help you navigate the complex process of incorporating your non-profit organization with the Division of Legal Affairs, Prime Minister's Department. This includes preparing all necessary documents, liaising with authorities, and ensuring compliance with all regulations.
Expert guidance on legal structure: Bestar's legal team can advise you on the most appropriate legal structure for your non-profit organization, whether it be a society, foundation, or association. This ensures your organization operates efficiently and meets all legal requirements.
Tax registration and exemption: Bestar can assist you in registering your non-profit organization for tax exemption with the Inland Revenue Board of Malaysia (IRB). This can significantly reduce your financial burden and allow you to allocate more resources towards your mission.
Governance and Compliance:
Development of governance policies and procedures: Bestar can help you develop effective governance policies and procedures that ensure transparency, accountability, and ethical decision-making within your organization. This builds trust with stakeholders and reduces the risk of internal conflicts or legal issues.
Compliance with legal requirements: Bestar can help you stay compliant with all relevant laws and regulations governing non-profit organizations in Malaysia. This includes annual reporting requirements, financial reporting standards, and ethical fundraising practices.
Training for trustees and staff: Bestar offers comprehensive training programs for trustees and staff of non-profit organizations covering topics such as governance, financial management, fundraising, and compliance. This ensures everyone involved in your organization has the knowledge and skills needed to operate effectively.
Fundraising and Grant Management:
Developing a fundraising strategy: Bestar can help you develop a comprehensive fundraising strategy that aligns with your mission and goals. This includes identifying potential donors, crafting compelling fundraising materials, and implementing effective fundraising campaigns.
Grant proposal writing and management: Bestar's experienced team can help you write compelling grant proposals and manage grants effectively. This increases your chances of securing funding and ensuring grant funds are used efficiently and transparently.
Financial management and reporting: Bestar can assist you with managing your organization's finances effectively, including budgeting, bookkeeping, and financial reporting. This ensures sound financial management and transparency to donors and stakeholders.
Additional Services:
Strategic planning and capacity building: Bestar can help you develop a strategic plan for your non-profit organization to achieve its long-term goals. This includes conducting organizational assessments, identifying key opportunities and challenges, and developing a roadmap for success.
Technology solutions for non-profits: Bestar offers a range of technology solutions specifically designed for non-profit organizations, such as donor management software, project management tools, and online fundraising platforms. These tools can help you streamline your operations, improve efficiency, and enhance your impact.
Benefits of using Bestar:
Reduced administrative burden: Bestar can handle the complex administrative tasks involved in running a non-profit organization, allowing trustees to focus on their core mission.
Increased efficiency and effectiveness: Bestar's expertise and resources can help you operate your organization more efficiently and effectively, achieving greater impact with your limited resources.
Improved compliance and risk management: Bestar's guidance ensures your organization is compliant with all legal requirements, minimizing the risk of penalties or legal disputes.
Enhanced transparency and accountability: By implementing effective governance practices and financial management systems, Bestar helps you build trust with stakeholders and donors.
Greater access to funding: Bestar's expertise in fundraising and grant proposal writing can help you secure the funding your organization needs to achieve its goals.
Overall, Bestar can be a valuable partner for trustees incorporating non-profit organizations in Malaysia. By providing comprehensive and tailored support, Bestar can help your organization operate efficiently, achieve its mission, and make a positive impact on society.