Not-for-profit Governance

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Not-for-profit organisations that are also registered charities are governed by the Australian Charities and Not-for-Profits Commission (ACNC). The ACNC was established in 2012 under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) and the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth). Currently, only charities that are registered are governed by the ACNC.

The ACNC also is responsible for administering the definition of a charity under the Charities Act 2013; being an organisation that is not-for-profit that is operating for a charitable purpose and is for a public benefit.

It is not a requirement for a not-for-profit organisation to register as a charity with the ACNC and therefore they are not required to be subject to the obligations imposed by the ACNC.
However, in order to obtain most of the benefits of being a charity, namely the tax concessions, it is a requirement that the charity be registered. Organisations therefore have to meet certain requirements in order to register as a charity as well as continuously throughout their operations.

Obligations of registered charities;

  • Must be not-for-profit and for a charitable purpose.
  • Must maintain this status.
  • Must notify the ACNC of changes such as the legal name or governing documents.
  • Must keep financial and operational records.
  • Must submit an annual information statement.
  • Must comply with governance standards.
  • Must comply with external conduct standards.

Governance standards for charities                                   

Minimum governance standards

The minimum governance standards set out how a charity should operate and must be complied with by all registered charities.

1. Purposes and not-for-profit nature

Under the Charities Act, a charity must operate for a charitable purpose and for a public benefit. The ACNC is responsible for ensuring charities comply with this legal requirement. It is also the responsibility of the charity to ensure that they are able to provide evidence and demonstrate that they are complying with this. One way to do this is to include the purpose of the charity in your governing documents, for example in the trust deed if you are a charitable trust. GLG legal can assist in setting up your charitable trust structure and ensuring your governing documents comply with relevant legislations.

2. Accountability to members

This standard applies to charity structures that have members only. It is your responsibility under this standard to ensure you are informing members on the charity’s operations, since members are the ‘owners’ of the charity, and hold the charity accountable. Some ways to meet this standard include holding meetings with members and making financial and other information accessible.

3. Compliance and Australian laws

Charities are evidently required to follow Australian Laws. This standard requires charities to not act in a way that could constitute an indictable offence, or a breach of law that has a civil penalty of 60 penalty units or greater. This obligation allows the ACNC to investigate actions that may be a serious breach of the law.

Obtaining legal advice will ensure you are complying with all the relevant legal obligations.

4.Suitability of responsible persons

Charities need to take reasonable steps under this standard to ensure that its board members, committee members and trustees are not disqualified from managing a corporation or being a responsible person by the ACNC. The purpose of this is to ensure that the charity is being well-governed and is meeting its legal obligations.

5. Duties of responsible persons

Responsible persons of a charity are required to comply with several duties such as acting with reasonable care and diligence and acting honestly and fairly and in the best interests of the charity. Essentially, responsible persons need to act with common sense.

You should ensure that each of the responsible persons of your charity are aware of their responsibilities and have processes in place regarding these duties.

6. Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector

This is a new governance standard that was only introduced in 2021 under the Australian Charities and Not-for-profits Commission Amendment (2021 Measures No.1) Regulations 2021 (Cth) (The Regulations).  It requires registered charities to take reasonable steps to participate in the National Redress Scheme if the organisiation is or is likely to be identified in a Redress application. The purpose of this being to maintain and increase public trust in the Australian charity sector.

One of the main ways to meet these standards is to ensure you touch on each of these requirements in the trust deed or governing documents of your charity. GLG legal can assist in ensuring you choose the best structure for your not-for-profit charity and make sure that the governance issues are addressed in the documents governing your organisation.

Enforcement of compliance

To be registered as a charity you must comply with the above governance standards. Failure to do so could result in warnings being issued or the cancellation of your registration. Considering that to obtain most of the benefits of being a charity you are required to be registered, it is important that you ensure compliance with these standards. You will not be required to demonstrate that you are meeting the standards unless requested.

Requirements for other legal structures

Companies

Not-for-profit companies such as companies limited by guarantee (CLG) are registered under the Corporations Act 2001 (Cth) and are then regulated by the Australian Securities and Investments Commission (ASIC). CLG’s must comply with ASIC’s reporting requirements such as financial reporting obligations. However, if they elect to register as a charity as well, most of the obligations are to the ACNC rather than ASIC.

Co-operatives

The reporting obligations of a Co-operative are dependent on what state it is operating in. Assuming that you are operating in Queensland, the o-operative will be regulated by the Office of Fair Trading.

Incorporated Associations

Not-for-profits in Queensland that are utilising an Incorporated Association structure are incorporated under the Associations Incorporation Act 1981 (Qld), and are also regulated by the Office of Fair Trading. There are a number of financial and operational responsibilities required of Incorporated Associations.

Depending on the structure of your not-for-profit, your organisation may subject to regulations by ASIC, the Office of Fair Trading, the ACNC, other regulatory bodies in other states and potentially a combination. GLG legal can assist you in determining the best structure for your not-for-profit, and ensure you comply with each of the relevant legal or regulatory requirements.

 

 

 

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