The International Journal
of Not-for-Profit Law

Volume 3, Issue 3, March 2001

Yemen

Yemen Enacts New Law Governing Associations and Foundations

By Theodore Nkwenti, ICNL Legal Intern

The government of Yemen recently passed into law a much-needed legislation (Law No.1 for the Year 2001) governing associations and foundations. The law is in keeping with Article 57 of the Yemeni Constitution which provides for freedom of association The law provides a legal framework for NGOs which until now were governed by a law on “Cooperative Associations” enacted in 1963. Associations and foundations established under the former law have one year to adjust their situation in conformity with the new law. There are approximately 2,800 NGOs in Yemen today,[1] and it is expected that this law will finally guarantee Yemenis the freedom to organize and belong to associations without the threat of government harassment.

Summary of the Law

Objectives

Essentially, the law seeks to encourage associations and foundations to identify and participate in social and economic development projects. It also seeks to foster civil society and strengthen social solidarity through democratic practices. Furthermore, the law seeks to simplify the procedures for establishing associations and to guarantee associations and foundations the freedom to carry out their activities pursuant to the Yemeni Constitution and consistent with the values of a Muslim civil society. Above all, the law seeks to enhance social solidarity within society by expanding the scope of charitable and goodwill activities.

Scope of activities

Associations can be formed for the common benefit of a specific social group or for public benefit. An association must have 21 persons at the time of application and 41 at the constituent meeting. Foundations can be formed by one or more natural or legal persons but only for a public benefit purpose. “Public benefit” is not defined. An association or a foundation may also engage in any trade or business activity permitted by law if the organization serves a public benefit, there is no direct or indirect distribution of profits, and the activities do not constitute any speculation or unsecured financial risk. Furthermore, the law prohibits organizations from engaging in speculative activities and from risks that may jeopardize their financial situation.

Creation and Registration

An organization shall file a written application, a copy of its letters of association, and its by-laws with the Ministry of Pensions and Social Affairs to gain legal status. The Ministry has a maximum of one month to process applications, and registered organizations shall be published in a national official registry. The Ministry shall also keep an open record of all registered associations and foundations as well as registration procedures. Furthermore, the Ministry has ten days to notify an association or a foundation, in writing, the reason for its rejection. Meanwhile, the association or foundation has sixty days to challenge the decision in court.

Taxes

The law exempts organizations associations and foundations from income taxation for all the profits they earn. It further exempts them from custom duties for the goods they import and the gifts and grants they receive from abroad. In addition, the law allows them 50% tariff reduction in electricity and water consumption. The law, however, provides that associations and foundations which acquire taxable assets or assets subject to custom duty shall pay the applicable tax or duty if they dispose of them within five years.

Reporting, Supervision, and Enforcement

For purposes of accountability, the law requires associations and foundations to keep complete and accurate records of their transactions in accordance with standard accounting principles. It further requires them to comply strictly with the rules, regulations and by-laws adopted by the General Assembly or the Board of Directors.

Termination and Liquidation

An association may be voluntarily dissolved by a two-thirds majority of the General Assembly. The Ministry may also petition the court to terminate an association or a foundation when it has seriously violated any provision of this law. However, before filing a petition to terminate an association or a foundation, the Ministry must give that organization at least three notices within a six-month period to cure the violation. A termination shall only go in to effect after a court ruling.

Mergers and Divisions

Associations and foundations with similar objectives may decide to merge following a vote of two thirds majority of their General Assemblies or founders of the foundation. Similarly, associations and foundations may also decide to break up. When associations or foundations merge or break up, the law of contracts shall govern the transfer of obligations and assets to the new organization

Foreign associations and foundations and foreign source of funds

Foreign associations and foundations may also register to set up offices in the Republic of Yemen. Similarly, citizens of foreign countries are also allowed to set up associations and foundations that may engage in cultural, sports and social functions provided their objectives do not violate the Yemeni Constitution or Islamic values. Associations and foundations may, with the knowledge of the Ministry, obtain financial assistance from any foreign person or entity, and any books that are not in conflict with Islamic values. The Ministry must give its approval, however, before an association or foundation can undertake an activity at the request or assignment of any foreign person.

Criminal provisions

The law provides that anyone who fraudulently engages in any transaction, inappropriately uses the funds of an association of a foundation, continues the activities of an association or foundation after its termination, or improperly distributes the assets of an association or a foundation may be imprisoned for up to one year or or fined up to YR 100,000.. Similarly, anyone who permits non members to participate in discussions of the General Assembly without the approval of the Board of Directors, improperly collects funds from the public, or interferes with the activities of an association or a foundation may be imprisoned for up to six months or pay a fine of up to YR 50,000.

Comments

The new Yemeni Law on Associations and Foundations has many good provisions and in many ways is the most progressive NGO law in the Arab world. For example, allowing associations and foundations to engage in economic activities and exempting them from income tax and customs duties will go a long way towards permitting financial sustainability for Yemeni NGOs. The provision for default registration if the Ministry delays action on an application, the requirement that the Ministry must state its reasons for denying registration, and the fact that a refusal to register or any other adverse action may be appealed to a court are all desirable and progressive provisions, as is the provision for a public registry. The provisions affecting internal governance and accountability are quite good, though much will depend on how they are implemented. The provisions permitting involuntary termination only by a court and after repeated notices and opportunity to correct are highly laudable.

Despite many favorable features, however, the new law also contains some highly undesirable features. The requirement for 41 members before an association can come into existence is excessive and will impede the formation of associations. Although foundations are permitted, there are no separate governance provisions for them. Although it is unfortunate that foreign funding requires notification of the Ministry, there is at least no provision requiring Ministry approval. The provisions permitting imprisonment for violations of this new law seem draconian. Furthermore, while the law holds board members personally liable for negligence, it has no provision to relieve officers, directors, and employees of personal liability for the debts, obligations, or liabilities of the association or foundation. Such an omission may discourage individuals from serving on NGO board of directors.

On balance there is more good than bad in the new Yemeni law, but the crucial question now is how it will be administered. In this connection, it is interesting to note that executive procedures for implementing the new law are required by its terms to be promulgated no later than August 2001. Perhaps when they have been issued and implemented it will be easier to form a judgment whether this new Yemeni law is indeed the most progressive in the region and a bulwark protecting the freedom of association.

[1] Rights-Yemen: Civil Society in Crisis, World News, available at ttp://www.oneworld.org/ips/oct00/02_41_007.html