Why you need a constitution
Mpho Diale explains the importance of having rules and regulations to guide your group
IT IS estimated that stokvels contribute about R45 billion to the country’s economy annually. Even though forming a stokvel is as simple as finding like-minded individuals and agreeing on meeting times and the contribution fee, for a stokvel to work efficiently, it needs to have a constitution.
WHAT IS A CONSTITUTION?
According to Mike Brown, the managing director of the investment company, Exchange Traded Funds SA, a constitution is made up of principles that govern how an organisation functions. For a stokvel to be legal, it needs to have a constitution.
“Stokvels work with money, but are not considered to be financial institutions or service providers,” explains Mike.
“However, according to the government, they all need a constitution so they can qualify to do certain things, which include collecting money, investing it or in some cases lending money.”
WHAT YOU NEED
According to Mike, drawing up a constitution doesn’t have to be a difficult process or a service that you pay for.
“You just need a basic constitution that defines the kind of stokvel you are, what your intention is, who the members are and how much is contributed per month,” he says.
He adds that if you’re unsure about where to start, search for a standard constitution online.
You can use this as a guideline to draw up your stokvel’s constitution
and make changes that speak directly to your stokvel.
USE THESE GUIDELINES TO DRAW UP YOUR CONSTITUTION
Start your constitution by stating the name of your stokvel. Examples of the stokvel’s objectives include promoting personal and group development and saving money.
You also need to state what the money will be spent on or what it will be invested in.
You need to state how many members will be allowed and include their full personal information like their residential addresses, dates of birth and ID numbers. When discussing membership, you need to be clear about whether or not a member’s family will be allowed to replace them should the principal member pass away.
WHAT THE CONSTITUTION SHOULD BE CLEAR ABOUT
■ Stokvel executive: You need to mention who will be in the executive, which must include a chairperson, secretary and treasurer. The responsibilities of a chairperson include preparing the agenda for meetings and leading the meetings, and making sure the stokvel’s rules are followed by all members.
The secretary keeps a record of all activities and acts as the goto person for all communication within the stokvel, while the treasurer keeps account of the finances. To maintain accountability, all three members of the executive must sign off on all financial decisions. For example, for your stokvel to access money, the paperwork must be signed by all members of the executive. ■ Meetings and contributions: Other than stating exactly when, where and how often meetings will be held, you also need to mention what time meetings start and the penalty for members who are not punctual. You also need to state if special meetings will be allowed and the circumstances that qualify for such a meeting. Likewise, you need to be clear about how much each member contributes, how you deal with members who default, and the processes that need to be in place should a member decide to leave the stokvel. ■ Other factors: These include a code of conduct, general rules, conditions under which the constitution can be changed and issues relating to beneficiaries.
KEEP THIS IN MIND
Mike says constitutions differ from stokvel to stokvel, but there are key issues that every stokvel’s constitution needs to address.
“These include where the money will be saved, which banking product suits the stokvel or an investment portfolio,” he says.
He says it’s important for the constitution to be signed by all members and to appoint a person who will act on the group’s behalf.
“For instance, if your stokvel is an investment club, you need to appoint a person who will act on your behalf when you deal with financial institutions.”
There are key issues every stokvel needs to address
When drawing up your stokvel’s constitution, you need to state who will be in the executive