The vagaries of corporate governance is a regular and sometimes controversial topic of discussion in Australian business circles. It is also the subject of much judicial interpretation.
On 1 July 2013, the Australian Charities and Not‑for‑profits Commission Amendment Regulation 2013 (No. 1) (Cth) (Regulations) came into effect by amending the Australian Charities and Not‑for‑profits Commission Act 2013 (Cth).
One of the principal effects of the Regulations is to insert Division 45 – Governance Standards into the Regulations – creating what has become known as the “Governance Standards”. In order for a charity to be registered with the Australian Charities and Not-for-profits Commission (ACNC) it must comply with the Governance Standards.
The ACNC is the government regulator created by the Australian Charities and Not-for-profits Commission Act 2012 (Cth) charged with monitoring compliance with the Governance Standards.
Simplified outline of the Governance Standards
The simplified outline contained at section 45.1 of the Regulations provides that:
“The governance standards support registered entities in fulfilling their objectives by providing a minimum level of assurance that they meet community expectations in relation to how a registered entity should be managed”.
The variable nature of governance
The simplified outline contained in the Regulations provides that the steps that a registered entity must take to comply with governance standards will vary according to:
- its particular circumstances;
- the sources of its funding;
- the nature of its activities; and
- the needs of the public.
Who must comply with the Governance Standards?
Section 45.1(1)(a) of the Regulations provides that the object of the governance standard is to commit a registered entity, its members and its responsible entities to the registered entity’s purposes.
What is a registered entity?
Registered entities are those that are registered with the ACNC as a charity.
Is registration with ACNC mandatory?
Registration is voluntary, however only registered entities are eligible to receive charity tax concessions.
The ACNC governance standards
The ACNC Governance Standards are comprised in five (5) parts contained in subdivision 45 B of the Regulations.
Governance standard 1 (GS1) – purposes and not for profit-nature of registered entity
GS1 provides that charities must be working towards their charitable purpose and must provide information about their purpose to the public.
Governance standard 2 (GS 2) – accountability to members
A registered entity that has members must be accountable to its members. In addition, the members must have an adequate opportunity to raise concerns about the governance of the registered entity. The notes to GS2 provide examples of steps which registered entities could take to ensure that they are accountable.
Governance standard 3 (GS3) – compliance with Australian laws
GS3 aims to provide members of the public trust and confidence that a registered entity is governed in a way that complies with Australian laws.
Governance standard 4 (GS4) – suitability of responsible entities
Registered Entities must ensure that their responsible entities comply with Australian law and must check that their responsible persons are not disqualified from managing a corporation under the Corporations Act 2001 (Cth).
Governance standard 5 (GS5) – Duties of responsible persons
GS5 provides that a registered entity must take reasonable steps to ensure that responsible persons comply with their duties as described in the Governance Standards. Further GS5 describes duties which are akin to the common law duties of a director of a company. The words “care and diligence”, “fiduciary” and “disclose material conflicts” attempt to imply a statutory duty of care to the controllers of the registered entity. Most notably, section 45.25(2)(g) of the Regulations provides that reasonable steps must be taken not to allow the registered entity to operate whilst insolvent.
Links and further resources
Legislation
Australian Charities and Not-for-profits Commission Act 2012 (Cth)
Australian Charities and Not‑for‑profits Commission Amendment Regulation 2013 (No. 1) (Cth)
Other links
Australian Charities and Not-for-profits Commission
ACNC media release introducing the Governance Standards.
Further information
If you need assistance to ensure you comply with the Governance Standards, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
Related insights about corporate governance
-
What exactly is a Franchise Agreement?
Franchising agreements are legally binding relationships between franchisors and franchisees. But what makes them different from other agreements? Learn more about the key clauses of the code of conduct that must be observed in order to ensure a successful franchising agreement.
-
Eligibility criteria for the Trust Restructure Rollover
Thinking of restructuring your trust for some reason? While there are certainly a number of commercial benefits in transitioning from a trust into a company, a common pitfall is failing to acknowledge potential liability for Capital Gains Tax (CGT) or address potential liability for state based transfer duty (Stamp Duty).
-
Changes affecting unfair dismissal and minimum wage
Employers should be aware of three changes to employment law that came into effect on 1 July 2016, which have a significant impact on employee rights, including the unfair dismissal high income threshold, maximum compensation for claims, and minimum wage.
-
Enforcing confidentiality agreement terms
Learn how to protect confidential information and the legal remedies available if a breach occurs. Find out what elements must be established for a successful claim.
-
What exactly is a “Confidentiality Agreement”?
This article explores the importance of Confidentiality Agreements (NDAs) and what must be established in order to protect confidential information. Learn what elements and expectations are typically found in such agreements.
-
Meeting the evidentiary burden for a search order
An Anton Piller Order is usually made without the presence of the respondent (ex parte) and consequently the Courts require the satisfaction of a high evidential threshold before granting orders of this nature. As stated in George Rofail v Landmark Recruitment Pty Ltd and Others [2004] NSWIRComm 260 (7 September 2004), they are usually made…
-
Trust restructures – relief from capital gains tax
Learn how to avoid or reduce Capital gains tax (CGT) and other taxes when transitioning from a Unit Trust to a company structure. Find out what you need to know about a Trust Restructure Rollover pursuant to Division 124-N of the Income Tax Assessment Act 1997 (Cth).
-
Changes to capital gains tax rollover relief rules
The Royal Assent of the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 provides increased flexibility for small businesses to restructure and grow. Eligibility requirements include transfers of active assets as part of a genuine restructure. Click to learn more about the requirements and considerations.
-
Creating contracts and capital gains tax
This article provides an overview of Capital Gains Tax (CGT) in Australia, including what is a CGT Asset, examples, CGT Events, Disposing of CGT Asset, creating contractual or other rights, granting an option and record keeping.
