Compliance Updates during Covid
Earlier this year the ACNC Commissioner recognised that charities faced unique challenges during the COVID-19 pandemic. As a result, the ACNC declared it would not investigate or take action in regards to certain breaches of their governance and external conduct standards.
ACNC has exercised some leniency in relation to:
- Governance Standard 1 and External Conduct Standard 1: a charity cannot operate outside its charitable purposes.
- Governance Standard 5: the charity requires Responsible Persons to ensure it does not operate while insolvent.
- External Conduct Standard 2: a charity is required to obtain and keep records for its operations outside Australia.
Previously, it was advised that this measure would be in effect between 25 March 2020 and 25 September 2020. However, in line with compliance extensions granted by other regulatory authorities, the ACNC Commissioner has extended the current compliance approach until 31 December 2020.
An earlier relaxation ACNC’s no action position for charities that may have been trading while insolvent has now been removed and charities now need to follow relevant state and federal legislation.
The Commissioner’s approach to this issue will follow the amendments made to the Corporations Act 2001 (Cth) by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth). Under section 588G of the Corporations Act 2001 (Cth), a director of a company can be personally liable for debts incurred while the company is insolvent. The amendments provide temporary relief to section 588G, provided the debt is incurred:
- in the ordinary course of business,
- during the relevant period; and
- prior to the appointment of a liquidator or administrator.
Further, the Commissioner has declared this approach will be applied to all charities, not just companies limited by guarantee. However, directors (or other responsible persons) must have an ‘achievable’ plan to return the charity to financial viability following the pandemic.
More information is available from the ACNC website.