House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 7 Duty to notify

Outline of chapter

7.1 This Chapter explains the obligations of entities to notify the Australian Charities and Not-for-profits Commission (ACNC) Commissioner (ACNC Commissioner) of certain matters.

Summary of new law

7.2 The new law requires registered entities to notify the ACNC Commissioner of certain matters, in particular certain changes to the entity's details or matters that may affect its entitlement to registration.

7.3 In order to ensure that the ACNC Commissioner and public are informed of those matters which may affect an entity's entitlement to registration it is necessary that the ACNC Commissioner is informed of certain changes to registered entities.

7.4 The duty to notify the ACNC Commissioner of certain matters is also important to ensure that the information about entities that is displayed on the ACN Register is accurate and up to date. Having the register accurate and up-to-date is necessary for the public to be able to rely on that information when making decisions.

7.5 Registered entities with similar obligations to notify other Commonwealth Government agencies of some information will no longer be required to notify those other agencies, for example, the ATO or the ASIC.

Detailed explanation of new law

Certain matters must be notified to the ACNC Commissioner

7.6 Registered entities have a duty to notify the ACNC Commissioner of certain matters. [Section 65-5]

Changes to entity information

7.7 A registered entity must notify the ACNC Commissioner, in the approved form, if the entity changes its name or address for service. [Paragraphs 65-5(1)(a) and (b)]

7.8 A registered entity must notify the ACNC Commissioner, in the approved form, if an entity has ceased to be, or has become, a responsible entity of the registered entity. [Paragraph 65-5(1)(c)]

7.9 This ensures that the details of the entity and contact details are current so that the ACN Register reflects the correct names of entities and that the ACNC Commissioner can contact registered entities or serve documents on them knowing that those documents will be received by the entity.

7.10 Keeping this information up-to-date also ensures that registered entities can receive documents and meet their regulatory obligations under the Bill.

7.11 A registered entity must notify the ACNC Commissioner of a change to its governing rules. [Paragraph 65-5(1)(d)]

7.12 If a group of entities make changes to a common set of governing rules, it is sufficient that the ACNC Commissioner is notified by one of the entities of the changes affecting them all.

7.13 The Bill allows the ACNC Commissioner to approve a form allowing one authorised entity to notify of changes on behalf of all entities in a 'group'.

7.14 However, notifying as a group does not mitigate the responsibility of each entity to notify the ACNC Commissioner of certain matters. That is to say, if the authorised entity fails to notify on behalf of the group, each entity in the group is responsible for failing to notify the ACNC. This ensures that registered entities do not attempt to use grouping arrangements to avoid individual responsibilities.

7.15 However, the ACNC Commissioner is likely to use their discretion to not impose multiple penalties in such cases, unless the circumstances dictate that as an appropriate response.

Other matters for which a duty to notify arises

7.16 Registered entities must notify the ACNC Commissioner of any fact or circumstance that may affect their entitlement to registration as a type or as a subtype of entity. [Subsection 65-5(2) and paragraph 65-5(1)(e)]

Example 7.24

The Gauge organisation has changed its activities and is no longer entitled to be registered as a charity. It does not meet the description of the relevant entity type and must notify the ACNC Commissioner of this change.

7.17 A registered entity must notify the ACNC Commissioner if it contravenes the Bill or does not comply with a governance standard or external conduct standard, and that contravention or non-compliance is significant. [Paragraphs 65-5(2)(a) and (b)]

7.18 A significant contravention is one that would affect an entity's entitlement to registration. [Paragraph 65-5(2)(c)]

Example 7.25

The responsible entities of the Blue Glass Foundation discover that substantial funds are being sent overseas without being accounted for. The Foundation must notify the ACNC Commissioner of this matter.

7.19 There is a difference between entitlement to registration and revocation of registration. Before revoking registration the ACNC Commissioner must consider a range of factors as detailed in Chapter 3 - Registration.

7.20 The requirements for an entity to maintain registration are explained in Chapter 3 - Registration and Chapter 5 - Governance standards and external conduct standards.

7.21 In determining the significance of a contravention or non-compliance, the registered entity should consider:

•

the nature, significance and persistence of any contravention or non-compliance; and

•

the desirability of ensuring that contributions to the registered entity are applied consistently with the NFP nature, and the purpose of the registered entity. [Subsection 65-5(3)]

7.22 The meaning of the term contribution is explained in Chapter 3 - Registration.

Example 7.26

Map It Inc, a registered entity, discovers gross errors in the entity's financial records for the previous two years. There is a risk that money has been misapplied. This is a significant contravention of the Bill and Map It Inc must notify the ACNC Commissioner.

7.23 The matters which must be notified to the ACNC Commissioner are based on notification provisions of other Commonwealth regulators, including:

•

the change of company details provisions of the Corporations Act 2001 ;

•

Division 426 in Schedule 1 to the Taxation Administration Act 1953 ; and

•

the breach reporting requirements of the Banking Act 1959 .

Timing

7.24 The duty to notify arises as soon as the registered entity becomes aware of the matter. [Section 65-5(4)]

7.25 The entity must notify the ACNC Commissioner as soon as practicable after the registered entity first has knowledge of the matter. [Paragraph 65-5(4)(a)]

7.26 Entities registered as large or medium entities must give notice to the ACNC Commissioner as soon as possible, but no later than the end of 28 days. [Paragraph 65-5(4)(b)]

Example 7.27

Hands to Help is a medium registered entity. Hands to Help makes a change to its governing rules on 1 January 2013. Hands to Help must notify the ACNC Commissioner as soon as possible and no later than 29 January 2013.

7.27 Entities registered as small entities must give notice to the ACNC Commissioner as soon as possible, but no later than the end of 60 days for all matters except for significant contraventions of the Bill. [Paragraph 65-5(4)(c)]

Example 7.28

Small Helpers is a small registered entity. Small Helpers changes its name to Big Help on 1 December 2012. The entity has until the end of 60 days from 1 December 2012 to notify the ACNC Commissioner of the change. As such, the entity must notify the ACNC Commissioner by the end of 30 January 2013.

7.28 Entities registered as small entities must give notice of significant contraventions of the Bill as soon as possible, but no later than the end of 28 days. [Paragraph 65-5(4)(b)]

7.29 If multiple notifications arise at the same time in relation to one or more matters then only one notification of all matters needs to be made. [Subsection 65-5(5)]

Example 7.29

The Big Plan, a registered entity, moves premises and changes its name to Small Steps on the same day. The entity may give one notification that notifies the ACNC Commissioner of both changes.

7.30 The notice must be given to the ACNC Commissioner in the approved form [Section 65-5(1)] . The approved form rules are explained in Chapter 13 - Miscellaneous.

Incentives to notify the ACNC Commissioner early

7.31 All registered entities must notify the ACNC Commissioner of the matters described in the sections above.

7.32 There are penalties for failing to notify the ACNC Commissioner of the matters outlined above, or for giving notice to the ACNC Commissioner late. [note in subsection 65-5(1)]

7.33 The administrative penalties regime is proportional and dynamic. As such, there are more severe penalties for prolonged lateness, attempts to mislead the ACNC Commissioner and for providing deliberately false information. Conversely, penalties are more lenient where an entity innocently provides incorrect information and discloses this to the ACNC. Further information can be found in Chapter 13 - Miscellaneous.

Example 7.30

J U Crowd Inc moves premises on 15 November 2012. J U Crowd Inc notifies the ACNC Commissioner of the change to its address for service on 10 December 2012. J U Crowd Inc has fulfilled its obligations under the Bill.

Example 7.31

Following on from the example above, J U Crowd does not notify the ACNC Commissioner of the change to its address for service. The ACNC Commissioner finds out that the entity's address for service has changed on 15 January 2012. J U Crowd may be liable for an administrative penalty.

7.34 The ACNC Commissioner must consider the actions that an entity could have taken, or has taken, before undertaking any enforcement action, including revocation of registration.

7.35 The duty to notify is a part of encouraging cooperation between the ACNC Commissioner and the NFP sector. The duty to notify allows registered entities to notify the ACNC Commissioner of changes and problems, and demonstrates their willingness to take action to meet their regulatory obligations and to address contraventions and non-compliance.

7.36 In considering an appropriate response to a contravention or non-compliance with the Bill, a notification made by an entity could be used by the ACNC Commissioner as evidence of the entity's willingness and responsiveness to comply with the Bill.

Example 7.32

Aussies Inc is a registered entity. Liam has recently resigned from Aussies Inc and the board of Aussies Inc appoints a new responsible entity, Patrick, and notifies the ACNC Commissioner of this matter. Upon his commencement Patrick inspects the books of Aussies Inc and becomes aware of significant errors and falsifications made by Liam in Aussie Inc's financial reports. Patrick brings these matters to the attention of the board, who had no prior knowledge of the problem. The board notifies the ACNC Commissioner of the matter immediately.

The duty to notify the ACNC Commissioner arises once the entity becomes aware of the matter, regardless of the fact that the actual contravention may have occurred many months previously.

Aussies Inc has complied with its duty to notify, although there may still be administrative penalties associated with submitting earlier false financial reports.

In considering an appropriate response, the ACNC Commissioner may exercise his or her discretion to reduce the administrative penalty to nil, having taken into consideration Aussies Inc's fulfilment of their duty to notify.

Example 7.33

Following on from the example above, Patrick brings the matter to the board's attention, and they decide not to notify the ACNC Commissioner. The ACNC Commissioner is made aware of the matter some time later.

The entity is liable to an administrative penalty for failing to notify the ACNC Commissioner, as well as possible enforcement action for falsifying financial reports.

7.37 In considering an appropriate response to the falsification of the financial reports, the ACNC Commissioner takes the entity's failure to notify the ACNC Commissioner of the matter into consideration. The ACNC Commissioner may exercise his or her discretion to increase the administrative penalty because the responsible entities deliberately attempted to withhold information.