It is important for charities and other not-for-profit entities to regularly review both their constitution/rules and their activities to ensure that they are up to date, that they reflect the current intentions of the Board and members, that they do not contain archaic or unnecessary provisions and that they will still comply with the prerequisites for tax concession endorsements that the entity may have.
Perhaps now is the time for each entity to undertake a “spring clean” to review these issues.
To assist you, we have included our rules/constitution review check list. Should we be able to assist you in relation to a review of your constitution/rules or your ongoing entitlement to endorsements and other tax concessions please do not hesitate to contact us.
|Your rules/constitution (hereinafter called constitution) should be reviewed every two to three years to ensure that it reflects your current objects, activities and operations; does not risk any endorsements or concessions you currently enjoy; and complies with current legislation. Whilst your entire constitution should be carefully read to ensure that it reflects the current position and future direction of your organisation, the table below sets out some of the more important clauses that should be given particular attention to when reviewing your constitution.|
|❏||1. Do the stated objects still reflect the objects and activities of the organisation?It essential that it accurately reflects the organisation’s objects and describes the organisation’s activities. However, it must also meet the ATO criteria to enable you to be eligible for endorsements and tax concessions.|
|❏||2. Has there been a change in membership classes or eligibility for admission as a member?|
|❏||3. How are disputes between members and between members and the organisation resolved?|
|❏||4. Has there been a change in the legal requirements and procedures at members’ meetings?|
|❏||5. Does your constitution allow you to use the latest technology to conduct your members’ meetings?|
|❏||6. Does the chair have a casting vote?|
|❏||7. Appointment of board membersHas the procedure changed? How are board members appointed? Can independent directors be appointed? Are any directors representative of a subgroup, region, area of expertise, etc? Minimum and maximum number of board members. Are certain qualifications or expertise required? Are directors required to be members?|
|❏||8. Office bearersWho are the office bearers?What is the length of their term?|
|❏||9. TermIs the term of board members still appropriate?|
What is the maximum number of consecutive terms a director can hold office for?
|❏||10. Board meetingsNotice required.|
Who is the chair and does the chair have a casting vote?
How many meetings is a director permitted to miss before they are expelled?
|❏||11. Expulsion of directorsWhat are the circumstances for expulsion of a director?12. VacanciesHow are they dealt with?|
|❏||13. Alternate directorsAre they permitted?|
|❏||14. Delegated authorityCan subcommittees be established?|
What is the procedure for their establishment?
How are they to be constituted?
|❏||15. RemunerationAre directors remunerated for their roles as directors of the organisation?|
Can directors receive payment for services provided to the organisation?
|❏||16. Are the indemnity and insurance clauses adequateIt is important to ensure that the indemnity and insurance provisions adequately protect directors and officers in carrying out their duties on behalf of the organisation. Inadequate indemnity and insurance provisions can expose directors and officers of the organisation to legal action which can result in their personal assets being at risk.|
If in doubt about whether these provisions are adequate, consult your lawyer. This is particularly important if these provisions have not been reviewed/updated for some time.
|❏||17. Do your winding up provisions comply with the legislation and with ATO requirements for eligibility for endorsements and concessions?Your tax concessions and/or charity or other endorsements could be put at risk if they do not comply with ATO criteria.|