Navigating the Nuances: New ACNC Guidance for Charities Operating in Corporate Groups and other ‘Complex Structures’
The Australian Charities and Not-for-profits Commission (ACNC) released its Guidance on ‘Complex Structures’ this week, which includes key regulatory insights on the standards that Australian charities operating within corporate groups should meet.
The ACNC acknowledges the legitimate reasons for such arrangements. However, it remains concerned about the governance challenges they present, particularly the risk of inadvertent or, more seriously, deliberate non-compliance and structures that conceal illegal activities.
What does the ACNC consider to be a ‘complex structure?’
The term 'complex structure' is not defined in the Australian Charities and Not-for-profits Commission Act 2012 (Cth). Instead, it is a broad descriptive expression adopted by the ACNC to refer to legal organisational structures (often referred to as ‘groups’) that have one or more of the following features:
Purposes and activities
Presence of charitable and non-charitable entities.
Different entity types within the structure (e.g., companies limited by guarantee, private companies, trusts, incorporated associations, etc.
Charities having different charitable purposes or providing different services.
Operations
Entities operating across multiple jurisdictions (e.g., in Australia and overseas, and/or different states/territories).
The use of common directors, boards, or management committees.
Entities with varying levels of regulatory oversight and obligations.
Finance and resources
Entities sharing assets and resources, including employees.
Significant or frequent related party transactions.
Disparity of size between entities, indicating different governance needs.
Why would a charity adopt a Group or Complex Structure?
Importantly, the ACNC acknowledges that ‘Operating within a complex structure is not, in itself, a problem or an indicator of poor governance.’ There are many common and perfectly legitimate reasons to pursue such structures, for example:
Operating in different geographic areas or under different regulatory frameworks;
Mitigating risk or ‘ring-fencing’ assets;
Accessing certain financing arrangements;
Remaining eligible for tax endorsements; or
Providing organisational focus.
Practical Tips for Charities within Group or Complex Structures
The ACNC's guidance emphasises that each charity within a complex structure will often require more robust, considered, and tailored governance measures to ensure compliance with its ACNC obligations.
Directors, executives, and company secretaries should pay particular attention to the following areas detailed in the guidance and highlighted below.
Managing Common Boards and Directorships
While common boards and directorships are commonplace and can offer efficiencies, they also present challenges in ensuring board members comply with their duties, particularly when duties to one charity might conflict with another.
Board members must understand which entity they are acting for at any given time to properly discharge their duties.
Charities should foster a culture of disclosure and robust conflict of interest management.
Charities should consider the following practical steps:
ensuring board members understand their duties and obligations;
properly documenting board decisions and reasons;
exploring the appointment of different or independent individuals to boards/sub-committees, seeking professional advice, and implementing a policy for abstaining from conflicted decisions.
Holding Board Meetings
It is good practice for each entity in a group structure to hold separate board meetings to help board members meet their obligation to consider the best interests of each charity separately.
Meetings can be held consecutively, in which case agendas and minutes should clearly indicate separate meetings, including details about time, place, and attendees.
Clarifying Roles within the Structure
If a board member or individual has decision-making responsibilities across multiple entities, it should be clear which charity they are representing or making a decision.
For employees, it must be clear who employs them, who they report to, and for which entity they are performing work.
Accurate organisational charts can help all stakeholders understand each entity's place, relationships, and governance structure.
Policies and Procedures
Charities should assess whether common or bespoke policies and procedures across entities should be used.
Charities should ensure policies and procedures are fit for purpose, regularly reviewed, and, most importantly, followed.
Record-keeping
Each charity must maintain accurate, explanatory, and contemporaneous records about its own finances and operations.
Record-keeping is essential for transparency across different entities within the structure and for meeting ACNC record-keeping obligations, including Governance Standards and External Conduct Standards.
Management of Conflicts of Interest
Group structures can increase the likelihood of perceived or actual conflicts of interest, e.g. due to personal/familial relationships or common boards.
Charities must implement adequate disclosure measures, e.g. a tailored conflict of interest policy and promoting a culture of disclosure.
Management of Related Party Transactions
The use of group structures often increases the incidence of related party transactions and, whilst permissible, they must be managed properly.
Decisions to enter into such transactions must:
be made in the best interests of each charity; and
further its charitable purposes.
Ensure a transparent process for selecting entities (e.g., tendering) and that transactions are on arm’s length terms or more favourable to the charity.
Accurate records are essential, including details of the types and terms of arrangements, e.g. leases, loan agreements, shared service agreements, etc.
Maintain related party transaction policies and procedures.
Conclusion
The ACNC's enhanced focus on complex structures, including corporate groups, serves as a clear directive for charities within group structures to review their governance arrangements. While acknowledging the legitimate reasons for such structures, the ACNC expects a heightened level of diligence and transparency.
By proactively addressing the governance considerations outlined by the ACNC, charities can ensure compliance and mitigate risks.
Where necessary, legal counsel can play a critical role in assisting charities to navigate these complexities and avoid non-compliance, ensuring their structures are not only compliant, but also optimally designed to achieve the maximum impact.
Get in touch
If you require any assistance, get in touch with our dedicated team of experts at: contact@hundtlaw.com.au