The new Associations Act (the “Act”) (Act Number 3/2022) was ratified into law on 9 May 2022 introducing major developments to the associations regime of the Maldives, with elaborate provisions determining more precisely the types, functions, responsibilities and privileges of associations. The new Act upon becoming effective, will replace the Associations Act1 in effect since 22 May 2003 (the “Former Act”).
Categories of Associations
Under the Act, the following categories of associations can be formed in the Maldives:
- Associations / Organisations / Societies;
- Private and Public Foundations;
- Federations / Alliances / Networks;
- Charities; and
- Professional Associations / Unions / Organisations / Societies.
Similarly to the Former Act, the new Act provides that associations formed under the Act would be legal entities formed separate from its members, whereby the members do not have any ownership rights of the assets of the Association.
The following categories do not fall into the new associations regime introduced by the Act and are thus, exempt from the Act:
- Associations formed and registered under an Act of Parliament.
- International Associations operated pursuant to agreements and/or conventions ratified by the government of the Maldives.
- Associations registered by students or teachers or guardians of educational institutions.
- Sports clubs registered under the Sports Act.2
Registration of Associations
- Under the Act, an association can be registered by two or more individuals as applicants maintaining the requirement from the Former Act. However, the new regime now allows both natural and legal persons to apply to register an association. Hence, two or more companies can now jointly register associations.
- The Registrar of Associations (the “Registrar”) is required to decide on the registration of an association within 30 days after the application documents are submitted.
- If the Registrar does not decide on an application of registration within the time stipulated in the Act, and if the registration documents are in compliance with the requirements stipulated in the Act, the association will be deemed to have been registered.
- Further, the new regime introduces a merger mechanism whereby two or more associations can merge to form a separate association. Upon merger, the members, assets and liabilities of the association will be transferred unto the new association. Mergers are, however, not applicable to charities.
Operation of Foreign Associations in Maldives
- The Act makes provisions for associations registered abroad to operate in Maldives pursuant to the registration of the association in Maldives. These requirements are not applicable to the following:
- International foreign associations which the Maldives is a party to; or
- Foreign associations being operated in the Maldives pursuant to bilateral agreements or treaties.
- The same registration procedures for local associations are applicable for foreign associations. However additional documents are required to be submitted by foreign associations. The new documents required under the Act include resolution of the members of the association to register the association in Maldives and copies of its constitutional documents.
- Foreign associations registered in the Maldives are required to follow all regulatory requirements stipulated under the Act. Hence, the requirement to appoint Maldivians for the top 2 Executive Committee positions and the financial head of the Association must be met by the foreign associations.
Constitutional Framework of Association
- The Act requires all associations to have a Memorandum of Association (MOA) stating the main policies of the association. The requisite details which must be included in the MOA has been provided in the Act.
- Additionally, each association must formulate its Articles of Association (AOA) to regulate the internal affairs of the Association.
- Associations are required to establish an Executive Committee in accordance with the respective AOA. The Executive Committee is empowered to undertake all functions to achieve the objectives of the association, except for powers specifically reserved for the general meeting of the members. As noted above, several positions of the Executive Committee are reserved exclusively for Maldivians.
- The new regime also requires general meetings to be held by all associations. The association will be required to pass its annual report and financial report of the association at the general meeting.
- Within 30 days of holding the general meeting, the association will be required to submit the reports to the Registrar of Associations.
Some of the major developments introduced by the Act pertains to the financial matters of associations. They include the auditing and disclosure requirements of associations, as well as requirements imposed on the state and state companies to provide financial assistance and tax relief to associations.
(a) Obtaining Financial Assistance
The Act allows for associations to obtain financial assistance from external sources. However, if any association receives an amount exceeding MVR 500,001 as financial assistance for any activity, the association will be required to disclose that information to the Registrar prior to the commencement of any such activity. The association is required to disclose the source, the amount obtained and the purpose for which the financial assistance is obtained. Further, the association is required to record such information in the annual report of the association.
(b) Auditing Requirements
If the total transactions of an association exceed MVR 500,001, the association is required to conduct an audit and submit the audit report along with the financial report of the association to the Registrar. Moreover, the Registrar has a discretion to notify the association to audit its records, if the financial report submitted by the association is incomplete, or if the association fails to submit its financial report within the prescribed time.
(c) State Assistance
The Act requires the government to provide financial assistance to associations annually. In this regard, the government is required to allocate 3% of the Ministry of Youth, Sports and Community Empowerment’s budget to provide free financial assistance to associations.
Further, state owned enterprises and state shareholding companies are now required to provide not less than 25% of its corporate social responsibility (CSR) budget annually as financial assistance to associations, in accordance with the policies formulated by the Ministry of Youth, Sports and Community Empowerment.
Liquidation of Associations
- The Act provides several mechanisms whereby an Association can be liquidated. The mechanisms can be summarised as follows:
- Voluntary liquidation by the association;
- Liquidation by the Registrar for any of the following reasons:
- Failure to submit documentation as required;
- Where the MOA and AOA of the association violates the laws of the Maldives;
- Failure by the association to commence activities within 1 year after registration;
- Failure to establish the Executive Committee within the prescribed period; and
- Failure to follow directions of the Registrar.
- Liquidation pursuant to another act of parliament;
- Liquidation pursuant to an order of court.
- Following the liquidation, assets remaining after settlement of the debts and obligations of the associations can be distributed as decided in the general meeting with the approval of the Registrar.
Application of the New Act to Existing Associations
Upon the Act becoming effective, all existing associations will be deemed to be registered under the new Act. The Registrar is required to formulate regulations to provide for the procedures and record details of the existing associations. Further, the Registrar is empowered to direct previously registered associations to fulfil certain regulatory requirements prescribed under the Act.
The Act will come into force on 9 November 2022, precisely 6 months from the date the Act was ratified into law.References