By Felicity Simpson

23 October 2018

Whether it be an unincorporated association or a company limited by guarantee, not-for-profit organisations have obligations to their stakeholders.

Often though, the volunteer nature of these organisations may contribute to a failure by the organisation, its’ controllers or members to take decisive action to address important issues which may arise during the normal course of business.

Some factors contributing to this include the absence of a personal financial benefit to the members and decision makers, the costs of obtaining profession advice and lack of experience or knowledge in managing company and business affairs.

With volunteers often taking on the role of decision makers in not-for-profit groups, the question of –“How much do I have to do?” may arise. Legally, the volunteer nature of a position does not negate its obligations. The answer is not always clear and is influenced by the type of organisation involved.

Some common examples include:

  1. Organisations registered with the Australian Not-for-Profits Commission (ACNC). The ACNC have introduced their own Governance Standards (https://www.acnc.gov.au/tools/topic-guides/governance-standards), which for the most part, replace the obligations otherwise imposed on a director of a Corporate not-for-profit.
  2. Corporations not registered with the ACNC – standard director and officer obligations under the Corporations Act will apply.
  3. Incorporated Association – the laws of the relevant state relating to Associations will apply. If the Association has registered with the ACNC, the Governance Standards may take precedence.

Even in a volunteer position, it is important to ensure basic obligations are met and the organisation is operating in accordance with its’ own rules and any legislative framework which applies as well as the expectations of its stakeholders. In determining whether a volunteer has meet their obligations, the finances and resources available, representations made and expectations of members should all be taken into account.

Some of the Issues which may arise within a not-for-profit organisation include:

  1. When is expert legal or accounting advice required?
  2. What are the implications for members not paying their fees upon their due date?
  3. When and how can ‘non-financial’ members be excluded/removed from decision making?
  4. The extent to which the organisation is required to comply with the principals of natural justice in its dealings with members.
  5. Taxation implications for the organisation: ranging from income tax, stamp duty and other tax exemptions through to full charitable status (where appropriate).
  6. Dispute resolution amongst members and/or directors.
  7. Process for nomination, approval and remuneration of directors or committees of management (if any).
  8. Updating of registers, whether with ASIC, the ACNC, Consumer Affairs (in the applicable state), along with the organisation’s internal record keeping.
  9. Who can initiate action, and at whose cost, to hold the organisation accountable and ensure it complies with its own rules and regulations?

 

Tisher Liner FC Law acts for not-for-profit organisations and can provide advice on appropriate structuring, rules, regulations, policies and procedures.

For advice on structuring a not-for-profit organisation or help with any concerns which arise in the operation of your not-for-profit please contact a member of our Business law or Not-for-Profit teams.

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