Section 111L – Directors’ Duties

Did you know that section 111L of the Corporations Act 2001 (Cth) switches off certain provisions of the Act for companies registered under the Australian Charities and Not-for-profits Commission Act 2012 (Cth)?

If a company is a public company limited by guarantee and is also a registered charity governed by the ACNC Act, section 111L of the Corporations Act switches off the directors’ duties provisions in sections 180 to 183. The relevant governance obligations are instead addressed through Governance Standard 5 in the Australian Charities and Not-for-profits Commission Regulation 2022 (Cth).

This is particularly relevant for registered charities when explaining directors’ duties to their directors or Responsible People. While the duties in Governance Standard 5 closely mirror the Corporations Act duties, there are important differences. For example, when considering the best interests of a registered charity, directors must have regard to matters such as the charity’s charitable purpose, public benefit, advancement of its mission, and stewardship of charitable funds.

The practical point is that boards of registered charities should not simply rely on a generic Corporations Act directors’ duties summary. Induction materials, board charters and governance training should explain the ACNC framework and the specific obligations that apply to Responsible People.

According to the Australian Charities and Not-for-profits Commission, Governance Standard 5 requires charities to take reasonable steps to ensure that the following duties apply to Responsible People and that Responsible People comply with them. In summary, Responsible People must:

•       to act with reasonable care and diligence

•       to act honestly and fairly in the best interests of the charity and for its charitable purposes

•       not to misuse their position or information they gain as a Responsible Person

•       to disclose conflicts of interest

•       to ensure that the financial affairs of the charity are managed responsibly, and

•       not to allow the charity to operate while it is insolvent.

Further details are available on the ACNC’s guidance page, Governance Standard 5: Duties of Responsible People.