What Is A Responsible Person?

General

A “Responsible Person”[1] is a person that is responsible for governing a charity, and includes for example, individual board, committee or trustee members.

Responsible Persons play an important role in directing the activities of a charity, and ensuring compliance with ACNC governance standards and broader legislative requirements. For this reason, the ACNC has high expectations of Responsible Persons.

The following article provides an overview of who a charity’s Responsible Persons are, the number of Responsible Persons a charity must have, the ACNC’s Governance Standards as they apply to Responsible Persons and the assistance that we can provide in this area.

Who are my charity’s Responsible Persons?

The ACNC has helpfully compiled a factsheet to assist charities in determining who their Responsible Persons are. We have reproduced this list below for your reference:

  • Incorporated association – Each of the members of the committee or management of the association
  • Company limited by guarantee – Each of the directors of the company
  • Indigenous corporations – Each of the directors of the corporation
  • Trust – Each of the trustees
  • Co-operative – Directors of the co-operative
  • An organisation or body incorporated in some other way (such as through an Act of Parliament) – The title used will differ depending on the legislation or charter but the term trustee, director or council member may be used
  • If your charity is the subject of insolvency arrangements – The trustee in bankruptcy, receiver, administrator or a liquidator

Sometimes, it may not be as clear who the appropriate Responsible Persons are. This may be because, for example, your charity is unincorporated without a well-defined governing body, or is a religious organisation with a central governing body and branches or parishes in many locations. The Responsible Persons may be the members of the governing body or those acting in the role of directing or guiding the strategic direction of the charity (rather than day-to-day management). These people will be responsible for ensuring that it is solvent and well run, and delivering the charitable outcomes. Sometimes there may be a large number of Responsible Persons, for example a collective where each member is equally responsible to manage the charity.

It should be noted that whilst roles such as the CEO, company secretary and public officer are critically important in running a charity, these persons will only be Responsible Persons if they are a member of the charity’s governing body. If a person is invited to sit in one some board meetings, but is not appointed to the board or given the same rights as other board members, they are unlikely to be a Responsible Person.

The ACNC has advised that a good way to work out if a person is a Responsible Person is to review the charity’s governing documents (e.g. Constitution or Articles of Association) in order to identify the positions on the board, the number of ordinary board members etc.

Number of Responsible Persons

The ACNC has released a Commissioner Policy Statement, which provides guidance on the number of Responsible Persons that a registered charity should have.

These policy statements help explain how the ACNC will interpret and administer the regulatory powers given to the ACNC Commissioner by the Australian Charities and Not-for-profits Commission Act 2021 (Cth).

In summary, this policy provides:

  • Principle 1: Charities are expected to maintain the minimum number of Responsible Persons required for their legal structure and by their governing documents;
  • Principle 2: Having more than one Responsible Person supports and promotes good governance; and
  • Principle 3: Perceived or actual conflicts of interest must be managed appropriately.

The above principles mean, for example, that charities who adopt the public company limited by guarantee legal structure- and are required to have at least three directors under section 201A of the Corporations Act 2001 (Cth) – are required to remain compliant with this requirement, by having at least three Responsible Persons and keeping the details of these persons up to date.

Additional Information

For additional details on this requirement and further examples regarding other charity types, please refer to the Commissioner’s Policy Statement: Number of Responsible Persons in a Registered Charity- Governance Standards.

ACNC Governance Standards

As noted in our previous article, which considered the objects and activities of the ACNC, the ACNC has established five governance standards for charities. At its broadest, these standards require charities to operate lawfully and with a charitable purpose, and be run in an accountable and responsible way.

These standards apply to all charities, not just those that are registered as companies, and it is a condition of a charities ongoing registration with the ACNC that they comply with these Governance Standards, which have applied since 1 July 2013.

Governance Standard 4

Relevantly, Governance Standard 4 is concerned with the suitability of Responsible Persons. This standard requires charities to take reasonable steps to ensure that its Responsible Persons are not disqualified from:

  • Managing a corporation under the Corporations Act 2001 (Cth); or
  • Being a Responsible Person by the ACNC Commissioner, within the previous 12 months.

According to the ACNC:

This standard makes sure that registered charities are not controlled by people who may pose a risk to the charity’s financial position or the pursuit of its charitable work. For charities to operate effectively, it is important that their members, the people they serve and the public have confidence in the suitability of their Responsible Persons.

This standard provides that if a charity cannot be so satisfied as to the suitability of Responsible Persons, it must not appoint this person or must take reasonable steps to remove this person as a Responsible Person.

This means that:

  • if any of your Responsible Persons are listed on the ASIC disqualified persons register,
  • if any of your Responsible Persons are listed on the ACNC register of disqualified persons;[2] or
  • if any of your Responsible Persons refuse to sign a declaration confirming they are not so disqualified,

you should ask the person to resign from their role. If that person refuses, reference should be had to your charity’s governing documents and any applicable legislation in order to determine available avenues of removal. The ACNC has also advised charities that cannot remove a person so described in the immediately proceeding bullet points to write to them and explain the situation so as to not jeopardise the charity’s registration.

We recommend that a charity’s governing documents set out in detail the pre-appointment procedures that it will take with respect to appointing Responsible Persons, including the checks and balances that are in place to ensure compliance with this standard.

A charity can also comply with this standard by thoroughly investigating the suitability of a proposed Responsible Person prior to codifying their appointment.[3]

Governance Standard 5

Further to the above, Governance Standard 5 requires charities to take reasonable steps to make sure that their Responsible Persons comply with the following duties:

  • to act with reasonable care and diligence;
  • to act honestly and fairly in the best interests of the charity and for its charitable purposes;
  • not to misuse their position or information they gain as a Responsible Person;
  • to disclose conflicts of interest;
  • to ensure that the financial affairs of the charity are managed responsibly; and
  • not to allow the charity to operate while it is insolvent.

It should be noted that many of these duties are consistent with a director’s legal duties under the Corporations Act, existing duties contained in state or territory incorporated associations legislation and overarching fiduciary and common law duties.

According to the ACNC, this generally means that Responsible Persons should “act with standards of integrity and common sense” and that the purpose of this standard is to give public confidence that a charity’s Responsible Persons are managing the charity well.

We note that some ways a charity can ensure the satisfaction of this standard include:

  • informing your Responsible Persons about this requirement e.g. by outlining them in a letter of appointment or by setting them out in constituent documents, such as a board committee or charter;
  • regularly providing information and training to Responsible Persons to refresh their knowledge in this area;
  • encourage Responsible Persons to attend, prepare for and participate in meetings;
  • offering specific training to Responsible Persons where relevant (for example, training on reading and interpreting Profit and Loss statements and Balance Sheets, which will help them to ensure that the financial affairs of the charity are being managed responsibly);
  • have in place appropriate and documented processes and policies to manage such things as conflicts of interests; and
  • take appropriate action, as informed by your organisation’s governance documents and legislative context, to manage Responsible Persons that are failing to meet their duties.

Notifying the ACNC of changes

A charity is also required to notify the ACNC each time a Responsible Person is appointed, removed, or resigns as a Responsible Person. This includes any change in their role e.g. if an ordinary board member becomes the treasurer.

These details can be updated via the online charity portal. Notification must occur within 28 to 60 days of the change, depending on the size of the charity. Where this does not occur, penalties may apply.

The charity portal will require that an organisation provide the following information about its Responsible Persons:

  • given names, family name, date of birth;
  • any other names they are or were known by;
  • residential address;
  • contact phone number and email address;
  • the position the person holds;
  • the date the person became a Responsible Person; and
  • confirmation that you have checked to make sure that this person is not listed on the ASIC or ACNC registers of disqualified persons.

It should be noted that only the person’s name and position will appear on the ACNC’s searchable register.

The ACNC require the above information in order to satisfy requirements that it has under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (refer section 40-5 of the Act). It also requires this information in order to be able to contact a charity and exercise its regulatory power to suspend or remove a Responsible Person (where relevant).
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How can we assist?

We can assist you in “taking reasonable steps” to ensure that your Responsible Persons, or a proposed appointee, is suitable for this appointment. In particular, we can:

  • assist you to perform a search of the ASIC disqualified persons register
  • assist you to perform a search of the ACNC register of disqualified persons,
  • discuss with your Responsible Person’s the requirement to sign a declaration confirming that they are not so disqualified.
  • We can also assist you in engaging with the ACNC in respect of removing a Responsible Person. In certain instances, removing a Responsible Person may require legal advice. We can provide information to you in this regard, and offer assistance where relevant.

Finally, we can assist you in undertaking regular health checks to ensure that your charity is complying with the ACNC Governance Standards on an ongoing basis (which is a critical requirement for a charity in maintaining its ACNC registration).

Additional resources

The ACNC has also published a variety of templates and examples, which can be used and adapted by charities and advisers to suit a charity’s specific needs. Relevantly, this includes:

  • financial declaration for Responsible Person;
  • Governance Standard 4 declaration for Responsible Persons; and
  • Letter of appointment for Responsible Persons.

Additional information on Responsible Persons is also contained on the ACNC website.

[1] Note: in the ACNC Act, these people are described as “responsible entities”

[2] Note: as at the date of this article, the ACNC has not yet disqualified any Responsible Persons.

[3] Note: in searching the ASIC and ACNC registers of disqualified persons, consideration should be given to whether a person has previously held or been known by a different name.

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