Agony Uncle: What if it's not in the rules?

Borthwick Chris Jul2019lg

In this help sheet series, Our Community’s resident agony uncle, Chris Borthwick, offers answers to frequently asked questions about issues not-for-profits are facing.


Question from 'Justin Alias'

"If an association undertakes a project which is of service to the community but is not in keeping with the constitution, is that a problem? Are there penalties? Thank you for advice."

Agony Uncle’s answer

Dear Mr Alias, briefly, the answers are, respectively, yes and no.

Your association is, strictly speaking, authorised by its members to do only those things that are specified in its objects, and anything other than that is beyond your power, or, in good old Latin, “ultra vires”.

Assuming you're acting in good faith, acting ultra vires doesn't necessarily involve any illegality, and it's generally a problem if and only if one of your members complains. It's not going to get you into difficulties with your state regulators, either; they all say firmly on their websites that they don't get involved in constitutional squabbles, which is what a member's complaint would be.

If – and only if – you're a charity, there's a theoretical possibility that the ACNC would take an interest. But, they too are very reluctant (for the best of reasons) to intervene. They tend to give not-for-profit boards a lot of rope, and are certainly not going to become involved unless:

a) you make a habit of it,

b) there's a lot of money involved,

c) what you’re doing is a bit suss.

Now, speaking as a friend and not a lawyer in this matter, I suggest you ask yourself the following basic questions.

Firstly ask: “Is this a good idea?”

If you’re happy with the answer, then your second question should be: “Who cares?”

If the answer is "nobody", then don't hang back.

Many not-for-profits seem to think that rules are like rat traps, and if you trigger them then retribution is certain, instant, and fatal.

Don't make that mistake.


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