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Compliance for Charitable Organizations and Professional Associations in Germany

Modern risk management for German NPOs

Nowadays, companies are not the only ones that need to worry about effective compliance structures. Compliance measures are also playing an increasing role for charitable organizations and professional associations (nonprofit organizations, NPOs). In fact, the issue of compliance deals with an area of opportunity and risk management: The goal of good compliance is to identify and rectify infringements early enough to prevent or reduce damage or loss. And, not least, good compliance serves to protect the responsible corporate bodies (boards, CEOs) as it enables them, in case of doubt, to prove their proper conduct and, hence, avoid Liability.

What are the benefits of good compliance?

The benefits of good compliance are obvious: It enables the charitable organization / professional association to present itself in the market as a respectable, transparent organization, to maintain the confidence of existing sponsors, donors, volunteers, (charitable) cooperation partners and other contractual partners and to win the confidence of new sponsors, donors, volunteers, cooperation and business partners. In addition, good compliance enables the corporate bodies to implement efficient quality assurance, minimize liability risks faced by the nonprofit entity managed by them and their own liability risks, and strengthen the team spirit of all employees. In case of any crises of confidence or image, the charitable entity and/or professional association remain able to act and can immediately take counter measures in a professional manner. 

What are the typical areas of compliance in charitable organizations and professional associations?

There are no binding compliance regulations for charitable organizations in Germany. Nor are there for professional associations. However, in recent times, the following key areas have taken shape as they are of special relevance to non-profit organizations:

  • Organizational law and design, especially with respect to external communication, compliance with obligations specific to the organization's legal form, web presence, including Data Protection;
  • Compliance with disclosure and publication requirements and avoidance of offences under criminal law;
  • Transparent structures, especially with respect to the allocation of tasks, communication and reporting lines;
  • Contract management (contract review, contract design, insurance cover);
  • Donation and cost-related risks, especially with respect to compliance with regulations governing donations, reporting obligations, assessment of settlement risks;
  • Compliance with the provisions of nonprofit law, especially with respect to ensuring that the operational management, the accumulation and use of funds comply with the organization's articles of association;
  • Proper allocation of entries and spending to the (non-)entrepreneurial spheres of an NPO and proper treatment of grants and membership fees under value added tax law;
  • Assessment and elimination of operational risks;
  • Proper implementation of fundraising, advertising, and marketing activities;
  • Compliance with all relevant labor law provisions, especially with respect to provisions on working times, occupational health and safety, salaries and wages, and issues concerning personnel leasing;
  • Compliance with anti-trust requirements (especially in case of professional associations).

The above list is not exhaustive. In fact, compliance is a complex issue for charitable organizations or professional associations and involves all fields of commercial law and requires a lot of expertise and experience to be able to identify and evaluate the key issues and develop an appropriate individualized model that protects the NPO while avoiding excessive demands on its administrative structure.

Our experienced specialist compliance consultants will be pleased to assist you in taking the necessary compliance measures and adopting an appropriate compliance model for your charitable organization / professional associations in Germany

Do not forget setting up compliance structures

An individually tailored compliance structure may be of vital importance for charitable organizations and professional associations in Germany. If, during a fiscal audit or any other verification of the tax or non-profit status, a documentation produced fails to meet the fiscal authorities' requirements, the consequences may involve the withdrawal of the nonprofit status or the withdrawal of the tax privileges granted to a professional association, and also a subsequent taxation and liability claims against the executive bodies (e.g. the management board). In addition, unpleasant penalties may be imposed under the act on administrative offences or under criminal law. Members of the management board and CEOs should therefore ensure a legally compliant structure of the NPO they manage.

Your German Compliance Attorneys

Compliance for association in Germany

You wish to reduce liability risks within your charitable organization and implement a professional risk management? You wish to give your professional association a legally-compliant structure and get yourself out of the line of fire? Our compliance experts Attorney Dr. Eric Uftring (compliance officer and Certified Specialist for Tax Law and Employment Law), Attorney Johannes Fein (Certified Specialist for Tax Law), and Attorney Olga Stepanova will be pleased to assist you in assessing your existing compliance structures and developing a customized compliance concept. Please feel free to contact us by e-mail (info@winheller.com) or by phone (+49 (0) 69 / 76 75 77 80).

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Advising the nonprofit foundation (Germany's first crypto foundation) on its establishment as a hybrid foundation and equipping it with IOTA tokens.

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Advising the nonprofit foundation (Germany's first crypto foundation) on its establishment as a hybrid foundation and equipping it with IOTA tokens.

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