Setting up branches - To Do or Not To Do?

So, let's say your small non-profit organisation is doing well, and attracting a lot of interest from volunteers and others. Given the reach of social media, you could well have a large following of friends and supporters on Facebook, Instagram and Twitter. Many of them turn up for events and drop by to volunteer regularly.

But what about those who are not based in the same state? For example, if your organisation is based in the Klang Valley, and your activities are carried out here, what about friends and supporters from other states?

Inevitably, you'll receive questions like "I want to join your organisation but I live in [         ]. How can I still participate? Do you have a presence in my city that I can get involved in?". In fact, die-hard enthusiasts might even say "If you don't have a presence in my city, a few friends and I would be happy to set one up. We will use your logo and name, and we will run it in our city".

Now, this may sound like an excellent idea as of course, nothing makes the founders of a non-profit organisation happier than having our non-profit organisation grow and our concept replicated across different geographical regions, allowing us to reach an even larger target audience.

It's all good, right? :-)

Well.. er..not quite so fast.:-) It depends on how your organisation (the parent organisation) is set up. If, (as is mostly the case) your non-profit organisation is a registered society under the Societies Act, 1966, setting up a branch is a rather complicated process.

Firstly, as a matter of policy, if your society is a registered society, you should NOT allow any other organisation to use your logo. This is because any organisation using your logo, is "deemed" by the Registry of Socieites, to be a branch of your organisation. In fact, any other organisation that is "in any way subordinate" to yours, could be deemed to be a branch.

Section 12 (5) of the Societies Act 1966 states : For the purpose of this section, a branch of a registered society includes any society which is in any way subordinate to another society.
And, a registered society cannot set up a branch as of right. There is a list of regulations to be complied with first and, the Registry of Societies must give its approval for the setting up of a branch. A registered society that tries to open a branch without permission contravenes the Societies Act is deemed to be an unlawful society and could face a range of penalties, including cancellation of the registration of the society.

In summary, the registered society has to first amend its constitution to include a provision enabling the setting up of branches. The constitution can only be amended at an Emergency General Meeting (EGM), so one needs to be convened. More information on how to amend a Constitution is available here, though the procedure has been simplified via the use of the online portal, eROSes. And even if the members vote in favour of the amendment during the EGM with a view to setting up branches, the Registry of Societies has the final say in deciding whether or not a registered society may open a branch.

Go to : http://www.ros.gov.my/index.php/my/perkhidmatan

1.	PENDAHULUAN
	Pertubuhan yang berdaftar di bawah Akta Pertubuhan 1966 boleh menubuhkan cawangan hanya jika: (a)Undang-undang berdaftarnya mengandungi peruntukan penubuhan cawangan; dan (b)Kebenaran bagi menubuhkan cawangan telah diperolehi terlebih dahulu daripada Pendaftar Pertubuhan.

3.	CAWANGAN PERTUBUHAN
		Pertubuhan yang berdaftar di bawah Seksyen 7(1), Akta Pertubuhan 1966 yang mana undang-undangnya termaktub peruntukan penubuhan cawangan boleh menubuhkan cawangannya dengan terlebih dahulu memohon kebenaran daripada Pendaftar Pertubuhan di bawah Seksyen 12(1), Akta Pertubuhan 1966.
4.		CARA MEMOHON MENUBUHKAN CAWANGAN
		4.1 Tiap-tiap permohonan untuk kebenaran menubuhkan cawangan hendaklah dibuat oleh Pertubuhan Induk. 4.2 Borang permohonan untuk kebenaran penubuhan cawangan (Borang 5) boleh dimuat turun secara percuma di sini atau diperolehi daripada Ibu Pejabat dan mana-mana Jabatan Negeri. 4.3 Tiap-tiap permohonan hendaklah mengandungi perkara-perkara berikut:
	(a) salinan borang permohonan Borang 5 – Kebenaran Menubuhkan Cawangan yang disahkan dan ditandatangani oleh 2 orang pemegang jawatan utama Pertubuhan Induk. Pemegang jawatan utama bermaksud Presiden/Yang DiPertua/Pengerusi, Timbalan Presiden/Timbalan Yang DiPertua/Timbalan Pengerusi, Naib Presiden/Naib Yang DiPertua/Naib Pengerusi, Setiausaha dan Bendahari. (b)surat kebenaran menggunakan alamat daripada tuan punya alamat, jika berkenaan. (Jika menggunakan alamat pejabat, sekolah, hospital, ladang, syarikat atau kilang, surat kebenaran majikan/tuan punya alamat hendaklah disertakan); dan   (c) Fi pemprosesan berjumlah RM10.00 dalam bentuk wang tunai/bank draf/kiriman wang atas nama Pendaftar sekiranya permohonan dihantar ke Ibu Pejabat Jabatan Pendaftaran Pertubuhan Malaysia atau Penolong Pendaftar sekiranya permohonan dihantar ke Jabatan Pendaftaran Pertubuhan Negeri

Assuming your organisation did opt to go through the process of setting up branches and obtained the relevant approvals from the Registry of Societies, bear in mind that in accordance with various other provisions of the Societies Act, 1966, the audited accounts of all the branches need to be consolidated, and reporting in terms of annual returns and other filings with ROS need to be done on a consolidated basis.

This immediately throws up practical hurdles, as it means that the "branch" is not separate from the main organisation. As far as the regulators are concerned, both organisations are linked and are viewed as a single entity at the macro level. As such, the main organisation and its "branches" should have centralised financial processing and operational systems.

Which brings us to the next point - assuming that your organisation is small, volunteer-run and does not have a full-time secretariat or any paid staff for that matter, how will your organisation monitor and oversee the day-to-day activities of the branches? This is especially critical in the area of financial management, as both the main organisation and the branches are dealing with donated public funds. As the main organisation is ultimately responsible for the consolidated financial reporting of the Group, your organisation needs to exercise at least some supervision, over the finances and other activities of the branches.

So for a small, volunteer-run non-profit organisation therefore, I would not recommend the setting up of branches just yet. Perhaps a little later on, once you've been able to build up your organisation in terms of funding and manpower. In the meantime, do encourage people to set up their own societies in other states and cities (just under a different name, and not using your logo or one that resembles yours). You could always provide them with guidance in how to do it in fact, since you've already been through the process of setting up yours. There could be opportunities for co-branding or using a tagline such as "Friends of Society X" to show that there is an informal affiliation between the 2 organisations. Just do not enter into any arrangement that might cause the 2nd organisation, to be a deemed a branch of yours.

Comments, questions or requests to cover particular topics, email me at spiralcraft1701@gmail.com.