GUIDE TO THE ACNC’S TEMPLATE
CONSTITUTION FOR A CHARITABLE
COMPANY LIMITED BY GUARANTEE
The template constitution and guide have been developed by the ACNC
in close consultation with the ATO, ASIC and a number of professional
advisers.
Disclaimer
This guide is for general information purposes only and does not constitute
legal, accounting or other professional advice. This guide does not address
every requirement and obligation under the Australian Charities and Notfor-profits Commission Act 2012 (Cth), the Corporations Act 2001 (Cth), or
under law applicable to charitable companies generally.
All external resources listed in this guide are for convenience only and do
not constitute an endorsement or recommendation of any external material.
The template constitution is also only for general information purposes and
is intended to be used as a starting point for small charities preparing their
own constitutions. This means that small charities should use the template
constitution as a guide only, and adopt a constitution that is suitable for their
own individual needs and circumstances. You should seek professional advice if you need help understanding the
template constitution or in deciding if it is suitable for your charity.
The ACNC’s general disclaimer, which is set out on the ACNC’s website,
applies to this guide and the template constitution.
This guide reflects the law as at 8 December 2014. Changes to the
Corporations Act 2001 (Cth) (in particular, the operation of certain provisions
in relation to registered charity), may affect the accuracy of this guide and
the template constitution.
Contact us
phone 13 ACNC
fax 1300 232 569
visit acnc.gov.au
email [email protected]
© Copyright 2014
GPO Box 5108
Melbourne VIC 3001
You are free to copy, adapt, modify, transmit and distribute this material as you
wish (but not in any way that suggests the ACNC or the Commonwealth endorses
you or any of your services or products).
Follow us
Introduction from the Commissioner
Public trust and confidence in charities depends on
good governance, clear purpose and accountability.
The ACNC’s work in encouraging healthy, trusted charities now includes
our template constitution for charitable companies limited by guarantee.
With 10 per cent of registered charities across Australia being companies
limited by guarantee, this straightforward, modern set of rules assists these
charities to be well-governed and transparent. It can be adapted by charities
to suit their circumstances.
By using the template constitution, small charities with minimal resources
can be confident that their rules meet legal requirements and form a strong
foundation for their important charitable work. This guide to the template
constitution will assist charitable companies to ensure that they have the
rules that are right for them.
The ACNC is grateful to our Advisory Board, professional and sector user
groups and focus group participants for their valuable contributions to the
template constitution and this guide.
This resource is part of the ACNC’s ongoing work in supporting a robust,
vibrant and trusted charities sector in Australia.
Good wishes
Susan Pascoe
visit acnc.gov.au phone 13 ACNC
1
Contents
Introduction from the Commissioner
1
Checklist3
About this guide
4
Preliminary clauses
8
Charitable purposes and powers 10
Members13
Dispute resolution and disciplinary procedures
16
General meetings of members
18
Members’ resolutions and statements
23
Voting at general meetings
25
Directors27
Powers of directors
31
Duties of directors
34
Directors’ meetings
36
Secretary38
2
Minutes, records and by-laws
39
Notices and financial year
41
Indemnity, insurance and access
42
Winding up
44
Definitions and interpretation
47
visit acnc.gov.au phone 13 ACNC
Checklist
This checklist contains information you need to consider when
completing the ACNC’s template constitution for a charitable
company limited by guarantee.
Do you know, or have you decided:
he name of your company,
T
Australian Business Number (ABN)
and Australian Company Number (ACN)
(cover page and clause 1)
You should write down this information when
it is available.
he amount of the guarantee
T
(clause 4)
How much will members need to pay towards
certain debts if the company winds up? For an
existing company, this must be the same amount
as in your existing constitution.
our company’s charitable purpose(s)
Y
(clause 6)
Why has your organisation been set up and what
will you work towards achieving? This is also called
your company’s mission. See our guidance on
what charitable purposes are, with examples of
charitable purposes.
Existing companies should review the guidance
on clause 6 for more information.
The quorum required for a
general meeting
(clause 22)
How many members will need to be at a
general meeting to make a quorum (the number
required to attend before the meeting can be
held)? See the guidance on clause 22 for more
information.
How many directors your company
has (clause
38)
The template constitution allows for 3 to 9
directors, but you may wish to change this
number. Your company must have at least 3
directors. See the guidance on clause 38 for
more information.
ow many meetings a director can miss
H
before they stop being a director
(clause 42)
Your company needs its directors to be actively
involved in managing the company, which includes
attending meetings. How many directors’ meetings
will your company allow a director to miss without
the other directors agreeing? See the guidance on
clause 42 for more information.
hether the directors will receive
W
fees (clause 45)
Under the template constitution, directors
cannot receive fees for acting as directors. You
may choose to change this, however there are
certain legal consequences if your company pays
its directors fees. See the guidance on clause 45
for more information.
he quorum required for a directors’
T
meeting (clause 52)
The default quorum in the template constitution
is a majority of directors (more than 50%). You
should check whether your charity needs to have
a specified minimum quorum (for example, a state
fundraising authority may impose conditions on a
fundraising licence requiring a quorum of at least
three directors). See the guidance on clause 52
for more information.
hen your company’s financial year
W
runs (clause 64)
The default financial year in the template
constitution is 1 July to 30 June. If your company’s
financial year is different, as a registered charity
you must apply to the ACNC for a substituted
accounting period.
hether you have or want to register for
W
deductible gift recipient (DGR) status
(optional clause)
If you want to keep or register for DGR status,
there are additional legal requirements for your
constitution. See the guidance on clause 69
and our DGR factsheet.
visit acnc.gov.au phone 13 ACNC
3
About this guide
Who is this guide for?
This guide explains the Australian Charities
and Not-for-profits Commission’s (ACNC’s)
template constitution for charitable
companies limited by guarantee (the
template constitution).
The template constitution, this guide and
related resources are available at acnc.gov.
au/clgconstitution.
The template constitution provides a
basic set of rules for a company limited
by guarantee with charitable purposes that
has a small, straightforward membership.
The template constitution is not appropriate
for charities that need complex rules (for
example, for membership or for election
procedures).
The template constitution and this
guide are written using plain language
as much possible.
Your charity’s legal structure affects things
such as where you can operate, what
must be in your governing documents
and your reporting obligations. If you
are unsure whether to incorporate as
a company limited by guarantee and/
or use the template constitution for your
charity, it is important to get professional
advice. Your local state or territory
legal groups can help you find legal
assistance.
What is a charitable company
limited by guarantee?
A company has a legal identity separate
from its members. It can own property,
can sue and be sued, and its registration is
recognised across Australia. This may be
important to you if you wish to operate your
organisation or conduct fundraising events
in more than one state or territory.
A company limited by guarantee is a type
of public company. Its members are only
liable to contribute a certain amount to
the property of the company if it is wound
up (permanently closed). Companies
limited by guarantee are incorporated
under the Corporations Act 2001 (Cth)
(the Corporations Act) and regulated by
the Australian Securities and Investments
Commission (ASIC).
A charitable company is a company that
meets the requirements to be registered as
a charity under the Australian Charities and
Not-for-profits Commission Act 2012 (the
ACNC Act). The main requirements are that
it operates on a not-for-profit basis and only
has charitable purposes that benefit the
public.
A registered charity is a charity that is
registered under the ACNC Act.
More information
For more information, see our guidance
on companies limited by guarantee and
the ACNC.
External information
For more information, see ASIC’s guidance
on charities registered with the ACNC.
4
visit acnc.gov.au phone 13 ACNC
What is a company
constitution?
A constitution is a document that sets
out a company’s rules and purposes. It
is broken down into numbered clauses,
with sub-clauses.
All companies that want to register as
charities with the ACNC must have a
constitution, which the ACNC refers to as
the charity’s ‘governing document’.
The Corporations Act explains that a
constitution operates as a contract (legal
agreement) between:
Mandatory clauses
Some clauses are listed as mandatory in
the template constitution (they should not
be changed or removed). This is because
they provide important information about
the company (such as the guarantee
amount in clause 4) or are necessary
to make sure the company is charitable
(such as the not-for-profit requirement in
clause 8).
Mandatory clauses have M next to
them in this guide.
■■ the company and each member
■■ the company and each director and
secretary, and
■■ the company’s members.
More information
For more information, see the ACNC’s
guidance on governing documents.
External resources
For more information, see the following:
■■ ASIC’s guidance on constitutions and
replaceable rules
■■ Justice Connect Not-for-profit Law’s
guidance on rules or constitutions.
Legal requirements for
company constitutions
There are certain legal requirements for
the governing documents of charitable
companies.
In addition, the template constitution
provides rules for good governance by
setting out operational rules that apply
to members (such as how they become
and stop being members and how to hold
meetings) and operational or governance
matters (such as election of directors,
directors’ meetings and indemnities).
Some clauses in the template constitution
reproduce requirements in the Corporations
Act. The guidance tells you where this is
this case.
Replaceable rules
The replaceable rules are sections in the
Corporations Act which are a default set
of rules for the internal management of
companies. Replaceable rules can be
wholly or partly replaced by clauses in a
company’s constitution.
Clause 71 of the template constitution
provides that the replaceable rules do not
apply to the company. However, many
clauses in the template constitution are
based on a replaceable rule, as they
cover useful operational matters for the
governance of companies. Clauses may be
worded slightly differently, leave out parts
that are not applicable to a small company
limited by guarantee or provide more detail
than in the replaceable rule.
The table ‘Laws relevant to the ACNC’s
template constitution for a charitable
company limited by guarantee’ identifies
the replaceable rules with the relevant
clauses in the template constitution.
This table is available at acnc.gov.au/
clgconstitution.
visit acnc.gov.au phone 13 ACNC
5
Changes to legal requirements
The template constitution complies with
and reflects the requirements under the
Corporations Act and ACNC Act as at 10
November 2014.
The ACNC legislation has ‘switched off’
some requirements of the Corporations
Act for companies that are registered
as charities with the ACNC (such as
requirements for holding meetings).
If the ACNC Act is amended or repealed
(revoked), the requirements under the
Corporations Act are likely to apply again
to charitable companies (that is, the
Corporations Act requirements will ‘switch’
back on).
If this happens, there may be clauses
in your constitution that appear to be
inconsistent with the Corporations Act
(particularly if you have amended the
template constitution). In such a case,
the Corporations Act provisions will apply,
even though your constitution may say
something different (see guidance on
clause 71). This ensures that you do not
breach your constitution if you have to
follow an inconsistent Corporations Act
requirement.
Clause 71 of the template constitution
specifies that the Corporations Act
overrides the constitution if they are
inconsistent.
How to use the template
constitution and guide
Using the template constitution
The template constitution is a basic set of
rules for a charitable company. It can be
used as a governing document with some
small additions, or it can be changed to suit
your charity.
If the template constitution is used for a
company that has or wants deductible
gift recipient (DGR) status, you will need
to include an alternative clause 69 – see
clause 69 in this guide.
The template constitution includes clauses
to deal with the most common governance
requirements for charitable companies.
Existing companies
If you want to replace your existing
company’s constitution with the template
constitution, you may need to keep some
parts of your existing constitution (for
example, the amount of the guarantee that
members agree to pay, which is in clause 4
of the template constitution). You may also
need to get professional advice.
New companies
If you want to set up a new charitable
company and use the template
constitution, you can find more information
including:
■■ the ACNC’s guidance on starting a
charity and registering your charity with
the ACNC
■■ ASIC’s guidance on registering a not-for-
profit or charitable organisation
■■ Justice Connect Not-for-profit Law’s
guidance on choosing a legal structure.
If you change parts of the template
constitution to suit your charity:
■■ keep a version with tracked or
recorded changes so that it is clear
where your company’s constitution is
different to the template constitution,
and
■■ check the effect on other clauses, as
some clauses are related (for example,
clauses on voting).
You may also need to get professional
advice (for example, to make sure
that your constitution complies with
requirements under the Corporations Act
and the ACNC Act).
6
visit acnc.gov.au phone 13 ACNC
Using this guide
Using the checklist
This guide explains every clause in the
template constitution in plain language.
You can use it while you review the
template constitution to decide whether
it is suitable for your company and, if so,
what may need to be changed to fit your
company’s needs.
The checklist at the beginning of this guide
tells you the main things you need to think
about when preparing your constitution.
This guide provides alternative options
for some clauses. These may suit your
company’s situation better.
This guide also shows you which clauses
are mandatory to have in a constitution for
a charitable company.
The table ‘Laws relevant to the ACNC’s
template constitution for a charitable
company limited by guarantee’ tells
you which section or sections of the
Corporations Act are relevant to each
clause.
However, you should review the whole
template constitution to make sure it is
suitable for your charity.
More information
The template constitution, this guide and
the table of laws relevant to the template
constitution are available at acnc.gov.au/
clgconstitution.
For information on charity governance, see:
■■ Governance for good: The ACNC’s guide
for charity board members
■■ ACNC governance standards.
For further external information, see:
■■ Governance Institute of Australia: Good
Governance Guides
■■ Institute of Community Directors
Australia: Tools & Resources.
visit acnc.gov.au phone 13 ACNC
7
Preliminary clauses
Cover page
Preliminary
The cover page of the template constitution
requires you to include the company name
(see clause 1), the company’s Australian
Business Number (ABN) and Australian
Company Number (ACN).
The preliminary clauses (1 to 4) set out
your company’s name and type, and the
guarantee that members must agree to
pay towards certain debts or liabilities if
the company winds up (closes). Clause
5 provides a ‘signpost’ to the definition
sections at the end of the template
constitution.
New company
You will not have an ABN or ACN before
you register as a company with ASIC, but
can add that information when you are
given it.
Existing company
If the company is already incorporated and
you are replacing your existing constitution
with the template constitution, you should
be able to add all of these details.
You can find your existing company’s
ABN and ACN by searching the Australian
Business Register’s ABN Lookup website.
The disclaimer on the cover page
explains how the template constitution
should be used. You should remove the
disclaimer when preparing your own
constitution.
technology
notice
definitions
dispute
directors
purposes
voting
minutes
payments
guarantee
resolutions
documents
winding
not-for-profit
meeting
indemnity
access
appointment
meetings
membership
duties
assests
auditor
annual
charitable
statements
disciplining
conflicts
records
powers
general
by-laws
amending
quorum
insurance
surplus
proxy
secretary
representatives
members
resolution
chairperson
election
register
interest
M Clause 1 – Name of the company
In clause 1, write the company name. See
the ASIC website at www.asic.gov.au for
more information on name availability
and to reserve your charity’s name.
The company’s legal name is the name
specified in the certificate of registration
issued by ASIC and will be published on
the ACNC Register. You can check on the
ASIC website to see if the name you want
for your company is available.
You may also wish to check the ACNC
Register to see whether any other charities
have that name.
There are restrictions in the Corporations
Act on the name your company can
have. For example, your name cannot be
offensive or misleading, and may require
certain approvals if it includes certain words
such as ‘trust’ or ‘bank’.
As a company limited by guarantee, the
Corporations Act requires your company to
have the word ‘Limited’ or ‘Ltd’ at the end
of its name. However, after you register with
the ACNC as a charity, you do not have to
use the word ‘Limited’ or ‘Ltd’ at the end
of the company’s name as long as your
constitution (as the template constitution
does in clause 45):
■■ prohibits the company from paying fees
to directors, and
■■ requires the directors to approve all other
payments that the company makes to
directors.
8
visit acnc.gov.au phone 13 ACNC
Clause 2 – Type of company
This clause explains that the company
is a company limited by guarantee and
was established to be (and continue as)
a charity.
M Clause 3 – Limited liability
of members
Members of a company need to
know what they may possibly be liable
(responsible) for if the company is wound
up (closed down) and cannot pay its
debts or liabilities. Under the Corporations
Act, members of a company limited by
guarantee do not have to pay more than
the amount that each member agrees to
contribute to the company if this happens.
Clause 3 sets this out.
Members must agree to comply with the
constitution when they join the company,
which includes agreeing to pay the
guarantee if it is needed (see clause
12(c)).
M Clause 4 – The guarantee
In clause 4, write the amount of the
guarantee that members may be required
to pay if your company is wound up.
The guarantee is a key feature of this type
of company. The company can decide
what the amount of the guarantee will be.
It is often as little as $10. Clause 4 also
sets out the time and circumstances during
which a member may be liable (under the
Corporations Act).
Clause 12 requires a person to agree to
pay the guarantee if it is needed when that
person applies to be a member.
If you change your existing constitution,
or adopt the template constitution as a
replacement for an existing constitution,
you cannot change the amount of the
guarantee (as it is the amount that
your members have already agreed
to pay). Make sure that the amount of
the guarantee stated in your existing
constitution is inserted in clause 4.
Clause 5 – Definitions
Some words in the template constitution
have special meanings. These words are
defined in clauses 70 and 72.
visit acnc.gov.au phone 13 ACNC
9
Charitable purposes and powers
M Clause 6 – Purpose(s)
In clause 6, write your company’s
charitable purpose(s). The ACNC provides
examples of charitable purposes that you
can use as a guide when writing your
purpose or purposes.
You must notify the ACNC within 28 days
if your charity is significantly not meeting
its ongoing obligations under the ACNC
Act. This includes if your charity changes
its:
■■ activities, so that it is no longer working
towards its charitable purpose, or
■■ purpose, so that it is no longer
Clause 6 sets out your charity’s purpose.
Your purpose is very important, as it is the
reason that the company exists and is what
its activities work towards achieving.
Governance standard 1 requires all
charities that are registered with the
ACNC to show that they have a charitable
purpose. Including your charitable purpose
in your constitution helps it to meet this
requirement.
New company
If you are setting up a new company, the
purpose should be carefully decided before
you include it in clause 6. Your purpose can
be general or specific. It will depend on why
you are setting up your company and what
you plan to do in the future.
If your charitable purpose expands or
becomes more focused in the future,
you should reflect this by updating your
constitution by the members passing a
special resolution (see clause 9).
Existing company
If you are using the template constitution
to replace an existing constitution, you
should closely reflect the company’s current
purpose in clause 6.
10
visit acnc.gov.au phone 13 ACNC
charitable.
M Clause 7 – Powers
Under the Corporations Act, companies
have all of the powers of an individual
and some additional powers relevant to
companies. Clause 7 ensures that these
powers can only be used to achieve its
charitable purpose(s).
Your constitution must have a clause like
this to limit the powers of the company to
what it needs to carry out its purpose(s).
Governance standard 1 requires all
charities that are registered with the ACNC
to show that they:
■■ work towards their charitable purposes
(see clause 6), and
■■ operate on a not-for-profit basis (see
clause 8).
Including clause 7 in your constitution helps
to meet this requirement of governance
standard 1.
M Clause 8 – Not-for-profit
A company this is a registered charity
must operate on a not-for-profit basis.
See our guidance on the meaning of
not-for-profit.
Governance standard 1 requires registered
charities to show that they are established
to operate on a not-for-profit basis.
Including clause 8 in your constitution helps
to meet this requirement.
Operating on a not-for-profit basis does not
mean that a charity cannot make a profit. It
means that:
■■ any profits must be directed back into
achieving the purpose of the charity, and
■■ the company cannot operate for the
profit, personal gain or other benefit of
certain people, such as its members,
directors, employees or their friends or
relatives.
Clause 8 means that your company cannot
give members money or assets, except in
the very limited circumstances stated.
The Corporations Act does not allow a
company limited by guarantee to pay
dividends to its members, however some
payments to members may be allowed.
For example, your company can buy goods
from a member, as long as the company
does not pay more than a reasonable
amount for the goods.
Your company could also pay a member
specifically to further its charitable
purposes. For example, a peak body with
member companies that are all registered
charities and have the same charitable
purpose may provide money to a member
in order to assist that member to carry out
a particular project (which is in line with
their shared charitable purpose).
Clause 9 – Amending the constitution
Your constitution can only be amended
(changed) if the members pass a special
resolution agreeing to amend it. The
directors cannot amend the constitution
by themselves.
Clause 9 requires members to pass a
‘special resolution’ if they want to amend
the constitution. This is required by the
Corporations Act and applies whether this
clause is included in the constitution or not.
A resolution of members is a decision
agreed to by a majority of the company’s
members. The members vote on the
resolution at a meeting (or agree to a
‘circular resolution’ in writing under clause
31). There are extra requirements for
‘special resolutions’.
Special resolutions
A ‘special resolution’ is defined in
clause 70 and has the same meaning
as in the Corporations Act.
Before a special resolution can be
passed:
■■ a general meeting of members must
be called (see clause 18)
■■ members must be given notice
about the proposed resolution (see
clause 21), including the exact
wording of the special resolution,
and
■■ 75% of the members present at
the meeting (in person, by proxy or
representative) must vote to pass
that resolution.
visit acnc.gov.au phone 13 ACNC
11
As a charity, you cannot amend your
constitution in a way that means that the
company can no longer be a charity. For
example, the members cannot pass a
special resolution that would:
■■ add a non-charitable purpose (charitable
purposes are in clause 6)
■■ remove the restriction on the company
operating on a not-for-profit basis (clause
8), or
■■ remove the requirement that if the
company winds up (closes) it gives its
surplus assets to another charity with
similar charitable purposes, and not to its
members (clauses 68 and 69).
12
visit acnc.gov.au phone 13 ACNC
This applies whether this clause is included
or not – we recommend it is included as
a reminder for the directors and members
into the future.
If your company changes its constitution,
you must notify the ACNC through the
Charity Portal at charity.acnc.gov.au. If
your company’s legal name does not
have ‘Limited’, you must also notify ASIC
if you amend clause 45 (payments to
directors). Read our guidance on when
you need to contact the ACNC and ASIC
about changes.
Members
The members’ rights in the template
constitution include the right to:
■■ inspect some company documents,
including the minutes of general
meetings (clause 57) and the
register of members (clause 10)
■■ be given information about the
charity’s annual finances and other
activities at or before each annual
general meeting (clause 20)
■■ ask questions about the company
at a general meeting (clauses 20
and 27)
■■ provided a certain number of
members agree, request the
directors call a meeting (clause
18(2)), call meetings themselves
(clause 19), propose resolutions or
make statements (clause 29)
■■ receive notice of general meetings
Members of a company are
an important part of how
the company operates and
makes decisions. Clauses
10 to 15 govern who can be
a member, how they can
become a member and when
they stop being a member.
Rights and obligations
of members
Most of the rights and obligations of
members are set out throughout the
template constitution, but there are
other rights in the Corporations Act
which still apply. Some of the rights
set out in the template constitution
come from the Corporations Act,
while others help a charity to
demonstrate that it is complying with
the ACNC governance standards.
(clause 21) and attend general
meetings
■■ vote on resolutions (clause 32), or
appoint a proxy to vote on their
behalf at general meetings (clause
36), and
■■ vote on a resolution to appoint or
remove a director (clauses 39 and
42.1).
Under the template constitution,
members have an obligation to pay
the guarantee (if required) if the
company winds up while they are a
member, or less than 12 months after
they stopped being a member.
External resources
For more information on the rights
of members of a company limited by
guarantee, see the Justice Connect Notfor-profit Law guide to member rights
and obligations for companies limited by
guarantee.
visit acnc.gov.au phone 13 ACNC
13
Clause 10 – Membership and register
of members
A company must have at least one member
(under the Corporations Act). The template
constitution is designed for small, noncomplex memberships with at least two
members.
If you are only going to have one
member or a complex membership
structure, you should get professional
advice to adapt the template constitution
to your circumstances.
Clause 10.1 sets out who the members
are. The ‘initial members’ referred to in
clause 10.1 are defined in clause 70 as
the people who agreed to be named as
proposed members and are named in the
application for registration as a company
with ASIC (consistent with the Corporations
Act).
Clause 10.2 sets out the requirements
for the company’s register of members
(under the Corporations Act). The template
constitution makes the company’s
secretary responsible for maintaining the
register (but it is still up to the directors to
ensure that the register is kept up-to-date).
Clause 10.3 states that members
have a right to access the register of
members. This right is provided under
the Corporations Act, and requires a
company to:
■■ allow anyone to inspect the members’
register electronically, if an electronic
register exists, or otherwise on paper
■■ allow members to inspect the register for
free, however the company may charge
other people a fee for inspecting it (the
maximum fee for inspecting the register is
set out in Schedule 4 of the Corporations
Regulations 2001 (Cth) (the Corporations
Regulations)), and
■■ provide a copy of the register within
seven days of a proper request to do so.
The maximum fee for providing a copy of
the register is also set out in Schedule 4
of the Corporations Regulations.
14
visit acnc.gov.au phone 13 ACNC
Under the Corporations Act, the register for
members must be available for inspection
at all times when the registered office is
required to be open to the public.
Clause 10.4 restricts the use of any
information from the register of members
to matters relevant to rights and interests
of members (consistent with the
Corporations Act).
Clause 11 – Who can be a member
Under clause 11, any individual or
incorporated body that supports the
purpose(s) of the company is eligible to be
a member. This is very broad and easy to
administer. The directors may decide to
set out a membership policy explaining the
process for membership.
You may want more specific requirements
for membership in clause 11. For example,
you may want a requirement that a member
be at least 18 years of age on the date they
apply to be a member.
You should get legal advice if:
■■ you want to have a more complicated
membership structure, or
■■ you are replacing an existing
constitution and you already have
members in different classes of
membership.
Clause 12 – How to apply to become
a member
Clause 14 – When a person
becomes a member
Clause 12 provides a simple way to apply
for membership of the company. It requires
an applicant to:
Under the Corporations Act, a person is a
member of the company if they agree to
become a member of the company and
their name is entered on the register of
members.
■■ apply to be a member in writing, and
■■ agree to support the company’s
purposes and comply with the
constitution, including the guarantee.
The Corporations Act does not require a
membership application to be in writing,
however it is good practice to have a
record that the person applying to be
a member agreed to the purposes and
constitution of the company (including
the payment of the guarantee amount if
necessary).
If your company wants to charge
a membership fee (also called a
subscription), you may need to get legal
advice, as there are clauses that must be
amended, for example:
■■ clause 12 (How to apply to be a
member), to require a person to pay
the membership fee when applying to
be a member
■■ clause 13 (Directors decide on
membership) to require the secretary
to return any membership fee if the
application is rejected, and
■■ clause 15 (When a person stops being
a member), to say that a person stops
being a member if they do not pay
their membership fee after a certain
period.
Clause 13 – Directors decide whether
to approve membership
Clause 13 sets out when directors must
decide whether to admit a person as a
member and requires the secretary to notify
the applicant in writing of the decision, and
update the members’ register. As with any
decision made by directors, a decision
about membership must be recorded (for
example, in the minutes of the meeting).
Clause 14 therefore states that, other than
initial members, a person only becomes
a member once their details are entered
on the register of members. Under clause
12, the application for membership must
state that the applicant agrees to become
a member.
Clause 15 – When a person stops
being a member
Clause 15 sets out five situations where a
person immediately stops being a member.
Clause 15(b) applies to corporations
and other incorporated bodies, such as
incorporated associations.
You may wish to include other ways that
a person stops being a member of your
charity, for example, if your charity has an
annual membership fee, you may want to
include a clause that stops a person from
being a member if they have not paid the
membership fee after a particular time –
see the guidance on clause 12.
Example additional
subclauses: 15 – When
a person stops being a
member
Additional subclauses:
f) do not pay their membership fee within
[specified time period].
f) w
ere appointed for a period of
[specified time period] and that period
has ended without the person’s
membership being renewed.
visit acnc.gov.au phone 13 ACNC
15
Dispute resolution and
disciplinary procedures
It is important to have a clear,
agreed way to deal with
disputes (disagreements
or grievances) within the
company and to be able to
deal with members who are
causing problems for the
company.
It may also be necessary for fund raising
authorities in certain states (for example,
NSW) to have a procedure for dealing with
disputes between members relating to
fundraising activities.
The dispute resolution procedure
gives a way for members to solve their
disagreements in a constructive way. The
disciplinary procedure allows the directors
to make a decision about a member’s
rights for the benefit of the company
as a whole, if the member has acted
inappropriately.
Clause 16 – Dispute resolution
Disputes that members have with other
members, directors or the company itself
should be dealt with under the dispute
resolution procedure in clause 16.
A dispute resolution procedure cannot
be started in relation to something that
is already the subject of a disciplinary
procedure in clause 17 until the disciplinary
procedure is completed.
The people who are having a dispute must
try to resolve it between themselves first.
If that does not work, they must tell the
directors in writing about it, then start a
mediation process to try to resolve their
dispute in good faith (fairly and honestly). If
a mediator cannot be agreed on, the ACNC
Commissioner or your state or territory law
society can help you find a professional
mediator to help. The ACNC will not charge
a fee for this service.
Many disputes can be resolved through
mediation. Mediation is an informal and
flexible way of helping people to come up
with their own answers to problems.
More information
For more information on resolving
disputes, see the ACNC’s guidance on
dispute resolution.
External information
■■ Australian Small Business Commissioner:
Dispute Support (general advice for small
businesses)
■■ Justice Connect Not-for-profit Law:
Disputes and conflict
16
visit acnc.gov.au phone 13 ACNC
Clause 17 – Disciplining members
Clause 17 provides a way to deal with
situations where a member acts in a
way that the directors believe is causing
problems for the company. It allows the
directors to warn, suspend or expel a
member in certain circumstances. It also
gives the directors the flexibility to refer
the decision-making to a general meeting
of members or an unbiased, independent
person.
Under clause 17.4(e), if the decision is
referred to an unbiased, independent
person, that person cannot make a
decision that could not have been made
by the directors. For example, since the
directors are not able to fine the member,
neither can that person.
Because disciplinary procedures affect
a member’s rights, it is important that
the procedure is undertaken sensitively,
confidentially and promptly, and that the
relevant member is treated fairly and
given a chance to have their say.
visit acnc.gov.au phone 13 ACNC
17
General meetings of members
A general meeting is a
meeting that all members
of the company are invited
to attend and can vote at.
also be aware that if the provisions in the
Corporations Act are ‘switched on’ again
as the government has indicated it may do,
the clauses you have altered may need to
be amended.
More information
The Corporations Act requirements for
holding general meetings no longer
apply to registered charities. Instead, the
ACNC’s governance standard 2 requires
registered charities to be accountable to
their members. The steps that a charity
must take to comply with this standard
will depend on all of the charity’s
circumstances. The template constitution
adopts many of the Corporations Act
requirements that previously applied
to registered charities (and currently
apply to other companies), as they are
well-known and understood practices for
holding fair meetings of members.
If a charity complies with the Corporations
Act requirements for how meetings of
members should be conducted (even
though these sections no longer apply
to charitable companies), the ACNC
will generally accept that the charity is
complying with governance standard 2.
Meetings and your charity’s needs
The governance standards are intended
to provide charities with flexibility, so you
should consider whether your charity would
require different meeting arrangements to
better suit your circumstances. Because
the general meeting requirements in the
Corporations Act have been ‘switched
off’, you can alter the clauses dealing with
meetings of members in the constitution.
However, if you do so, you need to ensure
that your charity is still complying with
the governance standards. You should
18
visit acnc.gov.au phone 13 ACNC
For more information on general meetings,
see our guidance on holding meetings and
governance standard 2.
Clause 18 – General meetings called
by directors
Under clause 18 directors can call a
general meeting if the majority of directors
agree to call the meeting. You may choose
to amend the template constitution to allow
one director to call a general meeting.
Clause 18 requires directors to call a
general meeting if this is requested by at
least 5% of members who can vote. The
ability of members to call a general meeting
is an important way to help meet ACNC
governance standard 2 (which requires
charities to be accountable to members).
When a request is made to the directors,
they must do the following things:
■■ decide the date that the general meeting
will be held on, which must be no more
than two months from the date of the
members’ request, and
■■ within 21 days, call a general meeting
and give all members notice of the
meeting.
Clause 19 – General meetings called
by members
Clause 19 gives members a way to call
general meetings if the directors do not
do so.
Members must, as far as possible, follow
the procedures for general meetings. This
includes providing a notice for a general
meeting as set out in clause 21.
Clause 20 – Annual general meeting
Clause 20 requires a company to have an
annual general meeting (AGM) at least once
each year. However, a new company can
hold its first AGM anytime within the first 18
months of being registered with ASIC.
Charitable companies do not need to hold
an AGM each year, however holding an
AGM will help your charity to comply with
governance standard 2, which requires
charities to take reasonable steps to be
accountable to their members, and allow
their members adequate opportunities to
raise concerns about how the charity is run.
Clause 20 requires:
■■ information from the directors about the
company’s activities and finances in the
period since the last AGM to be provided
to members before or at the AGM, and
■■ there to be a reasonable opportunity
for members to ask questions or make
comments about the management of the
company at the AGM.
Clause 20 allows other business of the
AGM to include the following matters,
even if they are not set out in the notice of
meeting:
■■ a review of the company’s activities and
finances
■■ an auditor’s report (if one has been
prepared)
■■ the election of directors, and
■■ the appointment and payment of auditors
(if any).
If the members are more likely to appoint
proxies than attend in person, you can
consider deleting clause 20.2(d) relating to
election of directors, as not all members
will have an equal opportunity to participate
in the vote, if there is a nomination and
election that was not included in the notice
of meeting.
Under the Corporations Act, a public
company is generally required to hold an
AGM within 5 months of the end of its
financial year. This requirement has been
‘switched off’ for registered charities.
Under clause 20 you can choose when to
hold the AGM, as long as the company
remains accountable to members under
governance standard 2, and as long as
there is one held in each calendar year
(clause 20.1).
More information
For more information, see our guidance on
holding your annual general meeting.
Clause 21 – Notice of general meetings
Clause 21 sets out:
■■ who must be given notice of general
meetings (clause 21.1)
■■ when and how they must be notified
(clauses 21.2, 21.3 and 21.4)
■■ what a notice of a general meeting must
have in it (clause 21.5), and
■■ what must be done if a meeting is
adjourned for one month or more (clause
21.6).
visit acnc.gov.au phone 13 ACNC
19
The notice provisions in clauses 61 to 63
are relevant when you are giving notice
of a general meeting under clause 21.
Clause 62 is flexible and allows electronic
notification. For example, a member may
agree to be notified by SMS that a notice
of meeting is available on the company’s
website, or may agree to be given the
notice at a mailbox in a clubhouse for
members.
It is important to consider what an
appropriate quorum would be for your
company, especially considering the
number of members. The quorum should
not be so high that there is a risk that
members being absent may make it difficult
to hold a valid meeting. However, it is also
good governance not to set the quorum
too low, as it is important that members
participate in meetings.
It is also important to remember that the
quorum:
■■ can be a percentage (for example, 10%
of members) instead of a number
Clause 21.5(d) relates to how a proxy
is appointed. If you amend clause
21.5(d) it must be consistent with clause
36 (appointment of a proxy). You may
need to get legal advice if you want to
change the proxy arrangements for your
company.
■■ includes members who are present in
person (including through the use of
technology), by representative (in the
case of corporation members) or by
proxy
■■ must be present for the whole
meeting, and
■■ should be reviewed from time to time
For a general meeting, resolutions (other
than special resolutions) do not need to be
set out in the meeting agenda. However
any resolutions that are proposed at
the meeting must relate to a subject or
topic listed in the notice (clause 21.5(c))
or a matter listed in clause 20.2 (see the
guidance on clause 20).
Clause 22 – Quorum at general
meetings
In clause 22, write the quorum for a
general meeting of members of your
company. This must be at least two
members.
For a meeting to be held, there must be a
minimum number of people present, either
in person (including through the use of
technology), by proxy or by representative.
This minimum number is called a quorum.
20
visit acnc.gov.au phone 13 ACNC
to make sure it is still right for your
company, especially if the number of
members changes a lot.
Clause 22.1 only allows a person to be
counted once for the quorum. This means
that if a person (including a member)
attends a general meeting as a proxy for
more than one member, that person will
only be counted once when the numbers
are counted for the quorum. That person
can still vote as a proxy for multiple
members (see clause 37).
A meeting will be adjourned (put off) if there
is no quorum in the way set out in clause
22.
If no quorum is present within 30 minutes
of the starting time of the resumed meeting
(on the date it was adjourned to), then the
meeting is cancelled. If a new meeting is to
be held, a new notice of meeting must be
provided again.
Clause 23 – Auditor’s right to attend
meetings
Clause 25 – Using technology to
hold meetings
An auditor (if your company has one) must
be given notice of all general meetings
(under clause 21). Under clause 23, an
auditor must also be:
Clause 25 gives your company the flexibility
to allow members to participate in meetings
through the use of technology.
■■ given any related communications
(for example, proposed members’
resolutions), and
■■ allowed to speak on anything on the
meeting agenda that relates to the
auditor in their capacity as an auditor.
More information
Technology such as web conferencing is
becoming a common and useful way to
ensure that members can participate in
meetings even if they live in remote areas
or are otherwise unable to attend a physical
venue for a meeting. In deciding how your
meetings will be held, you must ensure that
members are given reasonable access to
meetings and the opportunity to participate.
See the ACNC’s guidance on the
requirement to have reviewed or audited
financial reports.
External resources
See ASIC’s guidance on appointing an
auditor
Clause 24 – Representatives of
members
Clause 24 sets out how any members that
are incorporated (for example, they are
companies or incorporated associations)
can appoint individuals to attend general
meetings and sign circular resolutions on
their behalf.
As the template constitution requires
directors to be members, clause 24
allows corporate members to appoint
a representative to act as a company
director.
visit acnc.gov.au phone 13 ACNC
21
Chairperson for general
meetings
Clause 26 – Chairperson for general
meetings
Clause 26 sets out that the elected
chairperson (who is a director and is
elected by the directors under clause 40)
is the chairperson for general meetings. It
also sets out when another person can be
chosen as a chairperson for a meeting.
Companies can change:
■■ who elects a chairperson (for example,
the members instead of the directors)
■■ who the chairperson must be (for
example, a member instead of a director),
and
■■ if there is a term of office for the
chairperson (for example, one year).
Under clause 51, the ‘elected chairperson’
can also chair directors’ meetings. If you
change the template constitution to allow a
member to be the elected chairperson, you
may need professional advice to make sure
that the elected chairperson for general
meetings and directors’ meetings are not
the same. This is because it will not be
appropriate for a member who is not also a
director to chair directors’ meetings.
22
visit acnc.gov.au phone 13 ACNC
Clause 27 – Role of the chairperson
Clause 27 states that the chairperson is
responsible for the conduct of the general
meeting but in doing so must give the
members a reasonable opportunity to
ask questions and make comments, as
required under the ACNC governance
standard 2. The chairperson has powers to
meet their responsibilities under clause 27.
For example, they can require a member
to leave a meeting if they are disrupting the
meeting so much that it cannot continue.
The template constitution does not give the
chairperson a casting (deciding) vote where
a vote is evenly split. This can be changed
to provide the chairperson with a casting
vote. However, we consider that it is good
governance not to give the chairperson
a casting vote in order to ensure that a
contentious decision (one where the vote is
evenly split), is not passed until a majority of
members agree to it.
External resources
For more information on the role and
powers of the chairperson in general
meetings, see Institute of Community
Directors Australia: Tips for the chair.
Clause 28 – Adjournment of meetings
Clause 28 allows a majority of members
present at a general meeting (where there
is a quorum) to direct the chairperson to
adjourn the meeting. When the meeting
is resumed, it can only cover the same
business that the adjourned meeting was
to cover.
Members’ resolutions and statements
Clauses 29 and 30 are
important because they
allow members to propose a
resolution (a decision of the
members) or make a joint
statement in advance of a
general meeting.
Clause 31 is useful as it allows
members to pass a ‘circular’
resolution without a general
meeting.
Clauses 29 and 30 will help your charity
comply with governance standard 2, which
requires the company to be open and
accountable to members.
These clauses do not prevent members
from proposing a members’ resolution at a
general meeting (‘from the floor’), provided
that the resolution relates to a topic that
can be discussed at that meeting (either
something under clause 20.2 or about a
topic in the notice of meeting). Members
also have the right to speak at a general
meeting on any resolution or other matter
on the meeting agenda.
Clause 29 – Members’ resolutions and
statements
Clause 29 sets out how members can:
■■ notify the company that they want to
propose a members’ resolution at a
general meeting, or
■■ ask the company to give to all members
a members’ statement on a resolution or
any business of a general meeting.
A ‘members’ resolution’ is a decision
that certain members want to be put
to all members at a general meeting for
discussion and voting.
A ‘members’ statement’ is a document
that explains or supports a proposed
resolution (including a proposed members’
resolution) or covers any ‘other matter that
may properly be considered at a general
meeting’. This means that a members’
statement cannot be about a matter that
would be a matter for directors, and not
members.
Clause 29 requires that:
■■ at least 5% of voting members sign the
notice of the members’ resolution or the
request to distribute a statement, and
■■ the wording of the notice of resolution
or the statement to be distributed to
members must be given to the company.
You may wish to make the number of
members required in your constitution to
make a members’ resolution or statement
larger, depending on your charity’s
circumstances. However, you should not
change the requirement in a way which
would mean that members do not have
a reasonable opportunity to propose
resolutions and vote on those resolutions.
External resources
For more information, see ASIC’s guidance
on company resolutions.
Clause 30 – Company must give notice
of a proposed resolution or distribute a
statement
Clause 30 requires the company to send
a proposed members’ resolution or a
members’ statement to all members of the
company.
Under clause 30.1, the company must
pay the cost of distributing the notice or
request to all members if it is given in time
to send it with a notice of general meeting.
Otherwise, the members giving the notice
or request must pay, although the members
may resolve that the company pay the
costs at a general meeting.
Clause 30.2 sets out when a resolution or
statement does not need to be distributed
to members. This includes if:
■■ it is more than 1 000 words
■■ the directors consider that it may be
defamatory
visit acnc.gov.au phone 13 ACNC
23
■■ it is given too late to be sent with a notice
of meeting and the members making it
have not paid the cost of sending it to
members, or
■■ in the case of a members’ resolution,
it does not relate to a matter that can
properly be considered at a general
meeting or is otherwise not a valid
resolution able to be put to members.
You may need to get professional advice
if this happens.
Act requires a resolution by members at a
general meeting if the directors would like
to set a limit on the number of directors.
The template constitution also does not
allow a circular resolution to be used to
elect a director. It is good governance for
directors to be elected by members at a
general meeting, as the election of directors
is an important decision for the company
(see the guidance on clause 39).
How circular resolutions are passed
Clause 31 – Circular resolutions of
members
Clause 31 allows members to pass a
‘circular resolution’. This is a resolution
circulated and agreed to by members
without holding a general meeting. A
circular resolution can be put to the
members by the directors if a majority of
directors agree to put it to the members.
A circular resolution of members cannot be
used where the Corporations Act expressly
or impliedly requires a general meeting to
be held in order to pass the resolution. The
template constitution therefore specifies
that a circular resolution cannot be used:
■■ to remove an auditor (there is a specific
process for removing an auditor in the
Corporations Act, which requires a
general meeting to be held)
■■ to remove a director (there is a specific
process for removing a director of a
public company in the Corporations Act,
which requires a general meeting to be
held), or
■■ to pass a special resolution (the definition
of ‘special resolution’ in the Corporations
Act indicates that a special resolution is
passed at a general meeting).
These are only some of the common
circumstances where the Corporations
Act requires a general meeting to be held.
The template constitution also includes a
general restriction on passing a circular
resolution where the Corporations Act
requires a general meeting to be held. For
example, section 201P of the Corporations
24
visit acnc.gov.au phone 13 ACNC
A circular resolution is not voted on at a
general meeting. Instead, all members
sign a document stating that they are in
favour of a resolution, and that resolution is
passed when the last member signs. The
signed document is the record of the vote.
Members may sign separate copies of the
resolution as long as the wording of the
resolution is the same in all copies.
If a circular resolution is sent to members
by email, members can agree to the
resolution by reply email, but their reply
must include the text of the resolution that
they are agreeing to.
Circular resolutions are only suitable
for companies with a small number of
members, as they require all members to
agree (not just a percentage of members,
as for other resolutions). If any member
does not agree, or is not available to vote, a
circular resolution cannot pass.
A minute must be recorded and signed
(see clause 57) setting out the words of
the resolution and that it was passed by a
circular resolution.
The directors must notify the auditor (if
any) of a proposed circular resolution as
soon as possible and give the auditor the
wording of the resolution.
Voting at general meetings
If the vote is by show of hands, the
chairperson and meeting minutes do not
need to state how many votes were in
favour or against a resolution, and the
chairperson’s decision is binding. The
members may request a written vote in the
way set out in clause 35.1. The chairperson
may also decide to hold a written vote if, for
example, the chairperson is not completely
sure about the result on a show of hands or
if the chairperson considers that the proxy
votes may change the result.
A vote by a show of hands does not have
to be taken before a written vote is called
for.
Where a written vote is taken, the
chairperson and meeting minutes should
state the number and proportion of votes
recorded in favour or against a resolution.
Clause 32 – How many votes a
member has
Clause 32 confirms that each member
of the company has one vote at general
meetings.
Clause 33 – Challenge to a member’s
right to vote
Clause 33 allows the chairperson of a
meeting or a member to challenge a
person’s right to vote at a general meeting,
for example if the person has a conflict of
interest. The chairperson has the final say
on whether a person can vote.
Clause 34 – How voting is carried out
Clause 34 sets out how voting is to
be conducted. This is by a show of
hands, a vote in writing or another fair
and reasonable method chosen by the
chairperson.
Before taking a vote, the chairperson must
state how many proxy votes they have
received, and how those votes will be cast.
For example, the chairperson may state
that ten proxy votes have been received,
and that eight will be cast in favour of the
resolution and two against the resolution.
Clause 35 – When and how a vote in
writing must be held
Because some decisions may be
controversial or sensitive, there is a process
that allows members to demand a vote in
writing.
Under clause 35, a vote in writing can be
demanded by either a specific number or
percentage of members or the chairperson.
This may help the company to comply
with ACNC governance standard 2
(accountability to members).
Clause 36 – Appointment of proxy
Clause 36 allows a member to appoint
a proxy to attend and vote at a general
meeting (or multiple general meetings) on
their behalf.
A proxy can speak, vote in writing (to the
extent allowed by the appointment) and join
in to demand a vote in writing at a meeting
unless the member is at the meeting
(clause 36.3).
Although clause 36.2 states that a proxy
need not be a member, you may choose
to change this clause. For example, you
may want proxies to have an understanding
visit acnc.gov.au phone 13 ACNC
25
of the company and its purposes, and
therefore require proxies to be members.
However, you may instead want to allow
members to choose any person they trust
to represent them at a meeting.
■■ revokes the authority of someone else
who appointed the proxy (for example, if
a person who is appointed to represent
a member that is a company appoints
a proxy, and then the corporate
member revokes the authority of the
representative).
Previously, charitable companies limited by
guarantee were required to allow a member
to appoint anyone as a proxy. However,
this requirement no longer applies to
registered charities. If you decide to require
proxies to be members, see ‘Changes to
legal requirements’ at the beginning of this
guide and the guidance for clause 71 to
understand what this may mean.
This clause ensures that a resolution that
is passed at a general meeting cannot be
challenged after the meeting if a proxy did
not have proper authority to vote because
of one of the things in clause 36.8. It gives
more certainty in relation to resolutions
passed at a meeting.
How proxies are appointed
External resources
Clauses 36.4 and 36.6 set out how a proxy
must be appointed, that is, what the ‘proxy
form’ (appointment) must include and when
it must be given to the company. A member
must make sure that a proxy form is
delivered to the company at least 48 hours
before the relevant general meeting. The
written notice requirements in clauses 61
and 63 do not apply to proxy forms. This
means that the documents must actually
be received by the company at least 48
hours before the meeting.
For an example of a proxy form, see the
Governance Institute of Australia’s sample
proxy form.
If the member is present
Under clause 36.7 a proxy cannot speak
or vote at a general meeting on behalf of a
member if the member is present. Clause
36.7 ensures that, for example, if a member
is able to attend a meeting unexpectedly
after they have appointed a proxy, they can
exercise all of their rights as a member at
that meeting, despite having appointed a
proxy.
Clause 37 – Voting by proxy
Under clause 37, a proxy can only vote in
a written vote. A company can change this
clause to allow proxies to vote by show
of hands, but then would have to also set
out that a proxy cannot vote on a show of
hands if it holds two or more appointments
that specify different ways of voting.
If a vote is controversial, or the result of
a vote on a show of hands may change
if proxy votes were counted, proxies can
demand a vote in writing under clause 35.
Clause 37.2 sets out what a proxy must
do when a vote in writing is held. If a proxy
form specifies a way to vote, then the
proxy must vote on a vote in writing and
must vote in the way that is specified in the
proxy form.
Proxy unless written notice given
Under clause 36.8, unless the company
receives written notice prior to a meeting,
a proxy can still vote at the meeting, even
if the member who appointed the proxy:
■■ dies
■■ is mentally incapacitated
■■ revokes (takes away) the proxy’s
appointment, or
26
visit acnc.gov.au phone 13 ACNC
Clause 37.2 is different to the
Corporations Act provisions about
proxies, which no longer apply to
registered charities. See ‘Changes to
legal requirements’ at the beginning of
this guide and the guidance for clause 71
to understand what this may mean.
Directors
More information
For more information about the role of the
directors, see:
■■ Governance for good: The ACNC’s guide
for charity board members
■■ My charity and the ACNC: Guide to your
charity’s responsibilities to the ACNC.
External resources
■■ Justice Connect Not-for-profit Law:
Positions in a company limited by
guarantee (CLG)
■■ Governance Institute of Australia: Good
Governance Guide (NFP) – Board
Structure
■■ Institute of Community Directors
Australia: Assessing board performance
Clause 38 – Number of directors
Clause 38 requires a company to have at
least three and no more than nine directors.
The directors of a charitable
company are the group
of people responsible for
overseeing the company’s
activities and making sure
it works towards achieving
its charitable purpose. They
must also make sure the
company meets its ethical,
legal and financial obligations.
The ACNC calls directors
‘responsible persons’ or
‘responsible entities’.
Public companies (including companies
limited by guarantee) must have a minimum
of three directors (under the Corporations
Act) and at least two of those directors
must ordinarily live in Australia. However,
there is no legal maximum number of
directors.
What is the right number of directors
for your company?
When adopting the template constitution,
consider how many directors is a good
number for your charity. For example, nine
directors may be too many for a small
company to make decisions and operate
efficiently. However, a board of three
directors may not be able to manage all
of the responsibilities of a larger company.
If your company increases its members,
revenue or activities, you may wish to
amend the template constitution to have
more than a minimum of three directors.
The maximum number of directors
specified in the template constitution
includes any additional directors who the
directors may appoint.
visit acnc.gov.au phone 13 ACNC
27
Clause 39 – Election and appointment
of directors
Clause 39 sets out a number of
requirements for the election and
appointment of directors. The requirements
set out in this clause will help a company
make sure that good practices are followed
when directors are chosen, and that certain
requirements in the Corporations Act are
met.
Under clause 39, a person who wants to
be a director must:
■■ be a member or a representative of a
member of the company. This is not a
legal requirement and can be deleted in
clause 39.4(a) so that any person can
be appointed or elected. However, if you
include it in your constitution, directors
will also be bound by the constitution as
members. You may wish to change this
if, for example, your group is a support
group for people with a particular illness
and you would like people without that
illness to be eligible to be directors. If
you do change this clause, you will have
to remove clauses 42.1(d), 42.1(e) and
42.1(f) (see the guidance on clause 42)
■■ be nominated by two members or two
representatives of a member, although
this is not required for a current director
who was nominated at a previous
general meeting, and who has been
a director since that meeting. The
template constitution does not detail the
process for nomination and it is up to
the company to agree on the procedure.
For example, the directors may make
by-laws (under clause 59) which set
out the procedure for nominations. This
procedure may, for example, state that
nominations must be in writing, signed
by the two members (or representatives
of members) and the candidate, and
received by the company at its registered
office no later than 5.00 pm on the day
which is 30 days before the annual
general meeting. This would then allow
a list of the candidates to be sent to
members with the notice of meeting. On
the other hand, companies may decide
28
visit acnc.gov.au phone 13 ACNC
to adopt a less formal procedure. It may
be appropriate for companies with a
small and active membership to simply
verbally nominate the candidates (and
second the nomination) at the annual
general meeting, and
■■ give their signed consent to be a director
before being appointed (as required
under the Corporations Act).
A person who wants to be a director must
not be ineligible under the Corporations
Act or the ACNC Act (clause 39.4(d)). They
must also meet the legal requirements for
directors of charitable companies, which
are that they:
■■ are at least 18 years old, and
■■ are not disqualified from being a director
of a company or a responsible person
of a charity under the Corporations Act
or ACNC Act, unless they have been
given permission to be a responsible
person. Permission may be required from
ASIC or the Federal Court (depending
on the reason for disqualification) and/
or the ACNC (under ACNC governance
standard 4). For more information, see
the guidance on clause 42(h) (when a
director stops being a director).
Clause 39.3 sets out a requirement in
the Corporations Act that members
must appoint each director by passing a
separate resolution at a general meeting.
However, one resolution can be used to
appoint all of the directors if the members
first pass a resolution which says that the
appointments can be voted on together,
and no member votes against that
resolution. The reason for this procedure is
that a member may want to vote in favour
of the appointment of one director, but
against the appointment of another director.
In that case, the member should be able
to vote on separate resolutions for the
directors.
Because general meetings may be held
using technology (under clause 25),
directors can be elected in various ways,
for example, by using an online poll during
an annual general meeting that is held by
web conference.
Clause 39.5 allows the directors to appoint
a director to fill a casual vacancy (if, for
example, a director resigns during their
term of office) or appoint an additional
director (if, for example, the directors
consider that another director is needed
before a general meeting can be held to
appoint that director). These directors must
resign at the next annual general meeting,
but they can then nominate and be
appointed by the members at that meeting.
The Corporations Act does not require
a general meeting to be held to elect a
director, but it is good governance to have
something as important as the election of a
director decided by members at a general
meeting.
You may want to add extra requirements for
directors of your charity in the constitution,
or have a policy which sets out the ideal
mix of skills and experience you will seek
to have on the board for good governance.
You can then appoint or seek nominations
for people with these skills and experience.
More information
For more information on choosing suitable
directors for your charity, see:
■■ Choosing a new board member
■■ Letter of appointment for responsible
persons template
■■ Disqualification from being a responsible
person.
External resources
See the Governance Institute of Australia’s
Good Governance Guides on matters to
consider in the selection and nomination of
directors and suggested contents for letters
of appointment for non-executive directors.
For more information on alternate directors
(which are not included in the template
constitution), see ASIC’s guidance on
alternate directors.
Clause 40 – Election of chairperson
Clause 40 requires the directors to vote for
one director to be the company’s ‘elected
chairperson’.
Alternatively this could be a decision of the
members at the annual general meeting.
See the guidance on clause 26.
Clause 41 – Term of office
Clause 41 deals with the term of office for
directors, that is, the length of time they
are elected or appointed for, and how
and when they are elected or re-elected.
It provides for a system of ‘retirement by
rotation’, where each year at least a third
of the directors resign and can be reelected. This reduces the risk of a complete
replacement of all the directors in one
year and prevents the company losing
knowledge and experience.
It is good practice (but not a legal
requirement) for directors to be re-elected
periodically and to only serve for a
maximum length of time. This allows the
company to benefit from having a range of
people with different skills, experiences and
methods on the board.
Length of term of office
Clause 41 sets out when directors must
retire and how directors can be re-elected.
Generally, a director’s term of office will be
three years. This length of time (rather than,
for example, one year) is likely to allow the
company’s board of directors to be more
stable and experienced and make longterm plans for the charity.
Some directors must retire annually
Casual directors and additional directors
appointed by the directors (clause 41.1(a))
must retire at each annual general meeting
of the company (see clause 20). They can
be re-elected as a director at that meeting.
visit acnc.gov.au phone 13 ACNC
29
Retirement by rotation
At each annual general meeting, at least
one-third of the other directors who have
been directors for the longest time must
retire (clause 41.1(b)).
For example, if there are six directors, the
two directors who have been directors for
the longest time must retire. If there are
three directors who were all appointed
at the same time and therefore have all
served for the longest, only two directors
must retire. In this case, the director who
must retire must be decided ‘by lot’ (under
clause 41.2). ‘By lot’ means by random
selection. For example, you may write the
relevant directors’ names on pieces of
paper, put the pieces of paper in a hat and
pull a name out of the hat to decide who
must retire.
Maximum term of office
Under clause 41.6, a person can be a
director for a continuous period of nine
years. If they want to be a director for
longer, the members must pass a special
resolution (see clause 70).
Clause 42 – When a director stops
being a director
Clause 42 sets out when a director stops
being a director, other than when their term
of office finishes under clause 41.
Clause 42.1(a) covers written resignation.
Clause 42.1(c) allows a director to be
removed by a members’ resolution. It is
important to follow the procedure in section
203E of the Corporations Act if this occurs.
Under the Corporations Act, directors of a
public company cannot remove a director
or to require a director to resign.
Clause 42.1(d), (e) and (f) should be
deleted if you do not include clauses
39.4(a) and 39.5(a) on election and
appointment of directors, which require
the director to be a member or a
representative of a member.
30
visit acnc.gov.au phone 13 ACNC
Clause 42.1(g) sets out that a person stops
being a director if:
■■ they do not attend three directors’
meetings in a row, and
■■ they do not have approval from the other
directors.
If directors participate in directors’
meetings, it may help to meet ACNC
governance standard 5, which requires
charities to take reasonable steps to ensure
that responsible persons meet their duties.
A director can still be absent from directors’
meetings and continue to be a director if:
■■ they tell the other directors before the
directors’ meetings that they will absent
from the meetings, and
■■ the directors resolve to accept the absent
director’s apology.
However, it is important for directors to
be actively involved in the management
of the company and they should not miss
meetings without a valid reason.
Disqualified directors
Under clause 42.1(h), a person is usually
ineligible to be a director of a charitable
company if they:
■■ are disqualified from being a director
under the Corporations Act (under Part
2D.6)
■■ have been suspended (and the
suspension is still in place) or removed as
the responsible person for that company
under Division 100 of the ACNC Act, or
■■ are disqualified from being eligible to
be a responsible person under ACNC
governance standard 4.
In some cases a person who is
‘disqualified’ may still be eligible to be a
director if they are given permission by
the ASIC Commissioner or the ACNC
Commissioner, or both, if required.
More information
For more information, see our guidance on
disqualification from being a responsible
person.
Powers of directors
Clause 43 – Powers of directors
Clause 43 states that the directors are
responsible for managing and directing the
company’s activities in order to achieve the
company’s charitable purpose(s).
The directors may use all the powers of the
company except for powers that may only
be used by members (see clause 43.2).
For example, under the Corporations Act
a director or auditor of a public company
cannot be removed by the directors. This is
set out in clause 43.4.
Financial management
Under clause 43.3, the directors must
decide how the company’s finances will
be managed. Directors have an important
responsibility to reduce the risk of mistakes
or fraud and improve the accountability of
the company’s finances.
ACNC governance standard 5 requires
the responsible persons of a charity to
ensure that the charity’s financial affairs
are managed in a responsible way. This
includes putting in place appropriate and
tailored financial systems and procedures.
These systems and procedures must be
appropriate to the size and circumstances
of the charity, and how complex its financial
affairs are. The ACNC Act also requires
charities to keep financial records that
record and explain its financial transactions,
position and performance and that would
enable true and fair financial statements to
be prepared and to be audited.
Clause 43 specifies that directors must
decide how money is managed. For
example, directors may decide that any two
directors are required to sign cheques, or
that the directors must approve expenditure
over a certain amount.
If your charity has basic financial
management systems and procedures
in place, this will help it meet ACNC
governance standard 5. These include:
■■ procedures for spending the charity’s
funds (for example, for approval
of spending, signing cheques and
transferring money electronically), and
■■ insurance that is appropriate for the
charity (see, for example, clause 66).
More information
For more information on auditors and how
to manage risks and finances see:
■■ companies limited by guarantee
■■ basic financial controls
■■ Protect your charity from fraud: The
ACNC’s guide to fraud prevention.
External resources
■■ ASIC: removal of an auditor under the
Corporations Act 2001
■■ ASIC: Auditor resignation or removal
■■ Governance Institute of Australia: Good
Governance Guide – Risk management
overview
■■ Governance Institute of Australia:
Good Governance Guide (NFP) – Risk
management policy
■■ Institute of Community Directors
Australia: Damn Good Advice for
Treasurers: Twenty-five questions a notfor-profit Treasurer needs to ask
■■ Institute of Community Directors
Australia: Financial management policies
■■ Institute of Community Directors
Australia: Financial control policies
visit acnc.gov.au phone 13 ACNC
31
■■ Institute of Community Directors
Australia: Finance help sheets.
Clause 44 – Delegation of directors’
powers
Clause 44 allows the directors to delegate
(sign or hand over) their powers and
functions to any person, including to a
director or a company employee such as a
chief executive officer, or a committee, as
they consider appropriate.
Clause 44 does not allow the directors to
delegate:
■■ their power to delegate, or
External resources
For more information on delegating powers
to committees, see:
■■ Governance Institute of Australia: Good
Governance Guide – Who should sit on
board committees
■■ Governance Institute of Australia: Good
Governance Guide – What a board
committee charter should address
■■ Governance Institute of Australia: Sample
charter/terms of reference for a board
committee
■■ Institute of Community Directors
Australia: Sub-committees.
■■ certain other duties under the
Corporations Act.
The directors remain responsible for how
the powers they delegate are used, so it is
important for them to make sure that they
delegate their powers in an appropriate
way.
It is good practice not to delegate the
board’s decision-making powers (for
example, the power to adopt company
by-laws or to appoint the company’s chief
executive officer). The board of directors
must agree on which powers they will
delegate and which powers they will keep
for themselves.
M Clause 45 – Payments to directors
This clause is only mandatory for
companies that do not want to use
‘Limited’ in their name (under the
Corporations Act).
The Corporations Act does not require a
company to have the word ‘Limited’ at the
end of its name if it is registered with the
ACNC and the company’s constitution:
■■ prohibits the company from paying fees
to its directors, and
■■ requires the directors to approve all
The template constitution does not
require all delegations to be in writing,
however the Corporations Act requires
a delegation of power to be recorded in
the company’s minute book. When the
directors resolve to delegate a power at
a directors’ meeting, that resolution must
be recorded in the meeting minutes. The
ACNC Act requires a charity to maintain
written records to explain its operations.
A record of a delegation may be relevant
to explain why certain decisions are
being made by an employee or a subcommittee instead of by the directors.
32
visit acnc.gov.au phone 13 ACNC
other payments the company makes to
directors.
If this is the case, a company can resolve to
remove ‘Limited’ from its name and apply
to ASIC to do so (a fee applies).
Alternatively, a company does not have to
formally change its name, but can remove
the word ‘Limited’ when using its name (for
example, on the company’s letterhead).
When directors can be paid fees
Clause 45 does not allow the company
to pay fees to its directors for acting as
directors, but it specifies what payments
may be made to a director with the
approval of the other directors.
Under clause 45, a company can:
■■ pay a director for work they do for
the company other than as a director,
provided they are paid no more than a
reasonable fee (for example, a director
who is a web designer could be paid a
reasonable fee to update the charity’s
website)
■■ reimburse (repay) a director for expenses
they have properly incurred in relation to
the company (for example, the cost of
travelling to directors’ meetings), and
■■ pay some insurance or indemnities for
directors (see clauses 65 and 66).
be providing private benefit to the directors
and not operating on a not-for-profit basis
(see clause 8) and, therefore, not eligible
to be a registered charity. You may need to
seek legal advice and review the template
constitution for related changes.
Other issues may be relevant when
deciding whether to pay fees to directors.
For example, if a company pays its
directors fees and wants to fundraise
in NSW, it may need consent from the
minister (under the Charitable Fundraising
Act 1991 (NSW)).
Clause 46 – Execution of documents
Clause 46 reflects the Corporations
Act, which allows documents to be
‘executed’ (formally signed) on behalf of
the company by:
■■ two directors, or
■■ a director and the secretary.
If your company wants to pay a director
to provide professional or technical
services, make sure the service being
provided and the amount payable are
first approved by the directors. The
amount paid must be no more than a
commercially reasonable amount for
that service. It is also important that the
relevant director discloses that they have
a conflict of interest on the matter and not
be present and vote when the directors
decide to pay for that director’s services.
Deciding whether to allow
directors’ fees
If you allow your directors to be paid for
acting as directors, the company must have
and use the word ‘Limited’ at the end of its
name. Payment of directors’ fees must be
carefully considered. If a company amends
clause 45 to allow directors’ fees to be
paid, and pays excessively high fees, it may
In addition to clause 46, the Corporations
Act allows a company to authorise a
person to make, amend or discharge
(complete) contracts on behalf of the
company. This can be done by making a
directors’ resolution.
Clause 46 does not require a company
to have a common seal. Under the
Corporations Act, a ‘common seal’ (also
called ‘company seal’) is a stamp that
has certain information, for example the
company’s name, Australian Company
Number (ACN) and the words ‘common
seal’ on it. If a company uses a common
seal to execute a document, it must still be
witnessed by two directors, or a director
and the secretary. It used to be a legal
requirement for every company to have a
common seal, but now companies do not
legally need one.
visit acnc.gov.au phone 13 ACNC
33
Duties of directors
Clause 47 – Duties of directors
Clause 47 sets out the duties of the
company’s directors. These include
complying with legislation and common
law (judge-made law) and complying with
the charity’s obligations under governance
standard 5.
Governance standard 5 requires a charity
to take reasonable steps to make sure that
its responsible people, such as directors,
meet certain duties. Clause 47 sets out
these duties, which are to:
■■ act with reasonable care and diligence
■■ act in good faith (honestly and fairly) in
the best interests of the charity and for its
charitable purposes
■■ not misuse their position as a responsible
person
■■ not misuse information they gain in their
role as a responsible person
■■ disclose perceived or actual material
conflicts of interest
■■ ensure that the financial affairs of the
charity are managed responsibly, and
■■ not allow the charity to operate while it is
insolvent (there is a similar requirement in
the Corporations Act).
Clause 48 – Conflicts of interest
Conflicts of interest may be difficult to
work out. If there is a risk of a conflict,
it is safer for the director who has the
interest to disclose the conflict and not
be involved in decision-making. You may
wish to get professional advice if your
company needs to make an important
decision that a director has an interest in.
Under clause 48, any director who has or
may appear to have a ‘material conflict of
interest’ in a decision being made by the
directors should tell the other directors or,
if all of the directors have the same conflict,
tell the members (clause 48.1).
Once the other directors are told about
the interest, the company can manage any
risks.
Except in the circumstances listed in
clause 48.4, a director who has a material
personal interest must not:
■■ be present while the issue is being
discussed at a meeting, and
■■ vote on the decision (clause 48.3).
Your directors should know the legal
obligations of charities and all five ACNC
governance standards, as they are
responsible for making sure that the
charity meets its legal requirements.
External resources
For more information on the duties of
directors, see:
■■ ASIC: Your company and the law
■■ Institute of Community Directors
Australia: Board member responsibilities
■■ What are the obligations of directors
and officers of a company limited by
guarantee that is a charity? Keeping
Good Companies.
34
visit acnc.gov.au phone 13 ACNC
This requirement comes from the
Corporations Act. ‘Material personal
interest’ is not defined in the Corporations
Act, however the word ‘material’ means
that the interest must be of some
substance or value. If a director has a very
small interest in a matter, it is unlikely to be
considered ‘material’.
You need to get legal advice if you want
to include other circumstances in which
the directors with a conflict of interest may
vote in your company’s constitution (under
clause 48.4).
Under clause 48.4, a director who has
disclosed a conflict of interest can still be
involved in decision making if:
■■ their interest only arises because they are
a member of the company and all other
members have the same interest
■■ their interest relates to an insurance
More information
■■ their interest relates to a payment to a
For more information, see our guidance on
conflicts of interest.
contract for directors (see clause 66), or
director under the indemnity clause (see
clause 65).
In addition, under clause 48.4(e), if the
other directors are satisfied that the
interest should not disqualify the director
from voting or being present, they can
pass a resolution that says this and allows
the director to be involved in making the
decision (this process is also set out in the
Corporations Act). The directors should
be very careful if making this decision. It is
generally good practice that a director does
not discuss or vote on something that they
have a ‘material personal interest’ in.
External resources
■■ Governance Institute of Australia: Good
Governance Guide (NFP) – Conflicts of
Interest
■■ QUT Australian Centre for Philanthropy
and Nonprofit Studies Wiki: Conflict of
interest policy
■■ Institute of Community Directors
Australia: Handling conflicts of interest
■■ Our Community: compliance for not-for-
profit organisations.
ACNC governance standard 5 requires
a director to disclose ‘perceived or
actual material conflicts of interest’. The
Corporations Act requires a director not
to be involved in decision-making where
they have a ‘material personal interest’.
To make sure your company’s decisionmaking is transparent and complies with
all legal requirements, your directors
should declare any actual or perceived
conflict and, where the matter involves a
material personal interest, not take part
in any decision-making where those
interests are involved (unless limited
exceptions apply).
visit acnc.gov.au phone 13 ACNC
35
Directors’ meetings
Directors’ meetings allow
the company’s directors
to confidentially discuss
important issues, raise any
concerns about the company,
remain updated on the
company’s performance and
issues affecting the company,
and make decisions together.
Clause 51 – Chairperson for directors’
meetings
More information
The quorum is the minimum number of
people who must be present for the whole
meeting for it to go ahead. A majority
is more than 50% (for example, if your
charity has six directors, the quorum for a
directors’ meeting is four directors).
For practical guidance on directors’
meetings, see our guidance on holding
meetings.
External resources
See the following information from the
Governance Institute of Australia:
■■ Good Governance Guide – Recording
minutes of directors’ meetings
■■ Good Governance Guide – Board
minutes: what to record, the business
judgment rule
■■ sample agenda
■■ sample directors’ meeting minutes.
Clause 49 – When the directors meet
Under clause 51, the directors may appoint
another person to be the chairperson
for a directors’ meeting if the elected
chairperson (see clause 40) is not present
or does not want to act as chairperson for
that meeting.
Clause 52 – Quorum at directors’
meetings
Under clause 52, the quorum for directors’
meetings is a majority of directors.
You can change the quorum to at least two
directors. However, this may be too small,
depending on how many directors your
company has and your circumstances.
In some cases, your charity may be
required to have a certain minimum quorum
amount (for example, as a requirement
under a fundraising licence). If your charity
is required to have a minimum of three
directors for a quorum under a fundraising
licence, you could use the alternative
clause below.
Under clause 49, the directors can decide
where, when and how often to meet.
You can amend this clause, for example,
to set a minimum number of meetings to
be held in each year. However, it may be
preferable to make a by-law (under clause
59) that sets out how many meetings your
company must have each year and when
and where the meetings will be. This can
be changed if circumstances change during
the year.
Clause 50 – Calling directors’ meetings
Clause 50 sets out how meetings must be
called. It allows notice of the meeting to be
given to directors by any method that has
been agreed on by all of the directors (for
example, SMS or email).
36
visit acnc.gov.au phone 13 ACNC
Alternative clause 52
Quorum at directors’
meeting
52.1 Subject to clause 52.2, unless the
directors determine otherwise, the
quorum for a directors’ meeting is a
majority (more than 50%) of directors.
52.2 Despite clause 52.1, the quorum
cannot be less than three directors.
52.3 A quorum must be present for the
whole directors’ meeting.
More information
For more information on meeting quorums,
see clause 22 in this guide.
Clause 53 – Using technology to hold
directors’ meetings
Under the Corporations Act, directors’
meetings can be held using technology
(such as web conferencing) if all of the
directors agree.
There can be a standing agreement to use
technology for all directors’ meetings. If a
director no longer agrees to a particular
use of technology, they must tell the other
directors a reasonable time before the next
meeting.
Clause 54 – Passing directors’
resolutions
Under clause 54, a directors’ resolution can
only be passed if the majority of votes cast
by directors who are present at the meeting
and entitled to vote are in favour of the
resolution.
This means that if there are nine directors,
but only eight are at the meeting, and one
of those eight has a material personal
interest that is relevant to the matter, there
are only seven directors who are present
and entitled to vote on that resolution. If all
seven of the directors vote, the resolution
can only pass if at least four of those seven
directors vote to pass it.
Clause 55 – Circular resolutions
of directors
Clause 55 sets out how directors can pass
a ‘circular resolution’. A circular resolution
is a resolution that is circulated (passed
around) and agreed to by all directors
entitled to vote on the resolution without
holding a directors’ meeting. This is a
similar process to that used for circular
resolutions of members (under clause 31).
A circular resolution can only be passed if
all of the directors entitled to vote on the
resolution sign or otherwise agree to it.
How circular resolutions are passed
All directors entitled to vote on the
resolution must sign a document stating
that they are in favour of the resolution. The
resolution is passed when the last director
signs it. Directors may sign separate copies
of the resolution, as long as the wording of
the resolution is the same in each copy.
If a circular resolution is sent to directors by
email, directors can agree to the resolution
by reply email, but their reply must include
the words of the resolution that they are
agreeing to.
The directors must record and sign a
minute (see clause 57 below) setting out
the words of the resolution and that it was
passed by a circular resolution.
Circular resolutions may not be suitable
if the directors need to discuss and
consider the decision in detail.
visit acnc.gov.au phone 13 ACNC
37
Secretary
Clause 56 – Appointment and role
of secretary
The Corporations Act requires a company
secretary to be at least 18 years old, live in
Australia and, generally, not be disqualified
from managing a corporation.
Under the Corporations Act, a public
company must have at least one company
secretary who ordinarily lives in Australia.
Clause 56 sets out how the company
secretary must be appointed and what
responsibilities their role includes.
Before the company appoints a person to
be company secretary, it must have signed
consent from that person stating that they
agree to act as the company secretary
(clause 56.2).
Clause 56.4 sets out two of the secretary’s
important responsibilities, which are:
■■ keeping the company’s register of
members up-to-date (see, for example,
the secretary’s responsibilities in relation
to the register under clauses 10 and 13),
and
■■ maintaining the records of general
meetings and directors’ meetings
(including the minutes, notices of meeting
and resolutions) and circular resolutions.
Under the template constitution, the role of
secretary also includes:
■■ giving some notices on behalf of the
company (for example, giving a member
notice in relation to a disciplinary
procedure under clause 17)
■■ receiving notice of behalf of the company
(under clause 61), and
■■ along with a director, executing
documents on behalf of the company
(under clause 46).
38
visit acnc.gov.au phone 13 ACNC
The secretary does not have responsibility
for these things under the Corporations
Act and they may be changed in the
template constitution. However, because
in practice the secretary usually does
these things, they are specified in the
template constitution. The secretary must
also ensure that the company complies
with certain requirements under section
188 of the Corporations Act which are not
specified in the template constitution.
Under clause 56.3, the directors must
decide the conditions that the secretary is
appointed under. For example, the directors
may decide:
■■ that the secretary must attend every
general meeting and directors’ meeting,
unless they have a reasonable reason not
to, and
■■ the secretary’s remuneration (salary and/
or other benefits).
External resources
For more information, see the Governance
Institute of Australia’s Good Governance
Guide – Roles, duties and responsibilities of
company secretary.
Minutes, records and by-laws
Under the Corporations Act,
companies must keep minute
books which record certain
matters relating to director and
member meetings, resolutions
passed in those meetings,
and circular resolutions.
Clause 57 – Minutes and records
The ACNC Act requires charities to keep
written financial records and records which
correctly record and explain its operations.
These requirements, as they relate to
meetings of members no longer apply to
registered charities. However, as a matter
of good governance, and to comply
with obligations under the ACNC Act,
is it important to record the decisions
of members. As a result, we have
included this requirement in the template
constitution.
Keeping records of your company’s
meetings, decisions, operations and
finances and, where appropriate, making
these records available to people who want
to access them, is an important way to help
make sure that your company is:
■■ open and accountable to members and
other people
■■ in good financial health
■■ making good decisions, and
Clause 57 sets out the records that the
company must keep and who can access
these records.
This clause sets out the requirements under
the Corporations Act to take and record
minutes of meetings (written notes of what
was decided) and have them signed by the
chairperson within a reasonable time after
the meeting.
Minutes of meetings should clearly and
accurately record any decisions made at
meetings and may provide brief reasons for
those decisions.
■■ able to meet its obligations to the ACNC
and other regulators.
More information
For more information about keeping
records, see:
■■ keeping records,
■■ examples of records
■■ record-keeping checklist
■■ video: Record-keeping and reporting.
External resources
■■ ASIC: What books and records should
my company keep?
■■ ATO: Tax Basics for non-profit
organisations – record keeping
■■ Justice Connect Not-for-profit Law:
Record keeping
■■ Our Community: Record-keeping for
treasurers.
visit acnc.gov.au phone 13 ACNC
39
How to make and keep
directors’ meeting minutes
A good way to comply with the
record-keeping requirements for
directors’ meetings is:
Step 1 – As soon as possible after
the directors meeting, the company
secretary sends draft minutes to the
chairperson.
Step 2 – The chairperson reviews
and, if necessary, amends the draft.
Step 3 – The chairperson sends the
draft minutes to the directors (for
example, by email). Any director who
wants to amend the draft should reply
quickly and any disagreement on the
draft should be resolved between the
directors.
Step 4 – Once the directors agree,
the chairperson should sign the
minutes and record the minutes in the
minute book.
These four steps should happen
within one month of the meeting.
Clause 58 – Financial and other
records
Clause 58 sets out the company’s
obligations in relation to financial and
operational records, as required by section
55–5 of the ACNC Act.
Clause 58.1 requires your company’s
financial records to be kept in a way
that allows them to be audited. Even if
your company does not need to audit its
financial reports (as the ACNC Act only
requires large charities to submit audited
financial reports), you must still keep your
financial records in a way that would allow
them to be audited.
Keeping good financial and operational
records is important to make sure:
■■ you know your company’s financial health
■■ you can produce accurate and useful
financial reports, and
■■ the operations of the company are
properly and accurately recorded.
40
visit acnc.gov.au phone 13 ACNC
The ACNC Act requires medium and
large charities to have their annual
financial reports reviewed (medium
charities only) or audited (large charities),
and to submit the reviewed or audited
reports with their Annual Information
Statement.
More information
For more information, see:
■■ review and audit of financial reports
■■ review and audit: practical tips.
External resources
See ASIC: Directors and financial reporting.
For information on financial reports, audits
and auditors, see ASIC’s overview of
financial reporting and audit.
Clause 59 – By-laws
Clause 59 allows the directors to make
by-laws (also called policies or regulations)
to give effect to the constitution.
By-laws are formal rules for the company in
the same way that the constitution is. They
are useful for setting out how the company
must manage its day-to-day activities. For
example, your company may wish to make
by-laws about planning the budget, using
social media or managing volunteers.
By-laws can also set out how your
company must manage certain things in
the constitution. For example, clause 39
of the template constitution requires a
director to be nominated by two members,
but does not provide the process and
requirements for doing so. By-laws could
be made which require a member to
complete a nomination form and send it
to the company at least 30 days before a
general meeting.
External resources
For more information on making by-laws
for your company, see the Institute of
Community Directors Australia’s guidance
on making by-laws and its ‘Policy Bank’ of
template by-laws.
Notices and financial year
For example, a member may agree to be
notified by SMS that a notice of meeting is
available on the company’s website, or may
agree to be given the notice at a mailbox in
a clubhouse for members.
Under clause 62.2, if a company has not
been given an address for the member, it
does not have to find the member to give
them notice in person.
Clause 63 – When notice is taken to
be given
The notice requirements in
clauses 60 to 63 apply to any
written notices given to or from
the company.
Clause 63 sets out the time when notice is
taken to be given, depending on whether
the notice is delivered in person or by post,
email or fax (or another electronic method).
It is important to know and comply
with the times in clause 63 when giving
notice, to ensure that you comply with
the constitution and give members or the
company adequate time to consider and
act on the notice they have been given.
Clause 60 – What is notice
Financial year
Clause 60 provides that ‘notice’ is anything
written to or from the company, except a
notice of proxy under clause 36.
Clause 64 – Company’s financial year
Notice under the template constitution
includes many things, for example:
■■ an application to become a member
(clause 12)
■■ a notice of a general meeting (clause 21),
In clause 64, write your company’s
financial year. If your company’s financial
year is not 1 July to 30 June, you must
apply to the ACNC for a substituted
accounting period.
and
■■ the resignation of a director (clause 42).
Clause 61 – Notice to the company
Clause 61 sets out how notice may be
given to the company, including in person
(meaning directly to the company) or by
post, email or fax.
Clause 62 – Notice to members
Clause 62 sets out how the company
may give notice to members, including in
person or by post, email or fax. Clause 62
is flexible.
Clause 64 gives the company a financial
year (also called a reporting period) of 1
July to 30 June. Your company may have
a different financial year, for example, from
1 January to 31 December.
The financial year is the period that the
company uses for calculating its annual
financial operations and performance.
It is also the period you must report on
when you submit your Annual Information
Statement to the ACNC.
visit acnc.gov.au phone 13 ACNC
41
Indemnity, insurance and access
It is common for a company
to provide an ‘indemnity’
to its officers (directors and
secretaries). An indemnity
ensures that the people who
manage the company are
protected from any losses or
liability (legal responsibility)
that they incur in performing
their role. In other words,
where an officer suffers a
relevant loss in their role as
an officer of the company, the
company may need to pay
for that loss, rather than the
officer paying.
In order to properly manage risk, your
company may need to insure an officer
for any liability or legal costs that they
incur in performing their role. By taking
out insurance, the company may avoid
having to pay an officer under the indemnity
clause, because it will be covered by the
insurance company.
Which officers are indemnified
Under clause 65.2, the ‘officers’ who the
company indemnifies are all current and
former directors and secretaries of the
company.
What the indemnity does not cover
Under clause 65.3, the indemnity provided
by the company does not indemnify a
company officer if:
■■ the law (including the Corporations Act)
does not allow the company to do so, or
■■ the officer is indemnified in another
way, for example, is covered by an
insurance policy. If the officer is only
partly indemnified in another way, the
company must still indemnify the officer
to the extent that they are not otherwise
indemnified.
The Corporations Act limits the things that
a company can indemnify or insure an
officer for.
Under the Corporations Act, a company
cannot provide an indemnity for an officer
in some cases, so the indemnity in the
template constitution does not apply to
liabilities:
External resources
■■ owed to the company or a related
For more information about indemnities and
insurance see:
■■ Governance Institute of Australia:
Protecting company officers
■■ Justice Connect Not-for-profit Law:
Insurance and risk.
Clause 65 – Indemnity
Under clause 65, the company indemnifies
an officer of the company (a director or
secretary, or former director or secretary)
against losses and liabilities that they incur
in their roles as officers.
42
If a company indemnifies its officers, it
protects them against certain personal
financial responsibility. For example,
the company may be required to take
responsibility for any legal claims and
pay any legal costs, damages (monetary
compensation) and other expenses of legal
actions in relation to claims arising out of
the officer’s conduct as an officer of the
company.
visit acnc.gov.au phone 13 ACNC
company (for example, where the
company has a legal claim against a
director)
■■ for certain penalty or compensation
orders under the Corporations Act, or
■■ which did not come from conduct in
good faith (for example, the liability came
from the director acting dishonestly).
The indemnity also does not cover certain
legal costs (for example, the costs of
defending a criminal charge if the director is
found guilty).
The indemnity also does not cover other
situations where the law does not allow a
company to indemnify an officer.
The Corporations Act limits how a
company must indemnify its officers. The
operation of the indemnity in the template
constitution can be complicated. You
should get professional advice if you are
unsure how the indemnity clause operates
for your company.
Indemnity when replacing an existing
constitution
If your company is replacing an existing
constitution with the template constitution,
you must make it clear what time period
the company will indemnify its officers for. If
your existing constitution did not indemnify
the company’s officers, you must take care
not to indemnify former officers unless you
have clearly decided to do so. Clause 65
in the template constitution would provide
an indemnity for former officers. The
alternative clause 65.2 below would not.
You may need to seek legal advice if you
are replacing an existing constitution.
Alternative clause 65.2
‘Officer’ indemnified by the
company
65.2 In this clause, officer means a
director or secretary who holds office on
or after [the date this constitution takes
effect] and includes a director or secretary
after they have ceased to hold that office.
Clause 66 – Insurance
Under clause 66, the directors can agree
that the company will take out insurance
for company officers (current and former
directors and secretaries) to cover liability
that a person incurs as an officer of the
company.
As with indemnities, the Corporations Act
restricts what that insurance can cover. For
example, the Corporations Act prohibits a
company from insuring an officer for a wilful
breach of their duty to the company.
Clause 67 – Access
Under the Corporations Act, directors
are entitled to access certain company
‘books’ for the purposes of certain legal
proceedings, and can do this for up to
seven years after they stop being a director.
‘Books’ includes things such as
documents, registers or any other records
of information.
Under the Corporations Act, directors of
companies are generally entitled to access
the financial records of the company at
all reasonable times. However, this right
no longer exists for directors of charitable
companies under that Act. As such, this
right has been reproduced in the template
constitution to make clear that directors are
able to access these types of documents in
order to properly carry out their duties.
Clause 67 allows the company to agree
with the directors to expand what
documents the directors are entitled to
access.
For example, clause 67 may be used to
give directors a right to access board
papers, meeting minutes and meeting
presentations. Even though directors
may have this right under common law
(judge-made law), agreeing on it makes it
clearer and more certain for directors. It
is important for directors to have access
to certain company documents and
know their access rights, so that they
can make sure they fulfil their duties and
responsibilities.
External resources
Governance Institute of Australia: Good
Governance Guide: Director and ex-director
access to company information.
visit acnc.gov.au phone 13 ACNC
43
Winding up
M Clause 69 – Distribution of surplus
You must meet ASIC’s and the ACNC’s
legal requirements when you are
winding up your company. For more
information see ASIC: Closing your
company and our guidance on winding
up your charity.
M Clause 68 – Surplus assets not to be
distributed to members
Clause 68 does not allow any of the
company’s surplus assets (money or
property remaining after the company
pays all of its debts and liabilities) to
be distributed to any current or former
members of the company if the company
is wound up (closes down), unless the
member is a not-for-profit entity with
purposes that are similar to or inclusive of
the purposes of the company (see clause
69).
Including clauses 8 and 68 in your
constitution will help to show that your
company is a not-for-profit company, which
is required for registration as a charity with
the ACNC.
More information
For more information on the
requirements for your company to be notfor-profit, see our guidance on the meaning
of not-for-profit.
assets
Clause 69 of the template constitution
is not suitable for a company that has
or wishes to apply for deductible gift
recipient (DGR) endorsement. See the
example below for an alternative clause
for a company that is, or wants to apply
to be, endorsed as a DGR.
Under clause 69, when the company winds
up, its surplus assets must be distributed
to one or more other charities which:
■■ have charitable purposes similar to,
or inclusive of, the purposes of the
company, and
■■ are also not-for-profit.
Clause 69 requires surplus assets to be
distributed to a charity with purposes
similar to, or inclusive of, the purposes of
the company. This means that a company
can give the surplus assets to another
charity with wider purposes than the
company, as long as the charity has some
purposes which are the same as the
company’s purposes.
Under clause 69, the members must pass
a special resolution (see clause 70) to
agree on how the surplus assets will be
distributed.
If the members do not agree on where
the surplus assets will be distributed,
the company can apply to the Supreme
Court for a decision. If this happens
in your company, you will need to get
professional advice.
Some constitutions state that the directors,
rather than the members, can decide
which charity or charities will be given the
company’s surplus assests when it winds
up.
44
visit acnc.gov.au phone 13 ACNC
DGR revocation clause
If the company will be seeking DGR
endorsement (or is currently a DGR), it will
need to have a DGR revocation clause.
This clause makes sure that the company
will transfer any surplus gifts, deductible
contributions and related money to another
DGR if it:
■■ is dissolved or wound up (closed), or
■■ has its DGR endorsement revoked
(cancelled) by the ATO (whichever comes
first).
The revocation clause below also includes
a similar ‘winding up’ clause to the one
set out in the template constitution. The
ATO has advised that they will accept the
revocation clause below if you have or
apply for DGR status.
To be registered as a charity by the ACNC,
your constitution must also state that the
transfer of surplus assets is to another
charitable DGR with a purpose similar to or
inclusive of your charity’s purpose.
Alternative clause 69
Distribution of surplus
assets (whole DGR
endorsement)
69. Distribution of surplus assets
69.1 Subject to the Corporations Act
and any other applicable Act, and
any court order, any surplus assets
(including ‘gift funds’ defined in clause
69.4) that remain after the company
is wound up must be distributed to
one or more charities:
c. that is or are deductible gift
recipients within the meaning of the
Income Tax Assessment Act 1997
(Cth).
69.2 The decision as to the charity
or charities to be given the surplus
assets must be made by a special
resolution of members at or before
the time of winding up. If the
members do not make this decision,
the company may apply to the
Supreme Court to make this decision.
69.3 If the company’s deductible gift
recipient endorsement is revoked
(whether or not the company is to
be wound up), any surplus gift funds
must be transferred to one or more
charities that meet the requirements
of 69.1(a), (b) and (c), as decided by
the directors.
69.4 For the purpose of this clause:
a. ’gift funds’ means:
(i) gifts of money or property for
the principal purpose of the
company
(ii) contributions made in relation
to a fund-raising event held for
the principal purpose of the
company, and
(iii) money received by the
company because of such
gifts and contributions.
b.‘contributions’ and ‘fund-raising
event’ have the same meaning as
in Division 30 of the Income Tax
Assessment Act 1997 (Cth).
a. with charitable purpose(s) similar
to, or inclusive of, the purpose(s) in
clause 6
b.which also prohibit the distribution
of any surplus assets to its
members to at least the same
extent as the company, and
visit acnc.gov.au phone 13 ACNC
45
Applying for endorsement of a part
DGR (fund or institution)
For endorsement for a fund or institution
your company owns or operates (‘part DGR
endorsement’), you will need to confirm
that the gift fund your company maintains
has a revocation clause in its constituent
document or rules governing its activities,
for example, in the rules of the gift fund.
More information
For more information on DGR status see
our guidance on deductible gift recipients
(DGRs) and the ACNC.
External resources
■■ ATO GiftPack
■■ Justice Connect Not-for-profit Law:
Deductible Gift Recipient Endorsement.
46
visit acnc.gov.au phone 13 ACNC
Definitions and interpretation
However, between the time that you
register with ASIC and then with the ACNC,
the provisions in the Corporations Act that
have ‘switched off’ for registered charities
will still apply to your company (since
our company will not yet be a registered
charity).
Clause 71 ensures that until you are
registered with the ACNC, your constitution
is not inconsistent to the Corporations Act,
as the Corporations Act will prevail where
any inconsistency exists.
Clause 71 will have a similar effect if, in the
future, the Corporations Act changes so
that the provisions that have ‘switched off’
for registered charities start to apply again.
Clause 70 – Definitions
Clause 70 defines the meaning of some
words and phrases in the template
constitution.
If a word or phrase is defined in clause 70,
it will be in bold wherever it appears in the
template constitution.
Clause 71 – reading this constitution
with the Corporations Act
Clause 71 makes sure that your
constitution is not inconsistent with the
ACNC Act or the Corporations Act. It
states that the Corporations Act will
take precedence over the constitution if
the constitution is inconsistent with the
Corporations Act.
Clause 71 also says that the replaceable
rules under the Corporations Act do not
apply to the company (see the introduction
to this guide for more information).
More information
For more information on the changes to the
Corporations Act for registered companies,
see our guidance for companies limited by
guarantee.
Clause 72 – Interpretation
This is a common type of clause in many
legal documents that clearly explains how
words in the template constitution should
be read and understood.
Because some requirements in the
Corporations Act no longer apply to
registered charities, you may decide to
change some parts of the constitution to
better suit your circumstances (provided
you still comply with the ACNC governance
standards). For example, you may decide
that for your charity, it is better to require
proxies to be members.
visit acnc.gov.au phone 13 ACNC
47
48
visit acnc.gov.au phone 13 ACNC
acnc.gov.au