The introduction of the Australian Charities and Not-for-profit Commission Act (ACNC Act) and the Australian Charities and Not-for-profit Commission Regulations (ACNC Regulations) on 3 December 2012 changed both directors and company obligations for charities in Australia. The ACNC Act established the Australian Charities and Not-for-profit Commission (ACNC) which has largely replaced the Australian Securities and Investments Commission (ASIC) as the primary regulator for charities and to ensure compliance with governance standards. Despite plans to abolish the ACNC, the Federal Government has indicated that the ACNC will continue its operations into the foreseeable future and any change is not a priority on its legislative agenda.
ACNC Governance Standards
The ACNC Regulations outline a series of Governance Standards that must be met by charities registered with the ACNC. These governance standards are general in nature and apply to all charities regardless of corporate structure. Broadly, the standards require charities to remain in association with the vision of the ACNC, maintaining a charitable status, operating within the law and to ensure accountability and responsibility of the charity.
In order to remain registered under the ACNC, a charity has an obligation to:
- keep a charitable status;
- notify the ACNC of any changes to the charity’s legal name, address for service, responsible persons and governing documents;
- keep required records;
- report information regarding the charity’s charitably status to the ACNC annually; and
- meet the governance standards.
Companies registered with the ACNC have obligations under the ACNC Act and the ACNC Regulations that replace the standard obligations on companies under the Corporations Act 2001 (Cth) (Corporations Act). Obligations for a company registered with ACNC are found in ACNC Governance Standard 5, which set out the duties of responsible persons, such as directors and the Chief Executive Officers, including to:
- act with reasonable care and diligence;
- act honestly in the best interests of the charity and for its purposes;
- not misuse the position of responsible person;
- not to misuse information obtained in performing duties;
- disclose any actual or perceived conflict of interest;
- ensure that the charity’s financial affairs are managed responsibly; and
- not allow a charity to operate whilst insolvent.
Despite this, the following requirements of the Corporations Act still apply to directors of a company that are registered charities:
- criminal offences relating to breaches of duties of good faith an acting for a proper purpose and misuse of position or information (under section 184 of the Corporations Act); and
- the duty to prevent insolvent trading (under section 588G of the Corporations Act); this duty is also included under Governance Standard 5.
Relationship of ACNC and other regulators
Whilst the ACNC has assumed the regulatory role for Australian charities, the Australian Tax Office (ATO) remains responsible for deciding eligibility for tax concession as a charity and other Commonwealth exemptions and benefits.
The majority of reporting and notification obligations placed on companies registered with the ACNC now provide annual reporting requirements to the ACNC rather than to ASIC. Generally, a company should contact ASIC for matters relating to their corporate status, whilst they should contact the ACNC for matters relating to their charitable status.
It is important to note that if a company ceases being registered with the ACNC they must comply with obligations under the Corporations Act which are regulated by ASIC
It is important for charities to understand and keep up to date with their obligations under both the ACNC governance standards and the Corporations Act. Failing to do so may result in potential civil or criminal charges.