Comments of ECNL on “Associations and Institutions” Draft Law (October 2014)

i 5 November, 2014 No Comments

    Some issues related to the

    (Version from October 2014)

    European Center for Not-for-Profit Law
    Luben Panov
    Program Director

    I have identified some issues with regard to the draft law which raise concerns. Some of these have already been identified in the comments provided to the draft law last year. For clarity purposes I have included them again here. The list is based on the structure of the law and is not organized based on importance.

    1. The draft again requires at least 15 people to form an association (called society in the draft). This is an unnecessarily heavy burden and good practice is that founders are 2 or 3 persons. Moreover, in the article related to federations, only 2 entities can establish a federation.

    2. Art. 3 states that the right to establish an association is vested only to people that “legally reside” in Cyprus. This is contradictory to the freedom of association according to the European Convention of Human Rights which states that everyone on the territory of a signatory of the ECHR enjoys this freedom.

    3. The sanctions under art. 4, para 2 seem to be very harsh especially with regard to members, who may have no role in the exercise of the unlawful activities which can lead to termination of the organization. In general, the purpose for creation of an NGO as a separate legal entity is to limit the liability of the founders.

    4. Art. 6 limits the right of convicted people to freedom of association which contradicts the European standards. While it may be reasonable to limit the possibility of people convicted for fraud to participate in the management of an organization, it is a violation of the freedom of association to prohibit convicted people to found an association. Why shouldn’t there be an association of the people convicted of financial crimes, for example?

    5. Art. 8 continues to provide a very long deadline for registration – 3 months with the possibility to extend that with 1 more month. This is too long compared to good practices as registration of companies for example is a speedy process which in many countries is already a matter of days. I am not sure what the deadline for registering a company in Cyprus is, but that can be used as an argument.

    6. Art. 11 – the need to register members of the association – such a requirement should be there only in case this is needed to show the existence of a quorum, etc. I am not sure if there is an international practice with regard to that. In Bulgaria they do not require the list as such but when providing documents for initial registration, you submit the list of founders and then you submit the list of people present at general assemblies (when they make decisions that need to be registered).

    7. There is no deadline for registration of amendments in the statutes. It should be good to have a deadline there as well (but a reasonable one – not like the registration deadline).

    8. I am not quite sure but to me it seems there is some contradiction between art. 16 which says that membership cannot be represented (which sounds to me as if you cannot authorize anyone to vote instead of you) and art. 22 which says that each member cannot be authorized to represent more than one other member. I also think members should be able to authorize non-members as well (although the limitation of not representing more than 1 member might be reasonable) but I would be happy to hear the opinion of others on that as well.

    9. Art. 25 which relates to dissolution of associations gives the right of the Registry to request dissolution if the object of the organization is achieved. I suppose this should be an internal decision of the organization itself. Moreover, I believe in each of the cases when the Court starts the dissolution procedure, it should give the organization a period of time to remedy the problem before moving to dissolution e.g. if the organization is pursuing an objective different from the one written in its statutes – the court could give sufficient time to the organization to either end that or change its statutory purposes.

    10. In art. 33, para 2 the Attorney General has the power to remove convicted members of the administration of an institution. It is not clear to me whether in Greek convicted is in the meaning of a person charged with a crime or a person already sentenced. Moreover, while the power to remove a person is clear because people sentenced with a crime of dishonesty cannot be on the Board of an organization, the texts speaks also of “replacing” the problematic member which means appointing a new person instead. This should be done according the statute of the respective organization and should not be within the powers of the Attorney General, in my opinion.

    11. Similarly, in art. 37, para 12 the Court is vested with the power to appoint new members of the administration of an institution. There could rather be a deadline in which the administration itself (following the statutory provisions) appoints new members of the administration and only if this does not happen within a certain period of time, could the Court do that.

    12. Art. 38 vests the court with substantial power in the management of an institution which is contrary to the court’s role of an arbiter or an instance of last resort (when the organization cannot make its own decisions).

    13. Similarly in art. 43 the Registrar is vested with the power to “approve the sale or other disposal or alienation of immovable property belonging to an institution, if convinced that such sale, disposal or alienation is for the benefit of the institution”.

    14. Art. 48 gives the rules on what should happen to the property of an institution after its termination. This article, however, does not clearly state what is the sequence of making that decision e.g. if the statutes determine who will be the recipient, then the registrar does not have any power to determine the recipient. Or maybe the Greek version is clear on the sequence in which this decision is taken?

    15. The regulation of federations is not clear – is a federation a union of two similar types of legal entities or there could be a federation of a company and a society, for example. Moreover, why is the number of founders of a federation substantially lower than the number of founders for associations (2 vs. 15)? I do not want that it is increased to 15 but would rather suggest decreasing to 2 the number of founders of a society .

    16. Art. 51, para 2 – the principle of “innocent until proven guilty” is violated here. The Registrar is given the power to replace a member of the administration if criminal charges are pressed against that person. This should not be possible until the person is finally sentenced. Otherwise, it would be very easy for the government to press charges and then replace inconvenient NGO leaders.

    17. Art. 53 again provides for the possibility for the NGO to pay for an audit carried out by the State Audit Office, provided such audit was justified. Leaving aside the ambiguity of the term “justified audit”, if such a text remains the State Audit Office would be forced to find violations even in cases when there are none or interpret different cases not in the NGO benefit, just to justify its involvement and collect money from the NGO.

    18. Art. 54, para 2 (d) continues to provide the possibility for the government, through a Regulation, to determine possible penalties for violation of the law, including imprisonment.