Not-for-profit Law
Legal help for community organisations

Governance and COVID-19

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How does an organisation's governing body continue to act in the best interests of the organisation during COVID-19?

To act in the best interests of a not-for-profit organisation, the governing body (such as the board or committee) is required to manage:
  • continuing the organisation’s activities to the extent possible
  • the organisation’s finances
  • acting within the law, and 
  • looking after the interests of many stakeholders (such as employees, volunteers, clients, participants and donors)

We have considered governance issues in the COVID-19 environment below.

For more detailed information on governance, you can also refer to our webpages on who runs an organisation, governance and office holders' legal duties, whistleblower protection laws, rules and constitutions, documents and records, and holding meetings.

We have answered the following questions:

  1. As a board member, what should I know about the organisation's finances?
  2. How can I protect existing funding?
  3. Can I secure additional or emergency funding?
  4. How can I reduce costs? 
  5. How can I make sure I can retain my employees? 
  6. How can I protect our staff (including volunteers)?
  7. I've heard about groups adopting a COVID-19 policy.  What is it and do we need one? 
  8. What is a business continuity plan and what should it include?
  9. Should the board change the way it meets during COVID-19?
  10. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?
  11. Could our organisation be required to repay membership fees if our usual operations or activities cease because of COVID-19? 

1. As a board member, what should I know about the organisation's finances?

One of the legal duties of a director or board member of an organisation is to ensure the organisation doesn't trade while insolvent. In these economically challenging times, however, it can be difficult to predict whether your group will be able to continue to meet its financial obligations into the future, as and when they fall due.
 
While some regulators have announced ‘safe harbour’ measures that may assist board members and directors in their duty to prevent insolvent trading, you need to check what applies to your organisation. The answer differs depending on:
  • whether your organisation is a registered charity (see note 1 below) or
  • if your organisation is not a registered charity, what your legal structure is (see notes 2 and 3 below)
Note 1 - As a board member of a registered charity, what help is there if we are worried about not being able to pay our debts during COVID-19?
The Australian Charities and Not-for-profits Commission (ACNC) agreed to provide a temporary period of relief for directors of all charities from their personal liability to prevent insolvent trading, provided certain conditions are met. This relief, which ended on 31 December 2020, applies if the relevant debt was incurred:
  • in the ordinary course of business
  • during the period of 25 March until 31 December 2020, and
  • before any appointment of an administrator or liquidator
In addition, to receive this relief, the charity must:
  • ensure that its Responsible People (which includes its directors) were aware of the issue, and have an achievable aim for their charity to return to viability after the COVID-19 crisis has passed, and
  • must continue to follow relevant federal and state legislation, particularly where the charity is not a company limited by guarantee
If you require further information about how this relief may apply to your organisation, you can submit an enquiry on our website.
Note 2 - As a board member of an incorporated association, what help is there if we are worried about not being able to pay our debts during COVID-19?
If your organisation is an incorporated association that is not registered as a charity with the Australian Charities and Not-for-profits Commission (see note 1 above), your eligibility for the ‘safe harbour’ relief will depend on the state or territory in which you are incorporated. 
 
There was temporary protection in Victoria and some protection in the Northern Territory. New South Wales Fair Trading stated on their website that they would not take action under certain circumstances - however this was not been included in the legislation. For a summary of the position in each state and territory, visit the AICD website.
 
If you require further information, you can submit an enquiry on our website.
Note 3 - As a board member of a company limited by guarantee, what help is there if we are worried about not being able to pay our debts during COVID-19?
Temporary measures were put in place to protect you, as a director of a company limited by guarantee, from personal liability for insolvent trading. But note, if your company limited by guarantee  is registered as a charity with the Australian Charities and Not-for-profits Commission, you will need to meet  extra requirements before you can rely on this measure (see note 1 above) 
 
The protection applies to debts leading to insolvent trading incurred ‘in the ordinary course of the company’s business’ between 24 March 2020 and 31 December 2020. A debt will be considered as incurred in the ‘ordinary course of business’ when it provides for the continuation of the business during the protected period. However, directors must prove this fact to rely on the protection.

If you require further information about how this protection may apply to your organisation, you can submit an enquiry on our website.

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2. How can I protect existing funding?

You should consider whether you can access any existing funds to carry the organisation through the short term.  If you are thinking about using existing funds, give careful consideration to whether these funds must be used for a specific purpose or are subject to certain conditions. 

You may be eligible to apply for a government grant or be able to obtain accommodation on current grant funding.  A number of government departments which provide grants (such as the Commonwealth Department of Social Services (DSS)) are continuing to process new grant applications and manage current grants while seeking to extend flexibility on grant conditions. More information is available at the government's Community Grants Hub.  

It’s also important that boards deliver a clear and considered messaging to retain donors.  For larger donors, the board may consider regular and customised communication, including providing frequent updates and seeking donor input.  Smaller donors may require monthly newsletters or report updates.  We recommend considering a COVID-19 newsletter to keep donors informed. 

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3. Can I secure additional or emergency funding?

The Coronavirus SME Guarantee Scheme may help not-for-profit organisations access finance. Under this scheme, the Federal Government is guaranteeing 50% of new loans issued by participating lenders to eligible organisations. The initial phase of the Scheme was available for new loans made by participating lenders until 30 September 2020. The second phase of the Scheme started on 1 October 2020 and will be available for loans made until 30 June 2021. The Treasury website has more information on the SME Guarantee Scheme.

The Government has also agreed to guarantee loan amounts for eligible creative economy businesses in the cultural and creative sector. The Office for the Arts website has further information on this and other support packages.

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4. How can I reduce costs?

You may need to consider cost reduction across all areas of the organisation's operations.

If your not-for-profit is renting premises in the ACT, Western Australia, South Australia, Victoria or New South Wales, rent relief may be available.

  • In the ACT applications for commercial rates relief for 1 April 2020 to 31 January 2021 can be made until 31 March 2021
  • Western Australia, South Australia and Victoria have extended their bans on commercial evictions until 28 March 2021
  • New South Wales had a two-stage approach to the moratorium, which ended on 14 October 2020. They extended a support package for tenants and landlords until 28 March 2021

If your operations have stopped or are severely impacted, consider reviewing all your contracts with clients, suppliers and government departments.  You should consider the potential implications of those contracts and whether your not-for-profit can meet the obligations now that circumstances have changed. By having conversations with suppliers now, your organisation can also try to extend terms of trade where needed or terminate contracts where possible.  You will need to be mindful of any wrongful termination provisions in the contract if a party's right to terminate under force majeure is disputed.

Read more about your organisation’s options if it can’t comply with contractual responsibilities because of the COVID-19 outbreak.

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5. How can I make sure I can retain my employees?

The Australian Government has published specific guidance for not-for-profit organisations on its economic response to help organisations withstand the impacts of COVID-19.

The JobKeeper scheme has been available to assist not-for-profit organisations or charities that have experienced a decline in turnover by providing access to a government subsidy to continue paying eligible employees. Eligible employees include full-time, part-time and long-term casuals who have been employed on a regular basis for at least 12 months.

The JobKeeper scheme comprised three stages (explained below) and will end on 28 March 2021.

The initial period - 30 March 2020 to 27 September 2020

  • Under this stage of this scheme, employers received $1,500 per eligible employee, per fortnight.  
  • Not-for-profits were eligible for the JobKeeper Payment if, at the time of applying they had an aggregated turnover of $1 billion or less (for income tax purposes) and they estimated their GST turnover had fallen or was likely fall by 30% or more, or they had an aggregated turnover of more than $1 billion (for income tax purposes) and they estimated their GST turnover had fallen or would fall by 50% or more.
  • Charities registered with the Australian Charities and Not-for-profits Commission (ACNC) were eligible for the subsidy if they estimated their turnover had or was likely to fall by 15% or more relative to a comparable period. 

1st extension - 28 September 2020 to 3 January 2021

  • Under this stage of this scheme, employers received $1,200 per fortnight for all eligible employees who, in the four weekly pay periods before this period (in most cases), were working in the business for 20 hours or more a week on average, and $750 per fortnight for employees who were working in the business for less than 20 hours a week on average and in the period.

2nd extension - 4 January 2021 to 28 March 2021

  • Under this stage of this scheme, employers receive $1,000 per fortnight for all eligible employees who, in the four weekly pay periods before this period (in most cases), were working for 20 hours or more a week on average and $650 per fortnight for employees who were working for less than 20 hours a week on average in this period. 

Note - the Australian Government and its agencies, state and territory governments and their agencies, foreign governments and their agencies, local governments and wholly owned corporations of these bodies have not been eligible for the JobKeeper payment.

Read more about the JobKeeper payment.

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6. How can I protect our staff (including volunteers)?

We have addressed this question here.

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7. I've heard about groups adopting a COVID-19 policy.  What is it and do we need one?

We recommend you establish a COVID-19 policy, which sets out the rules and procedures your not-for-profit will implement for the duration of the COVID-19 crisis.  
 
A COVID-19 policy may include a number of measures, such as:
  • a 'positive action plan' that sets out what measures employees and volunteers should follow to reduce their exposure to COVID-19 and what happens if they develop symptoms or test positive for COVID-19
  • working from home strategies to protect employees and volunteers
  • a communication strategy that sets out how you will be communicating with each stakeholder, ensuring the board considers opinions and concerns of key stakeholders during this crisis, and
  • providing mental health support to volunteers and employees, and ensuring the board has a clear understanding of the duty of care required in relation to changing work arrangements and the importance of ongoing communication

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8. What is a business continuity plan and what should it include?

A business continuity plan (BCP) prepares your organisation to carry on ‘business as usual’ if there is an incident, crisis or disruption.  When a crisis occurs, boards and management must be aligned in terms of preparation required for the short and long term.  A BCP facilitates this and allows you to provide a considered and effective approach to restoring and resuming operational normality during the crisis.  

Your organisation may already have a BCP in place under its risk management procedures, disaster planning procedures or general emergency management. The size and complexity of your BCP will depend on the nature of your not-for-profit, the services it provides and its overall functions.

We recommend you establish a BCP (or update your existing BCP) to set out how you continue 'business as usual' during a pandemic.  This may include considering alternative supply resources due to border restrictions, considering the availability of laptops and telecommunication data for working from home and enforcing data privacy policies.  Your COVID-19 policy will also set out many of these measures.

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9. Should the board change the way it meets during COVID-19?

Boards should meet more frequently with management and employees and aim to establish a rhythm of regular meetings, for the duration of the crisis. You may also consider establishing a crisis management team, which reports back to the board on the organisation’s response to the crisis.  

A structured agenda becomes important during times of uncertainty, as they channel the direction of your meetings and provides a clear plan.

Agendas are also particularly useful when boards are adjusting to meeting electronically for the first time.  Make sure all directors have access to electronic platforms so the board can function electronically.  There are a number of platforms that provide cost-effective meeting technology including Zoom (free to download), Skype (free to download), Microsoft Teams (free for six months), and GoToMeeting (free for three months). Be mindful of using appropriate security and privacy measures for online meetings such as protecting passwords and meetings IDs.

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10. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?

In light of the physical distancing and occasional shutdown requirements imposed during the COVID-19 pandemic, you may need to decide if your not-for-profit organisation can hold its AGM remotely through the use of technology or if you could postpone the meeting. 

Whether your organisation can hold general meetings remotely will depend on your rules, the law in your state, and the approach of your regulator. While this may be confusing, the most important thing you can do during this time is to act in good faith and be clear in your communications with your members. Regulators are likely to take a facilitative approach in the current circumstances.

The legislation governing companies limited by guarantee, the Corporations Act, was amended from 6 May 2020 for six months to allow companies to hold AGMs through the use of technology such as video conferencing and to provide notice of those meetings electronically (for example, by email). This was extended until 21 March 2021. The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill), which extends these measures further, has passed the House of Representatives but is not expected to pass the Senate until August 2021 at the earliest. Unless and until these measures are enacted further, the Corporations Act has reverted to its pre-COVID-19 state with regard to virtual meetings. 
 

This means that, under the Corporations Act, hybrid meetings (where meetings are held in a physical location with members attending electronically) may be held, but the position surrounding virtual-only meetings is less clear. Until the Bill is passed, there remains some doubt as to whether the Corporations Act allows virtual-only meetings.

To provide some certainty, ASIC has adopted a 'no action' policy on virtual AGMs. This position supports organisations holding meetings with virtual technology, allows electronic dispatch of meeting notices and gives public companies an additional two months to hold AGMs. The position relating to the convening and holding of meetings using virtual technology applies to meetings held between 21 March 2021 and the earlier of 31 October 2021 and the date that any measures are passed by parliament relating to the use of virtual technology in meetings. The position relating to the two month deferral of AGMs applies to entities with financial years ending up to 7 April 2021. Accordingly, ASIC has reissued its guidelines for investor meetings using virtual technology. 

The ACNC has advised that AGMs of registered charities can be postponed if they can’t be conducted safely and will not take action unless there is evidence of wider non-compliance.

 
For incorporated associations, each state and territory regulator has issued guidance on these issues:
The Northern Territory hasn’t issued specific guidance on this issue. However, you may contact the regulator directly for specific queries.

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11. Could our organisation be required to repay membership fees if our usual operations or activities cease because of COVID-19?

This depends on your organisation’s constitution or by-laws.

Membership of a not-for-profit is not the same as a contract between a consumer and a supplier for the supply of ordinary goods or services. It is governed ultimately by the constitution (rules or by-laws), which defines and regulates the organisation’s relationship with its members (and between the members themselves). Typically, membership fees in the not-for-profit context are fees paid to further the overall purpose of the organisation and not to provide a person or group paying the fee a direct benefit.

Usually, the constitution of a not-for-profit doesn't promise the supply of any goods or services. In certain circumstances, it may give rights to members to use the organisation’s facilities or services, but only when those facilities or services are available to be used, not for example in the middle of the night and not, for example, in times of war or pandemic – including government mandated lockdown.

It is very unlikely that a decision by a not-for-profit to cease operations or provide a limited service, because of COVID-19 would be a ‘breach of membership contract’ requiring compensation (such as repayment of membership fees).

Despite uncertainty about the impact of COVID-19 on your organisation’s service offering or activity, your organisation can still seek annual membership payments for the financial year 2020-2021 with little risk that a member is entitled to ask for membership fees to be repaid (once again, this will depend on your constitution or by-laws).

It’s important to be clear with your members about:

  • the need for membership fees to ensure service continuity (if this is the case)
  • the uncertain impact of COVID-19 on the organisation’s service or activities for the foreseeable future (that is, you are unsure about what you will and will not be able to offer in FY20-21), and
  • what it means if membership fees are not paid (generally that the person or group is no longer a member)

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If your organisation needs legal assistance about operating your not-for-profit in the time of COVID-19, you can submit an enquiry on our website.
Last Updated: 06 April 2021