This is Information Sheet 234 (INFO 234).
If you are running or involved with a not-for-profit and charitable Indigenous corporation, your company is most likely to be set up as a company limited by guarantee. In this information sheet (INFO 234), we explain how to set up this type of company and your legal obligations.
- Definition of a company limited by guarantee?
- Obligations of Indigenous corporations
- Indigenous corporations that are registered charities
- Celebrating Indigenous business women
A company limited by guarantee is a type of public company that can be registered under the Corporations Act 2001 (Corporations Act). This company structure is commonly used for not-for-profit and charitable organisations in Australia. Like all other companies, companies limited by guarantee have obligations under the Corporations Act.
Companies limited by guarantee usually have a constitution that sets out specific rules about how the company should be run. The Corporations Act also contains rules about this. Some of these rules (known as ‘replaceable rules’) will not apply if the constitution says so. For more information, see Information Sheet 23 Constitution and replaceable rules (INFO 23).
Some key features of companies limited by guarantee include:
- Members (or shareholders) have limited liability if the company is wound up owing money. (‘Winding up a company’ is the process of shutting it down and selling its assets). The amount members have to pay to help with the costs of winding up the company is limited to the amount each has agreed to contribute.
- If the company is wound up and has surplus funds, these will be transferred to charities engaging in similar activities. Members are not entitled to the surplus funds.
- Each member of the company has a single vote.
Additionally, companies limited by guarantee:
- cannot pay dividends
- cannot issue shares
- must reinvest any profit towards the organisation’s purposes.
Indigenous corporations that are set up as companies limited by guarantee must:
- make their books and records available for inspection by directors
- keep written records of members’ meetings and resolutions (decisions made at meetings)
- ensure that no dividends are paid to members
- hold meetings as required by the Corporations Act
- comply with additional governance standards if the company is a registered charity.
Rights of directors and members
Directors of a company limited by guarantee generally have the same legal duties, responsibilities and liabilities as directors of other entities registered as public companies under the Corporations Act.
Books and records
A director of a company limited by guarantee has a right to access the financial records, and other books and records, of the company.
Members do not have all of the same rights as a director to inspect the company’s books and records, but they do have the right to inspect the company’s registers of members, options and debentures. A company’s directors may give permission to a member to inspect other books and records. Any member looking to access books and records of a company in this way should contact the company directly.
Find out what to do if there is a dispute at Information Sheet 236 Dispute resolution for Indigenous corporations (INFO 236).
Minutes of meetings
A company must keep a written record (known as ‘minutes’) of the members’ resolutions and meetings. Members are entitled to inspect, free of charge, the minute books of a company. Generally, the company will keep these at its registered office or principal place of business.
If a member requests a copy of the minutes, the company may charge a fee for this service under Schedule 4 to the Corporations Regulations 2001.
For more details on accessing company information, see Information Sheet 186 Disputes about access to company information (INFO 186).
For more details on financial reporting obligations of companies limited by guarantee, see Information Sheet 31 Lodgement of financial reports (INFO 31).
Meetings and voting rights
Companies limited by guarantee will usually hold an annual general meeting. The process the company must follow when calling meetings, conducting meetings and voting at meetings is set out in the Corporations Act. A company’s constitution may contain rules about meetings dealing with matters not covered by that Act.
For further information on the conduct of meetings and voting rights, see Information Sheet 47 Company shareholders (INFO 47).
Case study: Aunty Sue exercises her member rights
Aunty Sue is a member of her local Elders group, which is responsible for running community events. The Elders group is registered with ASIC as a company limited by guarantee as ‘EldersGroupCorp Ltd’ (EldersGroupCorp).
Aunty Sue and a number of other Elders are concerned that EldersGroupCorp has not followed a members’ resolution to allocate $20,000 to the development of an Elders meeting room. She wants to read the meeting minutes where the resolution was made, but EldersGroupCorp has refused to provide them to her.
Aunty Sue contacts her local community legal centre, which organises a meeting between Aunty Sue and the directors of EldersGroupCorp. The community legal centre is able to help the directors understand their obligations and Aunty Sue is given access to the minutes.
Company directors need to verify their identity as part of a new director identification number (director ID) requirement.
A director ID is a unique identifier that a director will apply for once and keep forever – which will help prevent the use of false or fraudulent director identities.
You need a director ID if you’re an eligible officer of:
- an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).
- a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
An eligible officer is a person who is appointed as:
- a director
- an alternate director who is acting in that capacity.
The Australian Charities and Not-for-profits Commission (ACNC) is the independent national regulator of charities. Charities registered with the ACNC must meet the requirements of the Australian Charities and Not-for-profits Commission Act 2012 and comply with the governance standards in the Australian Charities and Not-for-profits Commission Regulation 2013.
If a company limited by guarantee is a registered charity, it will affect your rights and obligations as a member. A number of provisions of the Corporations Act, which otherwise apply to companies limited by guarantee, do not apply to registered charities.
You can search the ACNC Register to find out whether your company is a registered charity. If it is a registered charity, visit the ACNC website to learn more about your rights and obligations as a member of a registered charity. Governance standard 2: Accountability to members is of particular relevance to members of registered charities.
In some circumstances, you may also be able to raise concerns about registered charities with the ACNC.
As part of the National Indigenous Business Month in October 2018, we created a series of posters celebrating the achievements of Aboriginal and Torres Strait Islander women in business. You are welcome to download these posters and display them in your community.
The posters profile:
- Dr Donna Odegaard AM (PDF 8.33 MB)
- Evelyn Clarke (PDF 8.27 MB)
- Janine McDonald (PDF 8.61 MB)
- Jasmin Herro (PDF 8.64 MB)
- Lenore Dembski (PDF 9.22 MB)
- Tanyah Nasir (PDF 8.81 MB)
- Tradara Briscoe (PDF 10 MB)
- Reporting obligations for Indigenous corporations
- Dispute resolution for Indigenous corporations
- Australian Charities and Not-for-profits Commission – guidance for Indigenous corporations
- Office of the Registrar of Indigenous Corporations
- Fact sheet - The CATSI Act and the Corporations Act (PDF 561KB)
- Moneysmart – financial tools and tips for Aboriginal and Torres Strait Islander peoples
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter on this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the Corporations Act.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances may be taken into account when determining how the law applies to you.
We acknowledge the original designer of the Australian Aboriginal flag, Mr Harold Thomas, and the original designer of the Torres Strait Islander flag, Mr Bernard Namok.