Clear hurdles in way of international NGOs

Kenya is the undisputed darling of international charitable organisations in East African region. Yet the law governing their status is almost as murky as the law of the jungle.

The Non-Governmental Organisations Coordination Act of 1990 creates two categories: national and international NGOs. But that is as far as it goes.

Either by design or poor drafting, the Act makes no further distinction between the two categories in its substantive provisions.

An international NGO is defined in the Act as having the original incorporation in one or more countries outside Kenya but operating within the country under a certificate of registration.

On the other hand, a national NGO is defined as one which is registered exclusively in Kenya with authority to operate within the country.

By dint of these definitions, the law acknowledges that the two categories are different.

It is therefore curious that the Act makes no specific provisions to govern each of them so as to preserve their distinctive character.

PROHIBIT

Kenyan law treats an international NGO registered in Kenya as a separate and distinct from its parent organisation.

In contrast, a branch of a foreign company registered under the Companies Act is deemed to be merely a local office rather than a separate legal entity from the foreign company.

It is evident from the definition of an international NGO that upon registration in Kenya such entity retains its character as a foreign organisation — akin to a branch of a foreign company under the Companies Act.

In essence, it is the local chapter of the parent organisation. Unfortunately, this is not how the regulator views international NGOs.

Apart from refusing to acknowledge that an international NGO registered is practically the same organisation as the parent, the board categorically prohibits any reference to an affiliation between the international NGO and its parent organisation.

CONTROL

Any mention of such affiliation in the constitution of the international NGO has to be deleted before the application for registration can proceed.

The effect of this requirement is to obliterate the difference between an international NGO and a national one.

An international NGO is intended to operate as an appendage of its foreign parent organisation.

It should therefore not be coerced to deny or conceal such a legitimate relationship.

The parent organisation should be able to exercise direct control of the international NGO and dictate its policy as a matter of right since, in most cases, it is the sole donor and also manages the Kenyan entity through secondment of key personnel.

The justification normally given by the regulator is that no NGO registered in Kenya should be answerable to a foreign organisation which is not checked by the NGO Coordination Board.

CHALLENGES

This however is like killing a fly with a sledge hammer. The board retains the power to regulate all NGOs in Kenya and to impose sanctions for any misfeasance, including de-registering it in the event of non-compliance.

The “no affiliation” policy presents a myriad of operational challenges to the concerned organisations.

Firstly, the parent organisation loses the essential nexus with its Kenyan chapter and, with it, an effective means to control the activities of an entity created for the sole purpose of advancing the objectives of the foreign organisation in Kenya.

Secondly, the governance structure of most global organisations does not envisage the creation of separate legal entities across the world or autonomy in the governance of such entities.

Decisions made at the headquarters are intended to be implemented by the international NGO in accordance with the terms of the funding agreements signed between the parent organisation and donors.

LEADERSHIP

Thirdly, while it is reasonable to require international NGOs to have a Kenyan component in their boards of directors for guidance on local issues and ease of accountability to the regulator, the parent organisation should be allowed to run the affairs of the international NGO through its global board.

Many global organisations struggle with the idea of having to scout for virtual strangers as local directors.

Under the current policy, a Kenyan must hold one of the key positions of chairman or treasurer.

The other equally vexing issue for international NGOs in Kenya is the confusion around the status of NGOs operating under a certificate of exemption.

The Act empowers the Cabinet secretary responsible for NGOs (Interior) to exempt any such organisation, upon application, from registration under the Act.

What is not clear is whether the exempted NGO has any ongoing compliance obligations under the Act.

The law, unfortunately, provides no guidance in this regard but the NGOs board has filled the void with a policy.

TAX RETURNS

The majority of international NGOs issued with certificates of exemption 20 to 30 years ago have operated on the assumption that being exempt means they are not required to comply with any of the provisions of the Act. They have therefore not filed annual returns to date.

The NGOs board is now demanding that such organisations should comply fully with all the provisions of the Act, which begs the question: what then is the value of the certificate of exemption?

In many cases, the requirement for compliance is impractical, owing to the unavailability of records going back so many years.

There are substantial fees and fines payable for late filing of annual returns which currently stand at Sh25,000 per year and a fine of a similar amount for each year of default.

The NGOs board should rethink its approach in dealing with the above issues in order to create a more predictable and conducive operating environment for international NGOs, which are a key source of foreign exchange.

Mr Maema is a senior partner at Iseme, Kamau & Maema Advocates. [email protected]