Running a Not-for-Profit Company? Here’s What You Must Know About ACNC and ASIC Duties

Introduction

For officers of Australian not-for-profits structured as companies, understanding their obligations to both the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Securities & Investments Commission (ASIC) is crucial. These entities, often companies limited by guarantee under the Corporations Act 2001 (Cth), must meet specific governance standards and reporting duties to maintain their charity registration and operate lawfully.

This guide provides essential information for company officers on ACNC registration, the requirements of the Australian Charities and Not-for-profits Commission Act 2012 (Cth), including the ACNC Governance Standards, and how these interact with ASIC duties. Clarifying these responsibilities helps ensure your not-for-profit maintains compliance and good governance, safeguarding its mission and charitable status.

Understanding Dual Regulators ASIC & ACNC for Your Australian Charity Company

What is an Australian Charity Structured as a Company Limited by Guarantee?

An Australian charity structured as a company limited by guarantee is a specific type of public company. These companies are initially incorporated under the Corporations Act 2001 (Cth) and are established so that the liability of their members is limited to a predetermined amount, which they would contribute if the company winds up. This structure is common for not-for-profits.

To be recognised as a charitable company, the organisation must meet the criteria for registration as a charity under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act). This involves:

• Operating on a not-for-profit basis
• Having exclusively charitable purposes that provide a public benefit

The establishment process follows two key steps:

1. Registration with ASIC
2. Application for charity registration with the ACNC

The Regulatory Role of ASIC for Your Australian Charity Company

ASIC is the primary regulator for all companies incorporated in Australia, including those that operate as not-for-profits or charities. For an organisation structured as a company limited by guarantee, the journey begins with registration with ASIC. This establishes the company as a legal entity under the Corporations Act 2001 (Cth).

ASIC’s role involves overseeing compliance with corporate law, which includes obligations related to:

• The company’s formation
• Its ongoing operational conduct
• The duties of its officers and directors

However, when a company limited by guarantee subsequently achieves registration as a charity with the ACNC, some of these ASIC obligations are modified, as the ACNC then assumes primary regulatory responsibility for certain aspects of the charity’s governance and reporting.

The Regulatory Role of the ACNC for Your Australian Charity Company

The ACNC is the national regulator specifically for Australian charities. Its primary function is to register organisations as charities and help them understand and meet their ongoing obligations.

For a company limited by guarantee to become a registered charity, it must satisfy the requirements outlined in the ACNC Act, such as:

• Operating on a not-for-profit basis
• Pursuing charitable purposes for the public benefit

Once an Australian company achieves ACNC registration, its regulatory landscape changes significantly. While it remains an ASIC-registered company, many of the reporting and governance provisions under the Corporations Act 2001 (Cth) are effectively ‘switched off’.

Instead, the charity must comply with the ACNC Governance Standards. These standards provide a framework for areas such as:

• Director and officer duties
• Financial management
• Annual reporting

This approach often offers more flexibility tailored to the not-for-profit sector. As a result, the ACNC becomes the main body to which the charity reports for many of its operational and governance matters.

The ACNC Registration Process for Your Australian Charity Company

Key Eligibility Requirements for ACNC Charity Registration & Your Obligations

For your Australian charity company to achieve ACNC registration, it is essential to meet a specific set of criteria. The ACNC outlines these prerequisites to ensure that only eligible not-for-profits obtain charity status.

Your organisation must satisfy all the following conditions:

• Be a charity: Your organisation’s purposes must be charitable and for the public benefit.
• Have an Australian Business Number (ABN): An ABN is a unique identifier necessary for transacting with government agencies and other businesses.
• Comply with the ACNC Governance Standards: These standards outline the minimum requirements for how registered charities must be run. Adherence to these standards is a continuous obligation for maintaining registration.
• Not be involved in disqualifying activities: Your organisation must not be listed in any Australian government agency, judge, or magistrate decision as engaging in or supporting terrorism or other criminal activities.
• Otherwise be eligible: This includes not being an organisation type that cannot be registered, such as political parties, government entities, individuals, or a partnership.

Meeting these eligibility requirements is the first step in the ACNC registration process. Fulfilling these obligations is crucial for any officer or director aiming to register their not-for-profit organisation as a charity with the ACNC.

Importance of an ABN & ACN for Your Charity’s Registration

An Australian Business Number (ABN) and an Australian Company Number (ACN) are fundamental identifiers for your charity’s registration and ongoing operations.

The ABN serves multiple important purposes:

• It is required to register as a charity with the ACNC
• You must obtain an ABN before you can apply for ACNC registration
• It functions as a public-facing number used for various business and tax purposes

Similarly, if your charity is structured as a company, it will have an ACN, which is issued by ASIC upon incorporation. The ACN is specific to companies and serves as a key identifier for ASIC.

Both numbers are essential for the initial registration process and for maintaining your charity’s legal and regulatory standing with both the ACNC and ASIC. Ensuring these numbers are correctly recorded and used is a key governance obligation for any officer of a not-for-profit.

How ACNC Registration Impacts Your Company’s ASIC Obligations & Governance Standards

Understanding ACNC Governance Standards & Your Charity’s Obligations

Registered charities have an ongoing obligation to comply with the ACNC Governance Standards, as outlined in the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth). These standards establish a framework for how charities must operate and are crucial for maintaining ACNC registration.

Compliance with these governance standards replaces certain requirements previously mandated under the Corporations Act 2001 (Cth) for companies that become registered charities.

The ACNC Governance Standards cover several key areas of a charity’s operations and internal processes:

• ACNC Governance Standard 1 requires charities to demonstrate they are operating for their stated charitable purpose and on a not-for-profit basis.
• ACNC Governance Standard 2 mandates that charities must be accountable to their members, ensuring members have adequate opportunities to raise concerns about the charity’s management.
• ACNC Governance Standard 5 outlines the duties of a charity’s Responsible People, such as directors and officers, requiring them to act with reasonable care and diligence and manage the charity’s financial affairs responsibly.

Corporations Act Reporting Obligations ‘Switched Off’ for Your Registered Australian Charity

When a company limited by guarantee registers as a charity with the ACNC, many of its reporting obligations to ASIC under the Corporations Act 2001 (Cth) are effectively ‘switched off’. This change means the primary reporting focus for these not-for-profits shifts towards the ACNC, significantly altering the compliance landscape for officer and director duties within the organisation.

Specifically, once ACNC registration is complete, your registered Australian charity is generally no longer required to:

• Lodge changes to its constitution with ASIC; this information is instead provided to the ACNC.
• Send a copy of its constitution to members upon request, as these documents become publicly available on the ACNC Register.
• Notify ASIC of changes to the company’s address details, including its registered office or principal place of business; these updates are made with the ACNC.
• Inform ASIC about the appointment, resignation, or retirement of directors, secretaries, or alternate directors, or submit their personal details. This information is also reported to the ACNC.
• Receive or review an annual statement from ASIC.
• Pay the ASIC annual review fee, although any fee due before ACNC registration must still be paid to ASIC.

It is important for officers of a charity to understand that while these Corporations Act 2001 (Cth) provisions are switched off, the obligation to adhere to ACNC governance standards and reporting requirements remains paramount.

Ongoing Reporting Duties for Your Australian Charity Company ACNC vs ASIC

What Your Charity Must Report to the Australian Charities & Not-for-profits Commission

As an officer of an Australian charity company, understanding your reporting obligations to the ACNC is essential for maintaining your organisation’s registration and compliance. Your primary reporting duties will be to the ACNC, which oversees not-for-profits registered as charities.

Your charity must notify the ACNC of several key changes:

• Changes to your charity’s name: If your organisation decides to operate under a new name
• Changes to your charity’s address: This includes any updates to your registered address or other contact details
• Changes to Responsible People: You must report any new appointments, resignations, or removals of directors or other individuals considered Responsible People by the ACNC
• Changes to your governing document: Amendments to your charity’s constitution or other foundational rules

In addition to these specific changes, your charity has an ongoing obligation to submit an Annual Information Statement to the ACNC each year.

Furthermore, if your charity is a company limited by guarantee, you should also contact the ACNC if it:

• Changes its legal structure
• Merges with another charity
• Winds up its operations
• Wishes to have its charity registration revoked

Promptly reporting these matters helps ensure your charity meets the ACNC governance standards and maintains transparency.

Limited Circumstances Requiring Your Australian Charity to Report to ASIC

Although ACNC registration ‘switches off’ many reporting obligations under the Corporations Act 2001 (Cth), there are still limited circumstances where your Australian charity company must report directly to ASIC. These situations generally pertain to the corporate status of your company rather than its day-to-day charitable operations or ACNC governance standards.

It is important for an officer to be aware of these specific instances. Your charity must report to ASIC for the following matters:

• Changes to your company’s name: While you notify the ACNC, changes to the legal name of the company also require notification to ASIC
• The resignation or removal of an auditor: If your charity has an auditor and there is a change, such as a resignation or removal
• The appointment of an external administrator: Should your charity face financial difficulties leading to the appointment of an external administrator
• If your company winds up or applies to be deregistered: The process of winding up the company or applying for its deregistration

Fulfilling these specific reporting duties to ASIC, alongside your primary obligations to the ACNC, is crucial for the lawful operation of not-for-profits structured as companies.

Key Responsibilities & Obligations for Your Charity’s Directors & Officers

Director Identification Number (Director ID) Requirements for Your Charity Directors

Directors of companies, including those that are registered Australian charities, must obtain a Director Identification Number (Director ID) from Australian Business Registry Services. This requirement applies to:

• Directors of companies
• Directors of registered foreign companies
• Directors of Aboriginal and Torres Strait Islander corporations
• Directors of registered Australian bodies (such as incorporated associations registered with ASIC that conduct activities outside their state/territory of incorporation)

Therefore, if your not-for-profit is structured as a company, all directors will need to apply for and hold a Director ID.

Director & Officer Obligations for Complying with ACNC Governance Standards

Directors and officers of a charity, often referred to as ‘Responsible People’ by the ACNC, have a fundamental obligation to ensure the charity complies with the ACNC Governance Standards. These standards are set out in the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth).

ACNC Governance Standard 5 specifically outlines the duties of these Responsible People. These duties require directors and officers to:

• Act with reasonable care and diligence in their roles
• Act in good faith (honestly and fairly) in the best interests of the charity and for its stated charitable purposes
• Not misuse their position as a Responsible Person for personal gain or other inappropriate advantage
• Not misuse information they obtain in their role as a Responsible Person
• Disclose any perceived or actual material conflicts of interest that may arise
• Ensure that the financial affairs of the charity are managed responsibly, including maintaining proper financial records and systems
• Not allow the charity to operate while it is insolvent (unable to pay its debts as and when they fall due)

Meeting these ACNC Governance Standards is a continuous obligation for every officer and director and is crucial for maintaining the charity’s registration and ensuring good governance within the not-for-profit organisation.

Conclusion

Understanding the distinct responsibilities owed to the ACNC and ASIC is vital for officers of not-for-profits structured as companies. Meeting ACNC registration requirements, adhering to the ACNC Governance Standards, and knowing which reporting duties are ‘switched off’ or remain with ASIC ensures ongoing compliance and sound governance for your charity.

Therefore, if you require assistance with your charity’s registration or understanding your officer obligations under the ACNC Governance Standards, contact LawBridge today for trusted expertise in not-for-profit legal services to ensure your organisation operates lawfully and effectively.

Frequently Asked Questions for Australian Charities Structured as Companies