Anti-Corruption Compliancein Charitable ActivitiesYekaterina Khamidullina, Senior Associate
As the culture of corporate and social responsibility becomes more common, many local companies have started paying special attention to charity and allocating considerable funds to provide charitable assistance each year.
The Kazakhstan Charity Law1 (hereinafter, the "Charity Law") was adopted in 2015. Over the recent years, it has been amended six (6) times. The latest amendments were introduced according to the Law of 4 July 20222, most provisions of which entered into effect on 5 September 2022.
This article addresses the latest amendments to the Charity Law and shares recommendations to companies on the aspects worth paying attention when considering and approving requests for charitable assistance to comply with requirements of the Charity Law, anti-corruption legislation of Kazakhstan, and applicable foreign laws.
Latest Amendments to the Charity Law
The Law of 4 July 2022 introduced many amendments into five (5) codes and fourteen (14) laws, among which are the Labor Code3, Code on People's Health4 and Healthcare System, Volunteering Law5, State and Social Mandate Law6, and other. We will consider the most significant amendments introduced into the Charity Law:
Introduction of new concepts:
- "corporate charity" – voluntary activities of business entities to provide charitable assistance;
- "fundraising" – process of raising voluntary donations and/or seeking for charitable assistance;
- "electronic charity" – activities to raise voluntary donations in the form of money made in the electronic form. According to the Dossier of the draft Law of 4 July 2022, electronic charity was introduced to increase transparency of charitable activities and reporting by charity organizations and beneficiaries on the use of donations;
- "authorized agency in the sphere of charity" – central executive agency carrying out management in the sphere of charity. The Ministry of Information and Social Development of Kazakhstan is the authorized agency in the sphere of charity;
Competence of the authorized agency in the sphere of charity now covers the issues of implementation of the state policy in the sphere of charity, interaction with individuals, legal entities and governmental agencies in the sphere of charity, awarding of an honorary degree in the sphere of charity, and exercise of other powers stipulated by the Kazakhstan legislation;
Minor clarifications were introduced into definitions of the concepts of "sponsor activities" and "voluntary donations";
Important amendment is the introduction of an obligation for business entities to develop internal documents on provision of charitable assistance in case of deciding to develop corporate charity. Internal documents must determine the principles, key directions, procedure for providing charitable assistance to users, and procedure allowing to form the expenditure budget of a business entity. Purposes of the provided charitable assistance must be determined according to the Charity Law;
Introduction of an obligation of a charity organization to publish reports on the implemented charitable programmes in mass media and/or on an Internet resource at least once a year. Such reports must contain brief information on income and expenses, and goals achieved when implementing a charitable programme;
Additional information was added with respect to requirements to a charitable programme, pursuant to which a charitable programme is developed, approved and implemented by a charity giver and/or a charity organization. A charitable programme must encompass the goals, objectives, period of implementation (term), estimate of contemplated income and expenses, and procedure for providing charitable assistance. A charity giver and/or a charity organization may implement one or several charitable programmes.
Algorithm of Company's Actions when Providing Charitable Assistance
Below is a recommended algorithm of actions, which companies may apply when providing charitable assistance in order to comply with requirements of the Kazakhstan legislation, applicable foreign laws (in certain cases) and provisions of internal acts of companies.
STEP 1 – Approval of internal acts of companies relating to provision of charitable assistance
Before providing charitable assistance, a company needs to approve a charitable programme and Regulations on Provision of Charitable Assistance, which must specify the goals, principles, key directions, procedure for providing charitable assistance, and procedure allowing to form the expenditure budget of the company. In the Regulations, we also recommend specifying the company's responsible persons participating in the company's approval of provision of charitable assistance.
When drafting the Regulations on Provision of Charitable Assistance, the company's management may provide for certain restrictions (e.g. charitable assistance must be provided only in the sphere of education, healthcare and to support the development of a certain region of Kazakhstan). The company may also provide for charitable assistance of a certain type only (philanthropic, sponsor or patron activities).
Since we receive many requests relating to application of the anti-corruption legislation and Charity Law from local companies with foreign participation, we have accumulated significant experience of developing various internal regulations (policies) according to requirements of the Kazakhstan legislation and foreign legislation applied by subsidiary organizations of foreign companies doing business in Kazakhstan. As a rule, such companies strive to specify in documents with counterparties that, in addition to requirements of the Kazakhstan Charity Law, it is necessary to comply with provisions of foreign legislative acts, such as the US Foreign Corrupt Practices Act (the "FCPA"), UK Bribery Act 2010 and other.
STEP 2 – Receipt of request and legal analysis
According to the Charity Law, understood as charitable assistance is "property provided by a charity giver on a free-of-charge basis to assist a user in improvement of financial and/or material status:
- in the form of social support to an individual;
- in the form of sponsor support;
- to a non-profit organization to support its charter activities; and
- to an organization carrying out its activities in a social sphere as defined under the Tax Code.
According to our practice, in major cases charitable assistance is provided to non-profit organizations to support their charter activities. Accordingly, when receiving a request for the provision of this type of charitable assistance, it is necessary to review a charter and certificate of registered legal entity.