Source: HRO.org (info), 28/01/12

· Freedom of Association  · Moscow city & Moscow region

Olga Sviridenkova, head of the legal non-profit partnership Lawyers for Civic Society: “The new Civil Code is a blow against non-profit organizations.”

A working group was due to present the draft of a revised Civil Code to the President by 1 February. The draft includes significant changes to legal regulations on the activities of non-profit organizations, including human rights organizations. The provisions relating to non-profits, in particular, have given rise to a peculiar situation. Until 19 January it was assumed that the article regulating to the capital requirement for an organization had been approved by a Ministry of Justice working group. Now suddenly there is talk of substantial changes, and even some previously approved amendments include a number of contradictions and inaccuracies:

Most significantly, the draft contains a new provision obliging non-profit organizations engaged in income-generating activities to set aside assets equivalent to at least the minimum statutory capital envisaged for limited liability companies.

This provision has already caused serious concern within the non-profit community, as the existing legislation sets the amount at 10,000 roubles.

Now that there is talk of increasing this amount to 300,000 roubles it is becoming clear that many non-profit organizations will lose the ability to earn independent income.

Currently a non-profit is permitted to engage only in activities that are related to and serve the achievement of the goals for which it has been established. This rule also applies to income-generating activities. The income cannot be shared among the non-profit’s participants or members, but can be used exclusively for the purpose of achieving the statutory goals.

The number of forms in which non-profits can be legally organised is being reduced. This is something experts and NGO lawyers have long been calling for. At the same time (currently being reviewed are the fourth version of the draft federal law 'On introducing amendments to Parts 1, 2, 3 and 4 of the Russian Federation's Civil Codes as well as to individual legislative acts of the Russian Federation’) the rationale for reducing and redistributing the types and categories of non-profits remains unclear.

For example, ‘autonomous non-profit organisations’ are included by the drafters among non-profits that fall within the organisational category of ‘foundations’.

On the other hand, religious organisations, which are regarded as membership organisations by the current legislation (in the new version of the Civil Code they are included among corporate organisations) have for some reason been labelled unitary organisations, whose key characteristic is lack of membership.

The draft Civil Code contains a further contradiction with regard to monies that non-profit organisations may earn.

In various provisions of the code two different terms are employed: 'income-generating activities' and 'enterpreneurial activities'. This approach suggests that the drafters assign different meanings to the content of these terms (by contrast, wherever the current legislation refers to non-profits the two terms are often divided by a comma, suggesting that they are treated as synonymous) without providing a binding definition.

If the draft is tabled and approved by the State Duma, this approach is certain to result in conflicting applications of the law.

What we are seeing is the resurgence of norms that have earlier been excluded from legislation on the grounds that they can be interpreted in various ways, and give ground to problems in the application of the law.

One example is the provision that allows the authorities to deny registration to a non-profit organisation if its statute contradicts moral norms.

What will be the consequences? Participants of the round table on the 'Impact of future amendments to the Civil Code on activities of non-profit organisations, including charities', held recently by the Public Chamber, pointed out that the number of amendments that will have a positive and negative impact is roughly equal.

But even some of the positive innovations envisaged by the draft bill will require non-profits to make significant changes to the way they usually carry out their activities.

The negative aspects, on the other hand, will not result in a unification and consolidation of legislation, including the legislation regulating the activities of non-profits, which is the official goal of the reform.

This might bring the development of civil society of Russia to a complete halt.

Source: Slon