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Government employees as board members of non-profit entities

We often come across instances where government employees who are involved  or wish to be involved (in a volunteer capacity) as board members of an NGO, are informed that they are not permitted to do so.
 
The first thing to be noted, here, is that anyone who is engaged as a full-time employee with any entity, government or not, is required to devote their full time and attention during business hours to the work for which they are employed. So a full-time employee who wishes to serve on the board of a non-profit must make sure that the meetings take place after hours, or must take leave in order to attend meetings. They will also have to be sure, in terms of the fiduciary duty that they owe to their employer, that there is no material conflict of interests between their service on the board and their duty as an employee, such as would impact upon their ability to carry out their employment duties.
 
The central piece of legislation dealing with the question of government employees being directors of companies is the Public Service Act, 1994 (Act No. 103 of 1994).

Relevant extracts are as follows:

  • Section 2(1) “…this Act shall apply to or in respect of officers and employees whether they are employed within or outside the Republic, and in respect of persons who were employed in the public service or who are to be employed in the public service.”
  • Section 30(1)  “No employee shall perform or engage himself or herself to perform remunerative work outside his or her employment in the relevant department, except with the written permission of the executive authority of the department.” ( Department means a national department, a national government component, the Office of a Premier, a provincial department or a provincial government component)
  • Regulation 2016, Chapter 2 of the Act deals with public servant conduct, financial disclosure, anti-corruption and ethics management and in particular
    • part 13 (b) on ethical conduct states that an employee shall: “not engage in any transaction or action that is in conflict with or infringes on the execution of his or her official duties
    • And part 13(c) says an employee shall: “not conduct any business with any organ of state or be a director of a public or private company conducting business with an organ of state, unless such employee is in an official capacity a director of a company listed in schedule 2 and 3 of the Public Finance Management Act”(ie a State Owned Entity-SOE). 

Section 30(1) echoes what is already in our common law around the duty to your employer as an employee.  And it prohibits government employees from doing any work for remuneration outside of government, except with express permission. Volunteering is permitted.

Crucially part 13(c) specifically refers to a prohibition on being a director of a public or a private company.  A non-profit company is neither a public nor a private company, so falls outside of this prohibition.  (The previous iteration of the non-profit company, which was the section 21 company was a public company as defined in the 1973 Companies Act, and there may be those who do not understand the shift which occurred with the new Companies Act.

An important note  to be made here is that the Public Service Act makes no direct mention of employees being trustees of trusts or committee members of voluntary associations. As trusts can be family or business trusts, this is a gap in the law which should be filled. The exclusion of voluntary associations, however, which are non-profits, is in line with the exclusion of non-profit companies from the list in 13(c).

From a strictly legal perspective there is no prohibition on a government employee serving in a voluntary capacity (i.e. for no pay) as the director of a non-profit company (or trustee of a trust or committee member of a voluntary association). However, there may be government departments which have internal protocols which are stricter than these provisions or which are based upon a misunderstanding of the law and the nature of a non-profit company.

Nicole Copley

Nicole has consulted to the NGO sector since 1993. She is an admitted attorney (non-practising), has her Masters in the tax exemption laws and is a Master Tax Practitioner. Nicole developed her drafting skills while working as a business lawyer, and she has a pragmatic problem-solving approach to all the work she does. Her depth and breadth of experience over many years and her work with government and a wide range of clients, give her useful perspective and insight. Nicole also lectures and trains on various topics of importance to the NGO sector. She is author of ‘NGO Matters: A practical legal guide to starting up’, and publisher of the series of NGO Matters handbooks.

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