Commissioner's Policy Statement

This Commissioner’s Policy Statement explains the ACNC’s approach to interpreting the ACNC Governance Standards as they apply to charities with only one Responsible Person, or fewer Responsible Persons than are required for their legal structure or to comply with the requirements set out in their governing documents.

The ACNC has based this policy statement on the objects of the ACNC Act and our Regulatory Approach.

This policy should be read alongside the ACNC Governance Standards.

Principle 1: Charities are expected to maintain the minimum number of Responsible Persons required for their legal structure and by their governing documents

Principle 2: Having more than one Responsible Person supports good governance

Principle 3: Perceived or actual conflicts of interest must be managed appropriately

Context

  1. To understand the principles outlined in this policy it is important to understand the key concepts involved in governing a charity. These include the requirements to meet the Governance Standards and the concepts of Responsible Persons. This section explains these concepts as they relate to this policy.
  2. The ACNC Governance Standards are a set of five requirements that all registered charities must meet.1 The Standards require charities to retain their charitable character, operate lawfully, and operate in an accountable and responsible way. Charities must meet the Governance Standards to be registered and remain registered with the ACNC.2
  3. The responsible entities for a charity are the people who are responsible for the decision-making, day-to-day management and compliance of a registered charity3. In practice, the ACNC refers to responsible entities of a charity as ‘Responsible Persons’. The policy will, therefore, use the term ‘Responsible Persons’.
  4. The following people will be Responsible Persons of a charity:
  • If the charity is a trust, the individuals occupying the position of trustee are its Responsible Persons. If the trustee is a company rather than a natural person, the directors of the trustee company are the trust’s Responsible Persons;
  • If the charity is a company (either limited by guarantee or limited by shares), the directors of the company are its Responsible Persons;
  • If the charity is an Indigenous corporation incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), the directors of the corporation are its Responsible Persons;
  • If the charity is an association incorporated under state or territory legislation, the members of the charity’s committee or board of management are its Responsible Persons;
  • If the charity is a co-operative, the persons who act in the positions of director or board member, whether they are formally appointed to such positions, are its Responsible Persons;
  • If the charity is an unincorporated association, the persons who the members have agreed or recognised will be responsible for the day-to-day management and decision-making are its Responsible Persons. This will be determined by considering the association’s governing documents and the practices its members have accepted.
  1. The ACNC may also recognise that a person who does not occupy one of the positions listed above is nevertheless a Responsible Person of a charity, if that person is responsible for the charity’s day-to-day management and decision-making in practice.
  2. When applying for registration, a charity is required to provide details of each of its Responsible Persons. A registered charity has an ongoing obligation to notify the ACNC when its Responsible Persons change.
  3. The ACNC Act does not mandate that a charity must have a minimum number of Responsible Persons. However, the ACNC takes the view that, in general, having more than one Responsible Person supports good governance through increased transparency and accountability.
  4. Accordingly, to determine if an applicant for registration or a registered charity is compliant with the ACNC Governance Standards in circumstances where it has just one Responsible Person, the ACNC may require further evidence and information; for example, evidence of how conflicts of interest are managed, or decisions are made on any remuneration to related parties including Responsible Persons.

Principle 1: Charities are expected to maintain the minimum number of Responsible Persons required for their legal structure and by their governing documents

  1. The legislation that governs a charity’s legal structure may specify a minimum number of Responsible Persons that the charity must have. The ACNC expects a registered charity to comply with any applicable legislative requirement regarding the minimum number of Responsible Persons it must have, as compliance with legal requirements is an important aspect of good governance.
  2. The legislation governing state and territory incorporated associations may also specify a minimum number of Responsible Persons. Charities incorporated as associations in a state or territory are expected to be aware of any minimum number of Responsible Persons specified in the legislation governing their legal structure, and to ensure that they maintain at least that number of Responsible Persons.
  3. Charities that adopt the public company limited by guarantee (CLG) legal structure are required to have at least three directors under section 201A of the Corporations Act 2001 (Cth) (Corporations Act).
  4. The ACNC expects CLGs that are registered as charities with the ACNC to remain compliant with the requirement to have at least three Responsible Persons, and to keep the details of their Responsible Persons up to date. If the ACNC finds that a registered charity does not meet this requirement, the ACNC may refer the matter to the Australian Securities and Investments Commission (ASIC) for investigation.
  5. Even if there is no minimum number of Responsible Persons specified in legislation that applies to a charity, the charity’s own governing document may require its committee/board of management to be made up of a certain number of members. The ACNC expects registered charities to comply with all requirements in their governing documents, including requirements relating to minimum numbers of Responsible Persons.

Principle 2: Having more than one Responsible Person supports good governance

  1. If a charity has only one Responsible Person, that person will not be able to make decisions about which they have a perceived or actual material conflict of interest without breaching their duty to act in the best interests of the charity, free from the influence of their own personal interest. This is likely to make it difficult for the Responsible Person to manage conflicts of interest and may be detrimental to the charity’s ability to pursue its purposes.
  2. Furthermore, if a charity has only one Responsible Person, it is likely to fall into difficulty if that Responsible Person is unexpectedly unable to carry out their duties; for example, if the Responsible Person falls seriously ill.
  3. The ACNC takes the view that having more than one Responsible Person contributes to good governance.
  4. Where new applications for registration are received from organisations with a sole Responsible Person, the ACNC is likely to request additional information to ensure that the organisation has adequate policies and procedures in place to demonstrate that it can manage conflicts of interest and meet the Governance Standards.
  5. Where a currently registered charity with the ACNC has a sole Responsible Person, the ACNC may request such information to enable the charity to demonstrate ongoing compliance with the ACNC Governance Standards.
  6. A charity registered with the ACNC has a duty to notify the Commissioner if it has significantly contravened or not complied with the ACNC Act or a Governance Standard or External Conduct Standard.4

Principle 3: Perceived or actual conflicts of interest must be managed appropriately

  1. Conflict of interest occurs when a person's personal interests conflict with their responsibility to act in the best interests of the charity. A conflict of interest may be actual, potential or perceived and may be financial or non-financial.
  2. Conflicts of interest are common. However, if a conflict of interest isn’t managed properly, it may damage a charity’s reputation and, in serious cases, even breach the law.
  3. As set out above, the ACNC may require a registered charity with a sole Responsible Person to provide additional information to demonstrate due diligence in relation to managing conflicts of interest.
  4. Governance Standard 5 requires a perceived or actual material conflict of interest to be disclosed. A director must disclose the conflict to other directors of the charity (if any). If a company only has one director, the director must disclose the conflict to members of the company. For charities without members, or with members who share the conflict with the sole Responsible Person, the conflict must be disclosed to the ACNC in the approved form, and the charity must ensure that any perceived or actual material conflicts of interest are managed appropriately. The information required is set out in the approved form.

References

Australian Charities and Not-for-profits Commission Act 2012 (Cth) Part 3-1, Part 4-1

Australian Charities and Not-for-profits Commission Regulation 2013 (Cth)

ACNC Governance Standards

ACNC Policy Framework

Corporations Act 2001 (Cth)

Explanatory Memorandum

Footnotes

1. A charity that meets the definition of ‘Basic Religious Charity’ does not need to comply with the Governance Standards. A ‘Basic Religious Charity’ must only be registered as the charity subtype ‘advancing religion’ and must not be entitled to be registered as any other subtype of charity. It must also not be incorporated under state, territory, or Norfolk Island association incorporation legislation, the Corporations Act 2001 (Cth), or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth); and must not be a deductible gift recipient, amongst other requirements. For further information, see the definition of ‘Basic Religious Charity’ at s 205-35 of the ACNC Act.
2. To be entitled to registration, an applicant must meet certain conditions, including that it is compliant with the Governance Standards (ACNC Act, s 25-5 (2)(a) and (3) (b)).
3. Explanatory Memorandum, ACNC Act s205-30.
4. ACNC Act, s 65-5(1)(e) and (2).

Version Control

VersionDate of effectBrief summary of change
Version 1 - Initial policy22/1/2019Initial policy endorsed by the Commissioner on 22 January 2019.