Not-for-profit Law
Legal help for community organisations

Governance and COVID-19

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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 main resource pages on governance

We have answers to 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?

We have also considered whether an organisation will be covered by volunteer personal accident insurance or WorkCover Insurance if a worker or volunteer is infected with COVID-19.

It is also worth noting that eligible workers, including volunteers, in Victoria have access to the COVID-19 Worker Support Payment. 

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 does not 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 was to end on 25 September 2020, but the ACNC has extended the period of relief to 31 December 2020. The relief applies if the relevant debt is 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) are 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
Note - Before 18 September 2020, there was an additional obligation that required the charity to inform its members and the ACNC if it was trading while insolvent. This requirement has now been removed.
 
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. 
 
We are working with the Australian Institute of Company Directors to have ‘safe harbour’ protection for not-for-profit incorporated associations extended across all states and territories. There is protection in Victoria and some protection exists in the Northern Territory. New South Wales Fair Trading has stated on their website that they will not take action under certain circumstances. However this has not been included in the legislation. For an updated listed 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 have been 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 that is a registered as a charity with the Australian Charities and Not-for-profits Commission then there are extra requirements that must be met before you can rely on this measure (see note 1 above) 
 
The initial requirement for this protection to apply was that the debts leading to insolvent trading must have been incurred ‘in the ordinary course of the company’s business’ between 24 March 2020 and 23 September 2020. On 7 September 2020, the Australian Government announced that this temporary relief would be extended until 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 six-month 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 individualised 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 Federal Government’s 'cash flow boost' provides a tax-free cash boost of between $20,000 and $100,000 to eligible businesses, including not-for-profit organisations and charities. 

The cash flow boost is available to not-for-profits or charities with an aggregated annual turnover under $50 million (which is generally based on prior year turnover).  The group will also need to have had an Australian business number on 12 March 2020. There is no requirement for the date at which the group was registered as a charity. To be eligible, the not-for-profit organisation will also need to have made payments to an employee or director where there is a withholding obligation. 

If your organisation is eligible, you don’t need to make a separate application - simply lodge your activity statement (up to the month or quarter of September 2020) and the boost will be delivered as credits in the activity system and not physical payments.

The Coronavirus SME Guarantee Scheme may also assist not-for-profit organisations to access finance. Under this scheme, the 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.

Finally, the Government has 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, the Federal Government agreed to a six-month moratorium on evictions for commercial tenants from the end of March 2020 to the end of September 2020. Apart from the Northern Territory, which ended its moratorium in April 2020, other states and territories have adopted individual measures beyond the end of September 2020:

  • Western Australia has passed laws extending the ban on commercial evictions until 28 March 2021
  • South Australia has also extended the ban on commercial evictions until 28 March 2021, unless otherwise stated
  • New South Wales had a two-stage approach to the moratorium, which ended on 14 October 2020. They are then extending a support package for tenants and landlords until March 2021
  • Tasmania’s moratorium on commercial evictions is due to end on 1 December, Victoria and Queensland’s moratorium ends on 31 December 2020 and the Australian Capital Territory on 31 January 2021

Each state and territory arrangement is unique, so you should obtain further information from the relevant state or territory office about the way in which it operates.

If your operations have stopped or are severely impacted, consider reviewing all your contracts with clients, suppliers and government departments.  You should give some thought to 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 may be 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 relevant stages of JobKeeper are set out below:

The initial period: 30 March 2020 – 27 September 2020

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

Extension 1: 28 September 2020 – 3 January 2021

  • Under this stage of this scheme, employers will receive $1,200 per fortnight for all eligible employees who, in the four weekly pay periods before the reference 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 reference period.

Extension 2: 4 January 2021 – 28 March 2021

  • Under this stage of this scheme, employers will receive $1,000 per fortnight for all eligible employees who, in the four weekly pay periods before the reference 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 the reference 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 are not 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), google hangouts premium (free until 1 July 2020), 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 shutdown requirements imposed during the COVID-19 pandemic, you need to decide if your not-for-profit organisation can hold its AGM remotely through the use of technology or if you should postpone the meeting until restrictions are lifted. We’ve produced a short resource that explains which organisations may do this and which may need to seek advice before proceeding.

PDF icon Can we hold our AGM remotely_flowchart.pdf

Whether or not your organisation can hold general meetings remotely will depend on your rules, the law in your state, and the approach of your regulator. We understand that all of this may be confusing, so we want to reassure you that the most important thing you can do at 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 given 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 has been extended until 21 March 2021. 
 
The changes mean that as long as members are given an opportunity to participate, vote, speak, and put questions to the board at the meeting, companies are able to hold their AGMs remotely regardless of what it says in the organisation’s governing document.
 
In addition to this change, ASIC has announced it will take no action against companies that would usually be required to hold their AGMs between 31 December 2019 and 7 July 2020, so long as those companies hold their AGM within 7 months of the end of the company’s financial year. For companies with a financial year ending between June 1 and July 7, the ‘no action’ position also applies where holding an AGM in January or February 2021 results in the requirement to hold an AGM in the 2020 calendar year not being met.
 
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.
 
The Office of the Registrar of Indigenous Corporations announced an extension of 6 months for new corporations registered from 1 January 2020 to hold their first general meeting. 
 
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?

There isn’t a one-size-fits-all answer to this question, and the answer will depend 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 an individual 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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Back to main COVID-19 page

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.
We have many other free resources that may be relevant to you. Access our complete library of resources on running the organisationreporting to government and tax.
Last Updated: 22 January 2021

Need more help with COVID issues ?

Check out our COVID-19 page which contains more resources and answers to FAQs on issues related to governance, contracts, employees and privacy
https://www.staging.nfplaw.org.au/covid19

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