In Australia, you can choose to structure your company as limited by guarantee or shares. A company limited by guarantee is a common choice for not-for-profits and charities, including recreational and cultural organisations such as sports and bowling clubs. If your company limited by guarantee is also a registered charity, the Australian Charities and Not-for-Profits Commission Act (ACNC Act) will apply along with the Corporations Act. Below, we explain your rights operating under this structure, including access to records, voting rights and appointing directors.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
1. What is a Company Limited by Guarantee?
A company limited by guarantee is a public company set up under the Corporations Act and registered with the Australian Securities and Investments Commission (ASIC). Once registered as a company limited by guarantee, the company may also register as a charity under the ACNC Act. The ACNC has various requirements to register as a charity. However, if you are a registered charity with the ACNC as well as a company limited by guarantee, you will have obligations to both ASIC and ACNC.
If you are unsure whether your company is limited by guarantee, you should check your share certificate. Alternatively, you could search the Australian Business Number (ABN) register and see if your organisation is listed as an ‘Australian Public Company’ as well as the ASIC register. Companies limited by guarantee are public companies.
2. Are You a Member?
To become a member, you will have needed to provide written consent either before the company’s registration or when the company enters your name on the members’ register. If you are unsure, you can always ask the Secretary to look at the register of members.
Continue reading this article below the form3. What Are Your Rights?
The company should have a constitution that contains your rights under the Corporations Act plus any additional rights. Your company must provide you with a copy within seven days if you want to access this document. If your organisation is a charity, you can also find the constitution on the ACNC Register. Of the many rights you have as a member, we will briefly discuss those regarding:
- access to records;
- meeting and voting rights; and
- appointing directors.
Access to Records
As well as a right to access the company’s constitution and register of members, you also have a right to inspect your organisation’s minutes of members’ meetings.
Additionally, if your organisation has revenue of more than $250,000 (what ASIC calls a “large company limited by guarantee”), you have a right to view the yearly director’s report. If the organisation has less than $250,000 in revenue and it is not a deductible gift recipient at any time during the financial year (what ASIC calls a “small company limited by guarantee”), then it only has to provide this information if directed by members with more than 5% voting power.
Meeting and Voting Rights
You have the right to attend and vote at general meetings and to receive notice of the meetings 21 days beforehand. You can also call a meeting of members with 5% or more of total voting power. Each member has a single vote.
If your organisation is a charity, there are no set rules for your rights regarding meetings. Instead, the charity must take reasonable measures to ensure members have an opportunity to raise concerns. These measures include allowing members to be involved in voting, holding annual general meetings and providing reports.
Appointing Directors
You also have particular rights concerning directors, including:
- voting to appoint a director to the board;
- removing the director from the board; and
- setting the amount or remuneration paid to a director.
Directors of companies limited by guarantee have the same obligations as companies limited by shares. However, these obligations change slightly if the entity is also a registered charity.
4. What If I Am Denied My Rights?
You should first try and resolve this through the complaints procedure in your company’s constitution. Disputes that follow the procedure set out in the company’s constitution are generally resolved privately, through mediation as a starting point.
If your organisation is silent on this matter, you can make a complaint to ASIC. ASIC can provide information to address your concerns and clarify your rights. However, it is unlikely that they will take action against a company unless it is likely to impact the broader public or creditors of the company or where there is significant misconduct by company directors, officers or employees.
Key Takeaways
If your business is structured as a company limited by guarantee, you will enjoy certain rights as a member, including:
- access to records;
- meeting and voting rights; and
- appointing directors.
Likewise, there are avenues to take if you are denied those rights, such as private mediation, complaints to ASIC or court proceedings.
For more information, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A company limited by guarantee is a public company set up under the Corporations Act and registered with the Australian Securities and Investments Commission. ‘Limited by guarantee’ refers to the amount that members are willing to contribute if the company winds up. This amount will ‘limit’ their liability and is set out in the company’s constitution.
Members enjoy a right to access the company’s constitution and register of members and inspect members’ meeting minutes. Members also have the right to attend and vote at general meetings and to receive notice of the meetings 21 days beforehand. Likewise, members can vote to appoint or remove a director from the board.
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