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
-
Cost awards in unfair dismissal cases – part 3
This article looks at when costs orders can be imposed on a party to an unfair dismissal application, with an example of how costs orders can be imposed on a complainant employee.
-
Copyright in artistic works – Australian law
Discover how copyright law protects artistic works and what to consider when reproducing them. Learn about the implications of ownership, what constitutes ‘substantial’ infringement, and how to get permission or licence a copyright.
-
Guide for managing data breaches
Parliament introduced the Data Breach Bill 2016, which will make notifications of data breaches mandatory. Learn more about the Bill and obligations of organisations to protect personal info in our article.
-
Failure to review contracts can cost millions…
The case of The State of NSW v UXC Limited [2011] NSWCS 530 serves as a reminder of the need for organisations to pay close attention to contract details. An oversight can result in costly damages.
-
Is your business ready for investors?
Want to attract investors? This article reveals the essential steps to make your business “investor ready.” From crafting a solid business plan to securing legal certainty, learn how to prepare your business for successful investment and stand out to potential backers.
-
Valuing your contribution to a joint venture
This article provides an overview of the considerations when entering into a Joint Venture, including inputs, outputs, legal and tax implications of different Joint Venture vehicles. Get the facts you need to make an informed decision.
-
Social media policies are a necessity for large companies – Fair Work Australia
The case of Stutsel v Linfox Australia Pty Limited [2011] FWA 8444 highlights the importance of having a clear social media policy. Mr Stutsel’s dismissal for making derogatory comments on Facebook was deemed unfair, as the company lacked a formal policy on social media use. This case serves as a reminder that businesses should implement…
-
What exactly is securities hawking?
This article examines Section 736 of the Corporations Act 2001 (Cth), which prohibits security hawking. It outlines exemptions, consequences, definitions and further references.
-
Client guide to cutting legal costs
Dundas Lawyers offers eleven tips to help clients save on legal fees while still getting quality advice. Learn how to get the most out of your legal strategy and avoid costly surprises with their guide.
-
Raising capital without disclosure
This article explains the rules under the Corporations Act 2001 (Cth) for raising capital in Australia without a formal disclosure document, such as a prospectus. It covers exceptions like the “20/12 rule” for small-scale offerings and other exemptions for specific investors. The article also highlights key provisions, restrictions on advertising, and ASIC’s role in regulating…
