Whistleblower protections for not-for-profit organisations

Not-for-profit incorporated organisations that meet the definition of a trading or financial corporation must comply with the corporate sector whistleblower protection regime in Part 9.4AAA of the Corporations Act 2001 (Corporations Act).

This may include the following organisations incorporated under state or territory legislation, if they are trading or financial corporations:

• incorporated associations
• other bodies corporate, including not-for-profit bodies corporate
• incorporated organisations registered with ASIC as Australian registered bodies
• incorporated organisations registered with the Australian Charities and Not-for-profits Commission (ACNC) as charities.

This information is relevant to the organisations listed above to determine whether they are subject to the corporate sector whistleblower protection regime, and how this may affect the organisation.

All not-for-profit organisations structured as public companies limited by guarantee must already comply with the whistleblower protection provisions.

More information about the corporate sector whistleblower protection regime is available in:

• Information Sheet 238 Whistleblower rights and protections (INFO 238)
• Information Sheet 239 How ASIC handles whistleblower reports (INFO 239)

• Will the whistleblower reforms apply to my organisation?
• What will I need to do if my organisation is a trading or financial corporation?
• Will the whistleblower protections cover volunteers?
• Does my organisation need a policy for dealing with whistleblower reports?
• How will ASIC apply the whistleblower protections to incorporated associations and other bodies corporates?
• How will ASIC treat whistleblower reports about incorporated associations or other bodies corporate?

Will the whistleblower reforms apply to my organisation?

Is my organisation a regulated entity?

The whistleblower protection provisions in the Corporations Act apply to a 'regulated entity'. A regulated entity is defined to include all companies registered under the Corporations Act and other types of incorporated entities, including a corporation to which the Commonwealth Constitution applies.

A corporation to which the Commonwealth Constitution applies is a foreign corporation, or a trading or financial corporation formed within the limits of the Commonwealth.

Not-for-profit organisations that are incorporated under state or territory legislation, such as incorporated associations or cooperatives, can meet the definition of a trading or financial corporation, despite being formed for a not-for-profit, charitable, or community benefit purpose.

Other bodies corporate incorporated under state or territory legislation that are trading or financial corporations will also be regulated entities. This includes where they are incorporated under their own piece of state or territory legislation. It can also include bodies corporate owned privately or by state or territory governments.

Is my organisation a trading or financial corporation?

It is not always clear whether a not-for-profit organisation or charity falls within the definition of a trading or financial corporation, where it engages in trading or financial activities as part of its not-for-profit or charitable activities. Some of these organisations may fall within the definition, and some may not.

Whether your not-for-profit incorporated organisation meets the test of being a trading or financial corporation will depend on the organisation’s activities. Some examples are provided below to assist you to form a view about whether your organisation may be a trading or financial corporation.

If your organisation’s trading or financial activities are a sufficiently significant proportion of its overall activities, the organisation will likely be a trading or financial corporation. It must be decided on a case-by-case basis with reference to your organisation’s activities. If it is in dispute, it may need to be determined by a court.

ASIC cannot give legal advice to organisations or members of the public, and we cannot give a ruling to your organisation on whether or not it meets the test for being a trading or financial corporation. If your organisation is in doubt about whether it meets the definition of a trading or financial corporation, we encourage your organisation to seek legal advice.

What are trading or financial activities?

Trading activities involve buying and selling goods or services. Financial activities involve commercial dealings or transactions in finance, such as borrowing, lending, investing or providing advice on financial matters.

A not-for-profit organisation selling goods or services to the public to support its operations or promote its activities, such as through fundraising drives, would not be enough to make it a trading corporation, where this activity is not a sufficiently significant proportion of its overall activities.

Similarly, an organisation merely having a loan or credit facility, or making financial investments, to support funding its operations would not be enough to make it a financial corporation.

However, where an organisation engages in trading or financial activity as a sufficiently significant proportion of its overall activities, it will meet the test for being a trading or financial corporation.

Examples of trading or financial activities

Previous legal cases provide some examples of when incorporated not-for-profit organisations have and have not been considered trading or financial corporations.

Not-for-profit sporting clubs

A not-for-profit sporting club was found to be a trading corporation where it payed players, charged admission to spectators for matches, and sold television and advertising rights connected with matches.

Conversely, a not-for-profit sporting club was found not to be a trading corporation where it generally did not pay players or charge spectators admission. The court found that, although the club engaged in some trading activities, this was not of sufficient significance to require it to be characterised as a trading corporation.

Charities

An animal welfare charity was found to be a trading corporation on the basis that it earned substantial income from trading activities, whereas a medical research charity was found not to be a trading corporation where its trading activities were insubstantial and peripheral to the central activity of medical research and only generated a small proportion of its revenue.

Not-for-profit finance organisations

The court has found that not-for-profit building societies have been found to be financial corporations, despite performing an important social function, as they lent money at interest and were therefore engaged in commercial dealing in finance.

Similarly, a not-for-profit superannuation entity incorporated under state law was found to be a financial corporation as its investments providing commercial and housing loans were a substantial and significant part of its overall activities.

What will I need to do if my organisation is a trading or financial corporation?

If your incorporated association or other body corporate does engage in trading or financial activities to a significant degree, your organisation will need to comply with the whistleblower protections in the Corporations Act.

This will mean that your organisation will need to comply with the obligations to protect whistleblowers who report misconduct, an improper state of affairs or circumstances, or breach of law by or about your organisation or an officer or employee of your organisation.

Broadly, this will mean:

• keeping a whistleblower’s identity and information confidential, unless they provide you with consent to disclose their information, and
• preventing your organisation or an officer or employee from harming or causing detriment to a whistleblower. For example, it is illegal to fire a person, harass a person, or discriminate against a person because it is thought they made a whistleblower report. Your organisation could also be liable to pay compensation to a whistleblower if they suffer loss, damage or injury for reporting misconduct.

More information about the corporate sector whistleblower protection regime is available in:

• Information Sheet 238 Whistleblower rights and protections (INFO 238)
• Information Sheet 239 How ASIC handles whistleblower reports (INFO 239)

Will the whistleblower protections cover volunteers?

Volunteers will likely fall within the definition of a whistleblower under the whistleblower protection provisions.

Whistleblowers are generally insiders within organisations, and will include an individual or an employee of a person who supplies services or goods to the organisation. The person does not have to be paid for their contribution, and so will likely include volunteers.

Does my organisation need a policy for dealing with whistleblower reports?

Incorporated associations or other bodies corporate are not subject to the requirement in the Corporations Act to have a whistleblower policy from 1 January 2020. This is because the requirement to have a whistleblower policy only applies to public companies, large proprietary companies, and proprietary companies that are the trustees of registrable superannuation entities.

Charities or not-for-profits structured as public companies limited by guarantee will need a whistleblower policy if their annual (consolidated) revenue is $1 million or more. See ASIC Corporations (Whistleblower Policies) Instrument 2019/1146.

Despite not requiring a formal whistleblower policy, if your organisation is subject to the corporate sector whistleblower protection regime, your organisation may benefit from documenting and implementing a strategy for dealing with any whistleblower reports you may receive in line with the legislative requirements. This may form part of the broader governance or compliance measures within your organisation. You may wish to seek advice, including legal advice, on implementing the new requirements.

ASIC has released Regulatory Guide 270 Whistleblower policies (RG 270) to help entities establish a whistleblower policy that complies with their legal obligations. It also contains our good practice guidance on implementing and maintaining a whistleblower policy.

RG 270 may also assist entities that are not required to have a whistleblower policy but are required to manage whistleblowing in accordance with the Corporations Act.

 

How will ASIC apply the whistleblower protections to incorporated associations and other bodies corporates?

ASIC applies the whistleblower protections provisions in the Corporations Act to incorporated associations and other bodies corporates that are trading or financial corporations in a way that is equivalent to their application to companies registered under the Corporations Act.

For example, we read a reference to an officer or senior manager of a body corporate as a reference to a person performing the equivalent role within an incorporated association or other body corporate, such as an officer, public officer, or committee member of an incorporated association.

You may wish to legal seek advice about how the whistleblower protection regime applies to your organisation, or what it means for your operations.

How will ASIC treat whistleblower reports about incorporated associations or other bodies corporate? 

ASIC is responsible for enforcing the corporate sector whistleblower protection regime as it applies to incorporated associations and other bodies corporate that are trading or financial corporations. ASIC can receive reports from people alleging misconduct, improper conduct, or breaches of the law by incorporated associations or other bodies corporate that are trading or financial corporations.

Whistleblowers can lodge these reports with ASIC through our how to complain webpage or by writing to us.

For more information see:

• Information Sheet 153 How ASIC handles reports of misconduct (INFO 153)
• Information Sheet 238 Whistleblower rights and protections (INFO 238)
• Information Sheet 239 How ASIC handles whistleblower reports (INFO 239)

Concerns about the treatment of whistleblowers

ASIC can pursue allegations that an incorporated association or other body corporate subject to the new whistleblower protection regime has:

• caused detriment to a whistleblower, or
• breached a whistleblower’s confidentiality. 

Concerns about governance or operations of incorporated associations or other bodies corporate

Beyond a whistleblower’s concerns about their treatment by an incorporated association or other body corporate, ASIC will likely not be able to take action on a whistleblower’s allegations about the governance or operations of an incorporated association or other body corporate.

Generally, this is because these organisations are registered under state or territory legislation, which sets out the governance and operational requirements for these organisations, and ASIC does not administer these requirements.

If the incorporated association or other body corporate is registered as a charity with the ACNC, whistleblowers may also wish to report their concerns about the charity’s operations to the ACNC.

Similarly, whistleblowers may also wish to raise their concerns with the relevant state or territory agency responsible for incorporated associations or other state or territory bodies corporate.

Whistleblowers will be entitled to the protections under the whistleblower protection regime from when they report their concerns to an eligible recipient. Eligible recipient as defined in the whistleblower protection provisions would include an officer, senior manager, auditor, or actuary of the incorporated association or body corporate, or alternatively ASIC (or APRA if relevant).