Not-for-profit Law
Legal help for community organisations

Governance

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At all times, to act in the best interests of a not-for-profit organisation, its board needs to manage:
  • continuing the organisation’s activities to the extent possible
  • the organisation’s finances
  • acting within the law, and 
  • looking after the interests of many stakeholders (such as employees, volunteers, clients, participants and donors)

We have considered governance issues in the COVID-19 environment below.

For more detailed information on governance, you can also refer to our main resource pages on governance

We have answers to the following questions:

  1. As a board member, what should I know about the organisation's finances?
  2. How can I protect existing funding?
  3. Can I secure additional or emergency funding?
  4. How can I reduce costs? 
  5. How can I make sure I can retain my employees? 
  6. How can I protect our staff (including volunteers)?
  7. I've heard about groups adopting a COVID-19 policy.  What is it and do we need one? 
  8. What is a business continuity plan and what should it include?
  9. Should the board change the way it meets during COVID-19?
  10. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?
  11. Could our organisation be required to repay membership fees if our usual operations or activities cease because of COVID-19?

We have also considered whether an organisation will be covered by volunteer personal accident insurance or WorkCover Insurance if a worker or volunteer is infected with COVID-19 here.

Also note - eligible workers, including volunteers, in Victoria have access to the COVID-19 Worker Support Payment. For more information, see our news item

1. As a board member, what should I know about the organisation's finances?

One of the legal duties of a director or board member of an organisation is to ensure the organisation does not trade while insolvent. In these economically challenging times, however, it can be difficult to predict whether your group will be able to continue to meet its financial obligations into the future, as and when they fall due.
 
While some regulators have announced ‘safe harbour’ measures that may assist board members and directors in their duty to prevent insolvent trading, you need to check what applies to your organisation. The answer differs depending on:
  • whether your organisation is a registered charity (see note 1 below) or
  • if your organisation is not a registered charity, what your legal structure is (see notes 2 and 3 below)
Note 1 - As a board member of a registered charity, what help is there if we are worried about not being able to pay our debts during COVD-19?
The Australian Charities and Not-for-profits Commission (ACNC) has agreed to provide a temporary period of relief for directors of all charities from their personal liability to prevent insolvent trading, provided certain conditions are met. This relief will be extended until September 2020 provided the relevant debt is incurred:
  • in the ordinary course of business
  • during the period of 25 March until 25 September 2020, and
  • before any appointment of an administrator or liquidator
In addition, to receive this relief, the charity must:
  • ensure that its Responsible People (which includes its directors) are aware of the issue, and have an achievable aim for their charity to return to viability after the COVID-19 crisis has passed, and
  • inform its members and the Australian Charities and Not-for-profits Commission if it is trading while insolvent
A charity that is not a company limited by guarantee must also consider other legislation relevant to its legal structure, such as legislation administered by state or territory governments. 
 
If you require further information about how this relief may apply to your organisation, you can submit an enquiry on our website.
Note 2 - As a board member of an incorporated association, what help is there if we are worried about not being able to pay our debts during COVD-19?
If your organisation is an incorporated association that is not registered as a charity with the Australian Charities and Not-for-profits Commission (see note 1 above), your eligibility for the ‘safe harbour’ relief will depend on the state or territory in which you are incorporated. 
 
We are working with the Australian Institute of Company Directors  to have ‘safe harbour’ protection for not-for-profit incorporated associations extended across all states and territories. There is protection in Victoria, NSW and (some protection) in the NT - for an updated listed of the position in each state and territory, visit the AICD website.
 
If you require further information, you can submit an enquiry on our website.
Note 3 - As a board member of a company limited by guarantee, what help is there if we are worried about not being able to pay our debts during COVD-19?
Temporary measures have been put in place to protect you, as a director of a company limited by guarantee, from personal liability for insolvent trading. But note, if your company limited by guarantee that is a registered as a charity with the Australian Charities and Not-for-profits Commission then there are extra requirements that must be met before you can rely on this measure (see note 1 above) 
 
The requirement for this protection to apply is that the debts leading to insolvent trading must have been incurred ‘in the ordinary course of the company’s business’ between 24 March 2020 and 23 September 2020. A debt will be considered as incurred in the ‘ordinary course of business’ when it provides for the continuation of the business during the six-month period, however directors must prove this fact to rely on the protection.

If you require further information about how this protection may apply to your organisation, you can submit an enquiry on our website.

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2. How can I protect existing funding?

You should consider whether you can access any existing funds to carry the organisation through the short term.  If you are thinking about using existing funds, give careful consideration to whether these funds must be used for a specific purpose or are subject to certain conditions. 

You may be eligible to apply for a government grant or be able to obtain accommodation on current grant funding.  A number of government departments who provide grants (such as the Commonwealth Department of Social Services (DSS)) are continuing to process new grant applications and manage current grants while seeking to extend flexibility on grant conditions. More information is available at the government's Community Grants Hub.  

It’s also important that boards deliver a clear and managed message to retain donors.  For larger donors, the board may consider regular and individual communication, including providing frequent updates and seeking donor input.  While smaller donors may require monthly newsletters or report updates.  We recommend considering a COVID-19 newsletter to keep donors informed. 

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3. Can I secure additional or emergency funding?

The Federal Government’s 'cash flow boost' will provide a tax-free cash boost of between $20,000 and $100,000 to eligible businesses, including not-for-profits. 

The cash flow boost is available to not-for-profits with an aggregated annual turnover under $50million (which is generally based on prior year turnover).  The not-for-profit will also need to have had an Australian business number on 12 March 2020 (or have been an ACNC-registered charity any time between 1 January 2020 and 30 June 2020).  

To be eligible, the not-for-profit organisation will also need to have made payments to an employee or director where there is a withholding obligation. 

If your organisation is eligible, you don’t need to make a separate application - simply lodge your activity statement (either a monthly March 2020 or quarterly March 2020 activity statement).  The boost will be delivered as credits not payments.

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4. How can I reduce costs?

You will need to consider cost reduction across all areas of the organisation's operation urgently.  If your not-for-profit is renting premises, the Federal Government has agreed to a six month moratorium on evictions for commercial tenants.

If your operations have stopped or are severely impacted, consider reviewing all your contracts with clients, suppliers and government departments.  You should give some thought to the potential implications of those contracts and whether your not-for-profit can meet the obligations now that circumstances have changed. By having conversations with suppliers now, your organisation can also try to extend terms of trade where needed, or terminate contracts where possible.  You will need to be mindful of any wrongful termination provisions in the contract, if a party's right to terminate under force majeure is disputed.

Read more about your organisation’s options if it can’t comply with contractual responsibilities because of the COVID-19 outbreak here.

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5. How can I make sure I can retain my employees?

The Coronavirus Economic Response Package (Payments and Benefits) Bill (passed on 8 April 2020), provides for the JobKeeper scheme. Under this scheme, employers will receive $1,500 per eligible employee, per fortnight for at least 6 months.  Eligible employees include full -time, part-time and long term casuals (who have been employed on a regular basis for at least 12 months).

Charities registered with the Australian Charities and Not-for-profits Commission (ACNC) will be eligible for the payment if they estimate their turnover has fallen or will likely fall by 15 per cent or more relative to a comparable period. 

Note, however, that the Australian Government and its agencies, State and Territory governments and their agencies, foreign governments and their agencies, local governments and wholly-owned corporations of these bodies are not eligible for the JobKeeper payment. Read more about the JobKeeper payment here.

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6. How can I protect our staff (including volunteers)?

We have addressed this question here.

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7. I've heard about groups adopting a COVID-19 policy.  What is it and do we need one?

We recommend you establish a COVID-19 policy, which sets out the rules and procedures your not-for-profit will implement for the duration of the COVID-19 crisis.  
A COVID-19 policy may include a number of measures, including:
  • a 'positive action plan' that sets out what measures employees and volunteers should follow to reduce their exposure to COVID-19 and what happens if they develop symptoms or test positive for COVID-19
  • working from home strategies to protect employees and volunteers
  • a communication strategy that sets out how you will be communicating with each stakeholder, ensuring the board considers opinions and concerns of key stakeholders during this crisis, and
  • providing mental health support to volunteers and employees, and ensuring the board has a clear understanding of the duty of care required in relation to changing work arrangements and the importance of ongoing communication

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8. What is a business continuity plan and what should it include?

A business continuity plan (BCP) prepares your organisation to carry on ‘business as usual’ if there is an incident or a crisis.  When a crisis occurs, boards and management must be aligned in terms of preparation required for the short and long term.  A BCP facilitates this and allows you to provide a considered and effective approach to restoring and resuming operational normality during the crisis.  

Your organisation may already have a BCP in place under its risk management procedures, disaster planning procedures or general emergency management.  The size and complexity of your BCP will depend on the nature of your not-for-profit, the services it provides and its overall functions.

We recommend you establish a BCP (or update your existing BCP) to set out how you continue 'business as usual' during a pandemic.  This may include considering alternative supply resources due to border restrictions, considering the availability of laptops and telecommunication data for working from home and enforcing data privacy policies.  Your COVID-19 policy will also set out many of these measures.

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9. Should the board change the way it meets during COVID-19?

Boards should meet more frequently with management and employees, and aim to establish a rhythm of frequent meetings, for the duration of the crisis.  You may also consider establishing a crisis management team, which reports back to the board on the organisation’s response to the crisis.  

A structured agenda becomes important during times of uncertainty, as they channel the direction of your meetings and provides a clear plan.

Agendas are also particularly useful when boards are adjusting to meeting electronically for the first time.  Make sure all directors have access to electronic platforms so the board can function electronically.  There are a number of platforms that provide cost-effective meeting technology including Zoom (free to download), Skype (free to download), google hangouts premium (free until 1 July 2020), Microsoft Teams (free for six months), and GoToMeeting (free for three months). Be mindful of using appropriate security and privacy measures for online meetings such as protecting passwords and meetings IDs.

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10. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?

In light of the physical distancing and shutdown requirements imposed during the COVID-19 pandemic, you need to decide if your not-for-profit organisation can hold its AGM remotely through the use of technology or if you should postpone the meeting until restrictions are lifted. We’ve produced a short resource that explains which organisations may do this and which may need to seek advice before proceeding.

Whether or not your organisation can hold general meetings remotely will depend on your rules, the law in your state, and the approach of your regulator. We understand that all of this may be confusing, so we want to reassure you that the most important thing you can do at this time is act in good faith and be clear in your communications with your members. Regulators are likely to take a facilitative approach given the current circumstances.

The legislation governing companies limited by guarantee, the Corporations Act, has been amended from 6 May 2020 to allow companies to hold AGMs through the use of technology such as video conferencing and to provide notice of those meetings electronically (for example, by email). The changes mean that as long as members are given an opportunity to participate, vote, speak, and put questions to the board at the meeting, companies are able to hold their AGMs remotely regardless of what it says in the organisation’s governing document. The changes are temporary and will remain in effect until 6 November 2020.
 
In addition to this change, the regulators have also adopted flexible approaches to enforcement:
  • ASIC has announced it will take no action against companies that would usually be required to hold their AGMs between 31 December 2019 and 7 July 2020, so long as those companies hold their AGM within 7 months of the end of the company’s financial year. For companies with a financial year ending between June 1 and July 7, the ‘no action’ position also applies where holding an AGM in January or February 2021 results in the requirement to hold an AGM in the 2020 calendar year not being met
  • the ACNC has advised that AGMs of registered charities can be postponed if they can’t be conducted safely and will not take action unless there is evidence of wider non-compliance.

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11. Could our organisation be required to repay membership fees if our usual operations or activities cease because of COVID-19?

There isn’t a one-size-fits all answer to this question, and the answer will depend on your organisation’s constitution or by-laws.

Membership of a not-for-profit is not the same as a contract between a consumer and a supplier for the supply of ordinary goods or services. Membership of a not-for-profit is something different altogether, governed ultimately by the constitution (rules or by-laws), which defines and regulates the organisation’s relationship with its members (and between the members themselves). Typically, membership fees in the not-for-profit context are fees paid to further the overall purpose of the organisation and not to provide an individual or group paying the fee a direct benefit.

Usually the constitution of a not-for-profit doesn't promise the supply of any goods or services. In certain circumstances, it may give rights to members to use the organisation’s facilities or services, but only when those facilities or services are available to be used, not for example in the middle of the night and not, for example, in times of war or pandemic – including government mandated lock down.

It is very unlikely that a decision by a not-for-profit to cease operations, or provide a limited service, because of COVID-19 would be a ‘breach of membership contract’ requiring compensation (such as repayment of membership fees).

Despite uncertainty about the impact of COVID-19 on your organisation’s service offering or activity, your organisation can still seek annual membership payments for the financial year 2020-2021 with little risk that a member is entitled to ask for membership fees to be repaid (once again, this will depend on your constitution or by-laws). It’s important to be clear with your members about:

  • the need for membership fees to ensure service continuity (if this is the case)
  • the uncertain impact of COVID-19 on the organisation’s service or activities for the foreseeable future (that is, you are unsure about what you will and will not be able to offer in FY20-21), and
  • what it means if membership fees are not paid (generally that the person or group is no longer a member)

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Back to main COVID-19 page

If your organisation needs legal assistance about operating your not-for-profit in the time of COVID-19, you can submit an enquiry on our website.
We have many other free resources that may be relevant to you. Access our complete library of resources on running the organisation, reporting to government and tax.
Last Updated: 10 July 2020