As part of its Secrecy Reform project, the Australian Charities and Not-for-profits Commission (ACNC) has published information relating to its regulatory and compliance activities. It provides an insight into its activities, and transparency of its decision-making processes.

In considering whether any organisation is eligible for registration as a charity, or eligible to be registered with a specific subtype, the ACNC takes into account:

• the Charities Act 2013 (Cth) (Charities Act)
• the Explanatory Memorandum to the Charities Act
• relevant case law
• the applicant’s governing document
• the applicant’s activities
• the applicant’s compliance with ACNC Governance Standards, ACNC External Conduct Standards, and
• other matters relevant to the registration application.

Example 1 – relieving financial hardship is not advancing health

An organisation applied to the ACNC for registration as a charity with the subtype of ‘advancing health’.

The governing document stated that its purpose was to alleviate the financial distress of an individual who was experiencing necessitous circumstances because they were unable to afford everything they needed to have a modest standard of living due to the cost associated with managing their health conditions.

‘Advancing health’ is a charitable purpose that encompasses ‘the prevention or relief of sickness, disease, or human suffering’. In this case, the organisation was not looking to ‘prevent or relieve sickness, disease or human suffering’, or to advance health generally, but was instead looking to provide financial assistance.

As a result of discussions with the ACNC, the organisation withdrew its application for registration with the charity subtype of ‘advancing health’ and instead applied to be registered with the charity subtype of ‘advancing social or public welfare’. This subtype provides relief to people experiencing poverty, distress, or disadvantage, including people in necessitous circumstances.

The ACNC registered the organisation as a charity with the charity subtype of ‘advancing social or public welfare.’

Example 2 – ‘for-profit’ clauses removed from the governing document

An organisation structured as a proprietary company limited by shares applied to the ACNC for registration as a charity.

According to its governing document, the company could operate as a for-profit organisation. The ACNC worked with the applicant to ensure its governing document was suitable by:

• removing the potential for private profit or benefit in the sale or transfer shares
• disallowing the payment of brokerage or commission in relation to the sale of shares as this conflicts with obligations of Responsible People to act in the best interests of the organisation
• ensuring not-for-profit and winding-up clauses did not explicitly override other clauses that allowed the organisation to operate for private benefit

Governance Standard 5 requires charities to take reasonable steps to ensure Responsible People act in the best interest of the charity, and that they don’t misuse their position. Although the governing document contained clauses requiring Responsible People to disclose conflicts of interest, it did not restrict them from being involved in decisions to execute a contract or agreement, or vote on matters involving a contract in which they had an interest.

After the organisation formally made the changes to its governing document, the ACNC registered it as a charity.