Australian Not-for-Profit Entities

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Australian Not-for-Profit Entities

Important Notice

Please note the following provides basic information about the features of and differences between Australia's not-for-profit organisations. It does not cover the whole of the relevant laws. This summary is not a substitute for professional advice and should not be relied on as legal advice.

Introduction

A not-for-profit organisation is an incorporated body which is prohibited from distributing surplus funds from its activities to the owners (members) of the organisation, either from profits or upon winding up. Any profit made is usually retained within the organisation to further its mission. Some not-for-profits distribute funds for charitable purposes.

There are three main types of non profit organisation that can be incorporated in Australia -

a non distributing co-operative, with or without shares.
a public company limited by guarantee.
an incorporated association.

Common features

All are incorporated bodies with the legal capacity of a natural person.

Cardinal stakeholder group not investors.

Membership based.

Many operate as mutuals.

Members have limited liability.

Members exercise democratic control.

Governance by a board of directors elected by members.

Directors accountable to members for the performance of the entity.

Annual financial returns lodged with the government.

Cannot distribute surplus funds to members either from profits or sale of assets upon winding up.

Major differences

Key Differences	Non Distributing Co-operative	Guarantee Company	Association (Vic)
Jurisdiction	State government.	Commonwealth government.	State government.
Governing legislation	Co-operatives National Law.	Corporations Act.	Associations Incorporation Act.
Membership	Members must have an 'active' relationship with the co-op. One class of membership with equal voting rights.	Members qualify in accordance with the company's articles. Can have different classes of members with different voting rights.	Members qualify in accordance with the association's rules. Can have different classes of members with different voting rights.
Capital raising	Issuing shares to members. Membership subscriptions. Retained earnings. Debentures.	Membership subscriptions. Public donations (charities). Retained earnings. Debentures.	Membership subscriptions. Public donations (charities). Retained earnings.
Accountability	No audit required for small co-operatives. Annual financial accounts presented to members.	Annual audit required. Auditors report and annual financial accounts presented to members.	No audit required if income less than $200,000 or assets under $500,000. Annual financial accounts presented to members.
Name of governing body	Board of Directors.	Board of Directors.	Committee of Management.
Selling major assets	Sale of main asset requires member approval.	Board can sell main asset without member approval.	Committee can sell main asset without member approval.
Transparency	Major decisions by members require disclosure of certain information.	No requirement to provide information to members re major decisions.	No requirement to provide information to members re major decisions.
Control	One member one vote.	Generally one member one vote.	Generally one member one vote.
Public inspection of member's details?	No.	Yes.	No.
Public inspection of directors' details?	Yes.	Yes.	No.