Better Governance for a Changing Environment

Better Governance for a Changing Environment BETTER GOVERNANCE FOR A CHANGING ENVIRONMENT Presented by Julia Sweeney, Partner Fisher Jeffries p 8233 0600e jsweeney@fisherjeffries.com.auw fisherjeffries.com.au

Structure • Company limited by guarantee • Corporations Act 2001 (Cth) • Incorporated Association • Associations Incorporation Act 1985 (SA) • Unincorporated Association • Trust • Partnership

Not for Profit • not for profit • charity • current definition • new definition • tax exempt • deductible gift recipient

Not for Profit Reform • The Australian Charities and Not-for-Profits Commission (ACNC) • from 1 November 2012 • until 30 June 2014, will only register and regulate charities • NFPs that are not charities will continue to be regulated by the Australian Taxation Office and their respective State legislation

Other Reform • “gag clauses” • “in Australia” • “unrelated businesses” • Fund raising legislation • NFP Consultation Code • Commonwealth Grant Guidelines • Red tape reduction

Reporting to the ACNC • Registration • annual information statement • financial information • a “charity passport” • notification of changes • record keeping

Resources • Australian Charities and Not for Profits Commission • www.acnc.gov.au • Facebook.com/acnc.gov.au • Twitter.com/acnc_gov_au • Youtube.com/ACNC videos • linkedin • Treasury • www.treasury.gov.au

Resources • Australian Taxation Office • www.ato.gov.au/Non-profit • Office for the Not for Profit Sector • www.notforprofit.gov.au • National Compact • www.nationalcompact.gov.au

Duties of Individuals • Directors • Officers • Committee Members • Responsible Entity

Top 10 Tips for Charity Directors/Officers/Committee Members • Know what your charity’s purpose is • Be clear about your role • Understand your charity’s financial position • Know your responsibilities • Have a copy of your rules • Don’t just follow the crowd • Know your charity’s obligations • Work as part of a team • Declare and manage conflicts of interest • Always act in your charity’s best interest

Duties Owed to the Entity • Directors’ duties are owed to the entity and the entity is defined as the owners (members) or the objects • Once a group has elected a member they assume office as a member of the board with a duty to serve its interests in preference to serving the interests of the group which elected them • Nominee directors

Common Law Duties • Good faith • act bona fide • act for a proper purpose • avoid conflicts of interest • Care and diligence

Statutory Duties – Corporations Act • Care and diligence • s 180 • Good faith • s 181 • Not to make improper use of position • s 182 • Not to make improper use of information • s 183 • Not to trade while insolvent • s 588G

Statutory Duties – Associations Incorporation Act • not intentionally deceive or defraud the association • s 39A(1) • not make improper use of information • s 39A(2) • not make improper use of position • s 39A(3) • care and diligence • s 39A(4)

Use of Information or Position • Diversion of a corporate opportunity

Care and Diligence Example • In FY 2007 Financial Statements: • failure to disclose certain guarantees • incorrect classification of non-current liabilities • Directors were aware of liquidity stresses from US acquisition • Had seen figures on true position around 2 months before sign off of accounts

Care and Diligence • Don’t come to court arguing: • relied on auditors • relied on audit committee • not an accountant • papers too numerous to read everything

Exercising Care and Diligence • Attend meetings regularly • Read board papers and other information provided • Be an active participant in meetings and ask pertinent questions • Bring an open mind to any decision and consider all relevant information • Become familiar with the “business” and operations of the organisation, and its functions and the board’s responsibilities and duties

Exercising Care and Diligence • Don’t rely on expert advice without understanding and “bringing your own mind to the decision required” • Ensure that delegations and policies are in place for administration • Ensure adequate monitoring of operations • Ensure minutes properly reflect the discussion and decisions and are circulated soon after the meeting • Ensure a rolling action list to keep track of business arising

Conflicts of Interest • Obligation to disclose - statutory • SS/91-195 Corporations Act 2001 • S31 Associations Incorporation Act 1985 • Voting • Present at meeting

Directors’ Rights and Protections • Delegate within a board-endorsed policy framework • Deed of access, indemnity and insurance • Right to information – especially financial information

Directors’ Rights and Protections • Right to call a board meeting • Right to professional advice • Insurance: directors’ and officers’ liability insurance

Better Governance for a Changing Environment