The constitution is the governing document for all Not-for-profit’s (NFP).
NFPs are generally the following structures in Australia:
- Australian public company limited by guarantee
- Australian private company limited by shares
- Incorporated association
The most popular is a company limited by guarantee and depending on the structure the constitution is often referred to as the charter or the rules.
As the governing document the constitution must comply with the laws that are relevant to your NFP which may be the Corporations Act 2001 (Cth) and the Associations Incorporation Act of the State or Territory it is registered in.
Most importantly if your NFP is a charity, the constitution must comply with the Australian Charities and Not-for-Profit Commission (ACNC) Act 2012.
The ACNC issues Governance Standards which must be complied with.
A constitution is a living document and should be reviewed regularly as part of a good governance regime to ensure it continues to serve the purposes and objectives of the NFP.
It is also important to ensure that it continues to comply with all legislative requirements including taxation requirements particularly relating to any tax endorsements or concessions.
We generally suggest a constitutional review every two to three years, but if your organisation is a charity, you may wish to review your constitution sooner, to ensure that it complies with the recent changes introduced by the ACNC.
We are often asked when drafting or reviewing a constitution what are the main areas to consider. They are the:
- Board or Committee
The objects must clearly reflect:
- what the NFP does and how it will achieve its purpose and goals
- ensure that it satisfies the criteria for any legal and taxation requirements
- the ability to grow and develop
- if it is a charity that it can comply with ACNC legislation
Board or Committee
It is important to determine whether the NFP is best served by a board or committee and will generally depend on the type of structure.
The constitution should ensure the Board or committee has:
- the relevant skills and perspectives to ensure it meets its objects
- procedures in place for appointing and electing the people and the size of the board or committee
- procedures for holding and convening meetings including annual general meetings
- mechanisms to admit members and whether members of the board or committee need to be members
- guidance on whether the directors or members be remunerated or not.
These are just some of the matters that need to be considered.
Importantly it is important that it the constitution be drafted to consider a range of issues and these need to be reviewed.
The constitution must consider how the membership structure works for your NFP.
It is important when considering membership that you:
- consider the criteria for eligibility and what type or classes of members you will have
- have an appropriate application procedure in place
- consider membership fees
- outline clearly what members can and can’t do including their voting rights
- have procedures in place to discipline and expel members
When should you review your constitution?
There is no specific requirement as to when you should review a constitution, but we recommend every two years the board or committee should have it on its agenda from a governance perspective.
How can FC Lawyers assist your not-for-profit?
FC Lawyers have an experienced team that have been involved in the NFP and charity sector for nearly 30 years acting for a range of organisations across many different sectors.
Our team also serves on numerous NFP and charity boards as chairs, directors, and members.
Contact our team to discuss your not-for-profit constitution or if you have any other charity law legal needs.
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