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Charities & Not-For-Profits Law in Australia

Ensure Your Charity Complies with the ACNC Governance Standards

Posted in Compliance, Governance

Most Charities will be aware that it is a condition of registration as a Charity (other than as a basic religious charity) that the Charity complies with the ACNC Governance Standards which have applied since 1 July 2013.

However, it is not enough that the Charity complies with the ACNC Governance Standards at the time of registration – a Charity’s registration is subject to their continuing to comply with the ACNC Governance Standards.

The Governance Standards are:

1. Charities must be not-for-profit and have a charitable purpose

The Charity should be able to demonstrate at any time (usually by reference to its governing rules) that it is complying with its purposes and its character as a not-for-profit entity.

However, over time a Charity may start providing different or additional services to those originally envisioned at the time of registration.  Although the Charity and its responsible persons may be acting in good faith and with the best of intentions, this may result in the Charity no longer complying with Governance Standard 1.

Therefore, it is worthwhile for the Charity to regularly review and update its governing rules.

Click here to read a case study.

2. Charities must be accountable to members

A Charity must take reasonable steps to ensure that it is accountable to its members and that its members are provided with an adequate opportunity to raise concerns about the governance of the Charity – primarily by providing regular reports and holding AGMs for members.

The Charity should also ensure that its governing rules contain provisions as to how the Charity will be held accountable to its members and what rights members have to voice concerns.  If the Charity can demonstrate compliance with these provisions, it would generally be found to have complied with Governance Standard 2.

Click here to read a case study.

3. Charities must comply with Australian laws

A registered Charity must not engage in any conduct which may be dealt with as an indictable offence or by way of a civil penalty of 60 penalty units or more.

4. Charity’s responsible persons to be suitable persons

A Charity must take reasonable steps to ensure that its responsible persons are suitable persons – in other words (except where authorised by the ACNC Commissioner) a responsible person may not be a person:

  1. disqualified from managing a corporation under the Corporations Act; or
  2. disqualified by the ACNC Commissioner  from being a responsible person of a charity in the previous 12 months.

The Charity must take reasonable steps to remain satisfied that its responsible persons are suitable – for example, by carrying out regular checks of the ASIC Disqualified Persons register.

Click here to read a case study.

5. Charities must take reasonable steps to ensure that their responsible persons comply with their duties

A Charity’s responsible persons are required to comply with certain duties similar to director’s duties under the Corporations Act, such as that they act in good faith in the best interests of the Charity, that they not misuse their position, that they disclose any conflict of interest and that they not allow the Charity to operate whilst insolvent.  The Charity is required to take reasonable steps to ensure that its responsible persons comply with these duties.

Charities should therefore ensure that their responsible persons are aware of their duties and put in place systems, policies and procedures to assist them in complying.

Protections are in place where it can be shown that a responsible person did take all reasonable steps to comply with their duties.

Click here to read a case study

The first step you should take when considering whether your are complying with the ACNC Governance Standards is a review of your governing rules to ensure that so far as possible by complying with its governing rules you are complying with the Governance Standards.

Please do not hesitate to contact us should you have any questions about your governing rules and ACNC’s Governance Standards.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au
Jennifer Paterson, Senior Associate | +61 2 9513 9531 | jpaterson@makdap.com.au