Not-for-profit Law
Legal help for community organisations

Governance

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Scroll down for answers and information on:

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

  • New 'safe harbour' insolvency provisions for company directors

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. We are also working hard to secure a blanket exemption on any requirements for not-for-profits to hold face-to-face meetings for the remainder of the pandemic.

If your organisation needs legal assistance about holding meetings, or generally operating your not-for-profit in the time of COVID-19, you can submit an enquiry on our website.

New ‘safe harbour’ insolvency provisions for company directors

Company directors (and committee members of incorporated associations) have a duty to make sure the organisation is not trading while insolvent. In the current health crisis, circumstances are changing and evolving on a day-to-day basis. This can make it difficult for directors to foresee insolvent trading.

In response to COVID-19, on 24 March 2020, the Federal Government passed legislation (as part of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth)) to protect directors of companies registered under the Corporations Act 2001 (Cth) from breaching this duty for the next 6 months. The protection only applies to debt incurred ‘in the ordinary course of the company’s business’ between 24 March 2020 and 23 September 2020 (though the period could be extended). The legislation doesn’t specify the size of the debt for the protection to apply, however, the language in the memorandum explaining the new law suggests ‘ordinary course’ may include initiatives (and associated debts) outside existing operations. Regulations are expected to clarify this issue.

The Australian Charities and Not-for-profits Commission (ACNC) has confirmed that, provided certain conditions are met, it will align with this approach to cover all charities (not only charities that are structured as companies limited by guarantee). To receive this protection, the charity must inform the ACNC and its members if it’s trading while insolvent and make sure its ‘Responsible Persons’ (its governing body, like its board or committee of management) is aware of the issues and has an achievable aim to return to solvency.

How does this temporary relief apply to not-for-profit organisations?

Your group is likely to be subject to the temporary relief if you are:

  • a company limited by guarantee incorporated under the Corporations Act 2001 (Cth) and/or
  • registered as a charity with the ACNC (search the ACNC register to check if you are registered)

If you are an incorporated association that is not an ACNC registered charity, your eligibility for the relief will depend on the state or territory in which you incorporated.

To summarise:

ACNC-registered charity (whether a company limited by guarantee or an incorporated association):
  • The temporary protections will apply.
  • ACNC Governance Standard 5 imposes additional insolvent trading duties on ‘Responsible Persons’ (directors and others involved in governing the company) of charities. The ACNC has said it will apply Governance Standard 5 in line with the temporary relief provisions. Importantly though, the ACNC will adopt this position for all charities on that condition that the charity informs its members and the ACNC of its financial distress, and takes measures with the reasonable aim of returning to solvency. The ACNC will only apply Governance Standard 5 in accordance with the safe harbour protections, if the charity's COVID-19 activities align with its purpose, or if it can reasonably show its members approve of such activities that are ancillary or incidental to its purpose.  
Non- ACNC registered charities:

Company limited by guarantee

  • The temporary protections will apply.

Incorporated association

  • The temporary protections may apply to committee members, depending on which state or territory you are incorporated in.In Victoria, the incorporated associations legislation adopts provisions of the Corporations Act 2001 relating to insolvent trading which means that any new ‘safe harbour’ provision will apply. The position remains unclear in other states and territories. We are seeking specialist advice on the position in these jurisdictions. We will update this information as we receive further clarification on the position of the regulators.

The Australian Institute of Directors has written an article about the implications of the new safe harbour provisions on company directors.

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

Last Updated: 02 April 2020

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