This is an abridged and adapted translation of an article originally appearing in the Charity Times on the 6ht of August 2018. You can see the original here.
On the evening of the 3rd August, the Ministry of Civil Affairs published the “Regulations for the registration management of social organisations (draft to solicit feedback)” (from here on referred to as the Social Organisation Regulations), with the aim of collecting feedback and comments from the nonprofit sector. The deadline for review and feedback is the 1st of September.
Originally the registration of social organisations was regulated by the implementation of three major regulations, covering the three legal forms of social organisation in China: “Foundation management regulations”, “Social groups registration management regulations” and “Citizen run non-enterprise unit registration management regulations”. Compared with these three regulations, what changes does the new draft bring in its wake?
This article identifies 15 major points of discussion, including: 1) there is not a unified definition of social organizations 2) the relationship between the Social Organisation Regulations and the relevant law and regulations is undetermined; 3) social organisations have the common requirements of being non-profit and establishing party organizations; 4) the direct registration of social organisations has a basis in law; 5) the requirements for the founders and leaders of social organisations will be stricter; 6) more standardized regulations on social organisations’ naming; 7) the registration process of social groups has five changes; 8) the financial requirements for foundations to register have six changes; 9) the financial requirements for social service organisations have changed; 10) social organisations are able to set up branch organisations; 11) regulations on wages and welfare levels are often unclear; 12) there is a unified annual reporting system; 13) social organisations should post their information through authorized channels; 14) registration management authorities can inspect social organisations’ accounts; 15) the party building department will be able to review the eligibility of the leaders of social organisations.
1. There is not a unified definition of social organisations
Social Organisation Regulations Article 2:
The social organisations referred to in this law include social groups, foundations and social service organisations.
In general, in order to enact laws and regulations, standardised ideas and targets will be established at the beginning. For example in the beginning of the Charity Law, there is a clear explanations of what charitable activities are.
The Social Organisation Regulations doesn’t directly explain what social organisations are, but it uses lists, pointing out that social organisations include social groups, foundations, social service organisations and then explaining what constitutes social groups, foundations and social services organisations.
2. The relationship between the Social Organisation Regulations and the relevant laws and regulations is undetermined
Social Organisation Regulations Article 3:
When laws and administrative regulations towards social group, foundations and social service organisations include other regulations, implement according to relevant laws and regulations.
The Social Organisations Regulations specify in the third article that “when (….) include other regulations, implement according to relevant laws and regulations.“ It is worth noting that the Charity Law, and the original three major regulations had no such specification.
3. Social organisations have two general requirements
Social Organisations Registration Regulations:
Social organisations cannot take part in profit-makings activities.
Within social organisations, according to the constitution and relevant regulations of the Communist Party of China, Communist Party of China organizations must be established before carrying out activities. Social organisations should provide the necessary requirements for the activities of the Communist Party of China organizations.
In its general rules, “the regulations for the registration of social organisations” explicitly points out the common requirements for social organisations, including the most important two. The first is to be non-profit: this is the long-term basis of social organisations, and can be said to have been emphasised again here. The second is party building. The original three major regulations did not include these requirements, but this is a new requirement that has been put forward over the past few years, and is now formally made explicit in legal form.
4. The direct registration of social organisations has a basis in law
Social Organisation Regulations Article 10:
According to the regulations of this law, organisations who fulfil one of the following can register directly:
1) Chambers of Commerce.
2) Social groups and social service organisations that are involved in research or exchange activities in the natural science or engineering and technology sectors.
3) Charitable and civil society organisations that provide support for the impoverished, help for the needy, support for the elderly, support of orphans, medical aid, support for the disabled, disaster relief, support for doctors or educational support.
4) Social service organisations and social groups that provide community service support and similar work in order to fulfil the life needs of urban and rural communities.
Organisations that do not fulfil the preceding requirements, and Chambers of Commerces and trade associations required to have professional supervisory units according to the administrative and national law and relevant regulations, must obtain examination and approval from their professional supervisory units, and then register according to this regulation.
The direct registration of four types of social organisations has been trialled since 2012, and has been implemented in many places. Furthermore it has also been specified in many central, ministerial documents, but as direct registration is not mentioned in the three major regulations, the actions in different locations have not been uniform. The Social Organisations Regulations has made a clarification and given legal support to the direct registration of the four types of organisations.
Of course, outside of the direct registration of these four types of organisation, professional supervisory units (PSU) still exist, and successful registration is still subject to examination and approval from the corresponding PSU.
5. Stricter requirements for social organisations’ founders and leaders
Social Organisation Regulations Article 13:
Those with any of the following cannot be the founder or leader of a social organisation:
1. Without or lacking ability for civil conduct
2. Currently or previously serving punishment for crimes or having been deprived of political rights
3. Five years have not passed since penalties from intentional crime were completed
4. Five years have not passed since the registration certificate of an organisation of which they were the leader has been revoked or banned
5. Has been entered into the list of those with serious breaches of faith
The Social Organisation Regulations describe five types of behaviour that would result in not being able to found or lead a social organisation, which in comparison to the three major regulations is much stricter.
For social groups and citizen-run non-enterprise units, the important factors in the original regulations were “the leader is currently or previously being penalised or being deprived of political rights or does not have the ability for civil conduct”, but the Social Organisation Regulations has added three new conditions (3, 4 and 5).
In regards to foundations, the original regulations were stricter than they were for social groups and citizen-run non-enterprise units. The new Social Organisations Regulations only adds one condition, “has been entered into the list of those with serious breach of faith”.
From here on out, in order to become a founder or leader of a social organisation, the standards are no doubt higher.
6. A more standardized regulation on naming
The three original major regulations only specified how social groups should name themselves. Article fourteen of the new Social Organization Regulations requires all foundations, social groups, and citizen-run non-enterprise units to match their names with the geographic location of the departments in which they registered. It is noteworthy that organizations whose names include “China”, “national”, and “Chinese” (meaning the organization is registered with the State Council) are eligible for public fundraising from the day they register.
7. Five changes in the registration process of social groups
Compared to the original Social Group Regulations, the new regulations bring in five major changes: 1) urban-rural community service groups are added; 2) requirements on establishing party branches are added; 3) social organizations do not need to apply to prepare for establishment before applying to register anymore; 4) a hearing is now required for the registration of some social groups; 5) below the national level, it is now possible for more than one organization to register with the same mission.
8. Six changes in the financial requirements for foundations to register
1) There is no more distinction between public fundraising foundations and non-public fundraising foundations; 2) registration can only be issued on the provincial or higher level; 3) foundations registered with the Ministry of Civil Affairs should primarily aim at funding other organizations; 4) the minimum registration fund on the provincial level is 8 million RMB, while on the national level the minimum is 60 million RMB; 5) foundations are specified as charity organizations; 6) the registration certificate will include not only the name of the legal representative but also the directors.
9. Changes in the financial requirements for social service organizations
The minimum registration fund on the national level for social service organizations (which in the old regulations are known as citizen-run non-enterprise units) is 10 million RMB. Standards for registration on lower levels can be decided by the registration management departments.
10. Social organizations are now allowed to establish branch organizations
The three original major regulations do not allow social service organizations (citizen-run non-enterprise units) to have branch organizations. Now, however, all social groups, foundations, and social service organizations are allowed to have branch organizations based on their operational and financial needs. Nevertheless, these branch organizations cannot have independent legal status.
11. Regulations on wage levels and welfare have become unclear
According to the three original regulations, foundations cannot spend over 10% of annual expenditure on staff wage and welfare. The wage and welfare levels of social groups should be in alignment with those of public institutions. No related regulations existed for citizen-run non-enterprise units.
The new regulations require all social organizations to control wage expenditure from outweighing “the regulated proportion”, without pointing out what exactly is the appropriate proportion. Even though the Charity Law contains specific standards for the annual expenditure of charity organizations, only a small portion of social organizations are charity organizations.
12. All organizations will abide by the annual reporting system
The three original major regulations used to require all foundations, social groups, and citizen-run non-enterprise units to submit a report during annual inspections. The registration management agency would then decide whether the organization is qualified to pass the inspection.
Similar to the Charity Law, the new Social Organizations Regulations replace the annual inspections with an annual reporting system, which requests each organization to disclose its annual report to the public every year before May 31st. Organizations that do not do so consecutively for two years or for three times within five years will have their registration certificate revoked.
13. Social organizations should post their information through authorized channels
The new regulations ask registration management agencies to provide a unified information platform for all registered social organizations to post their information and inform the public. Information that must be posted includes branch organizations, representative organizations, annual reports, the use of donations, and other information required by the State Council. Failure to post these pieces of information will result in the revocation of the organization’s qualification for government purchased services.
14. Registration management agencies now have access to inspect social organizations’ bank accounts
The new regulations allow registration management departments to inspect social organizations that violate the regulations by 1) talking to the person in charge, 2) inspecting the organization’s office, 3) inquiring with related organizations and individuals, 4) reviewing related paperwork, or 5) checking the organizations’ bank accounts (with the authorization of the government on the same level).
15. The person in charge will go through the party building departments’ qualification review
Since social organizations are required to establish a party branch under the new regulations, the person in charge of the organization will now face a qualification review from the party. How this qualification will be carried out and to what extent it will affect social organizations’ registration remain unclear though.