Legal issues concerning NGO operation: General provisions

definitions of terms, it is not surprising that Ukrainian society and state authorities do not have a clear understanding of the role of foundations and associations. Between legal complications and the country’s overly complex and ambiguous tax environment, NGOs in Ukraine are suffering. Taking measures to improve the legislative environment must become a long-term focus of rural NGO advocacy initiatives throughout Ukraine.

Given the problems stated above, what is the actual situation for rural Ukrainian NGOs? Our research, which is similar to other surveys conducted by international projects working in the rural sector, has revealed some alarming results. Rural NGOs are not satisfied with the current legal standards regulating their work. They identify the contradictions and legal uncertainties as problematic and difficult to comprehend. Yet nearly 70 percent of respondents rely on the press for updated legal information, because they live in remote communities without easy access to professional legal advice. Only 18 percent have the resources to consult lawyers to keep them abreast of the legal issues that affect their work. When in need of legal advice, the vast majority of rural NGOs depend upon local or executive government officials, whereas nearly 30 percent receive no help whatsoever. Respondents also confirmed that the current legislation impedes NGO development, particularly tax legislation, which nearly 75 percent felt was an issue that must be resolved if their work is to continue.

It is difficult to imagine how rural NGOs can sustain themselves without sufficient access to information or support from readily available advisory networks. This has been identified as a pressing issue for those working in the sector; they have expressed an urgent need for direct access to advisors who assist them with development concerns.¹⁵ However, even with Internet access, NGO legal advisory services are slow in posting up-to-date information, highlighting any changes, and providing analysis on new legislation.¹⁶

system are especially problematic for rural NGOs, as they have difficulties in accessing the relevant authorities and gathering information that will assist them in their work.

NGOs are responsible to many bodies including:

• registration authorities, who ensure that an NGO adheres to its statutes;

• tax authorities, who ensure compliance with financial reporting standards, requiring monthly, quarterly, and semi-annual financial reports—even if an organization does not engage in financial activity;

• judicial authorities, who ensure compliance with the law.

NGOs must also report to the Pension Fund, Social Insurance Fund and Employ-ment Fund and will be fined if these agency deadlines are not met.

Box 4: Registered NGOs in Ukraine Possess the Following Rights as Legal Entities

• to engage in civil and legal relationships;

• to acquire property and non-property;

• to appear as a party before the court;

• to establish other legal entities;

• to hire staff and perform the activities delineated in the NGO’s statutes;

• to enter into contracts with other legal entities;

• to perform bank transactions.

Clearly, the regulations and procedures noted above create obstacles for rural NGOs who do not have access to advisory services and up-to-date legal information. Their limited revenues and small number of staff also make it difficult to complete simple administrative tasks. Simplifying and reducing redundant procedures would create a much more favorable environment for the sustainability of rural NGOs.

One proactive response to this issue has been implemented in the Dontesk region.

The NGO, “Donetsk Agricultural Development,” has taken the initiative to open branch offices throughout villages in the oblast, in order to assist rural communities in establishing local NGOs. By so doing, the main office circumvents the bureaucracy of NGO registration procedures, given that branches can be established simply and efficiently, and within a day. The experienced main office also manages all the adminis-tration, including financial, legal, and reporting obligations, freeing the branch offices from these onerous tasks. Once the main office has succeeded in winning grants, it can easily disperse this income among the branches. What results is the development of a community of NGOs, with an immediate network and the capacity to share expertise, opportunities, and risks.²⁰

2.2.1.1 New legislation (came into force January 1, 2004)

Ukraine has recently entered into a self-governing civil society.²¹ Our research identifies the following issues, which have arisen from these new laws (see Table 1.):

Table 1.

Issues, Advantages, and Disadvantages for NGOs

Issue Advantages Disadvantages

1. According to the new Civil Code, associations are now divided into two categories:

entrepreneurial and non-entrepreneurial.

• Article 86 of the Code permits non-entrepreneurial associations to conduct entrepreneurial activities.

• There is no conceptual threat to the development of the third sector under the new Civil Code;

however, some unforeseen problems could arise once NGOs have adopted special legislation that will regulate the provisions of the Code.

2. The new Civil Code of Ukraine has provision for foundations and

non-membership based institutions.

Although there is still no legal definition of “foundation” in the Code, it does define an

“establishment” (“organiza-tion”), which is very similar in meaning to “foundation.”

• Foundations do not have fixed memberships and are new to the Ukrainian third sector.

• Both legal and non-legal persons are now allowed to establish associations.

• Problems may arise when the new Civil Code and the new Economic Code are concurrently implemented, since various articles contradict with one another.

3. Beginning July 2004, NGOs must be registered with the State Registrar of Legal Entities and Natural Persons-Entrepreneurs. This requires a fundamental reform to the current national system for the registration of legal entities (including NGOs).

• A centralized registry will assist the NGO community.

• Public access to the registry is not yet defined.

• If it is not an open registry, therefore it may become an instrument of state control.

4. The Ukrainian law “On social services” defines the legal and organizational basis for providing social services to persons who are experiencing difficulties and in need of outside help.

• Local governments are now able to enter into contracts with NGOs to finance the provision of social services. Central and local government authorities are responsible for regulating the funding, volume, and quality of the provision of these social services.

• NGOs must obtain a special license to provide social services. This is a new regulation that will involve bureaucracy and fees and will impede the implementation of the program. This could also provide another means of government control and patronage.

As a result of the above-cited revisions, some of the most significant outcomes for Rural NGOs include:

• Challenge: They will have to re-register as of July 2004, and include the term

“association” or “establishment” in their title. This re-registration process will be time consuming and the fees will pose a problem.

• Challenge: It is unforeseeable how the government will implement any changes, partly because there is a considerable amount of ambiguity in the new regula-tions. To date, procedures are undefined, and given past experience, information will be difficult to access, particularly for rural NGOs.

• Opportunity: All NGOs now have the option to participate in the development of regulatory policies for economic activity.

• Opportunity: One positive achievement of the law “On social services” is that it defines the term “volunteer” as it relates to Ukrainian legislation. According to Article 1 of this law, a volunteer is a private person who voluntarily/freely con-ducts charitable, nonprofit motivated activity that is beneficial to society.²²