Not-for-profit companies are commonly referred to as "companies limited by guarantee" or "CLGs" and are regulated by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001. CLGs are typically established for charitable, educational, religious, or other similar purposes, and they operate on a not-for-profit basis. Some of the key differences between regular companies and CLGs include: Tax Status: CLGs may be eligible for tax-exempt status, which means they are exempt from paying certain taxes, such as income tax and Goods and Services Tax (GST), on their surplus funds, subject to meeting certain requirements and obtaining appropriate endorsements from the Australian Taxation Office (ATO). However, they are still generally subject to other taxes, such as payroll tax and fringe benefits tax, if applicable. Governance and Reporting: CLGs are required to have a minimum of three directors, and they are governed by the same legal duties and responsibilities as regular companies under the Corporations Act 2001. However, CLGs are also subject to additional reporting and compliance requirements, including the obligation to maintain a Register of Members and submit annual financial reports to ASIC. Distribution of Profits: CLGs are generally required to apply their profits and assets solely for the purpose of pursuing their charitable objectives, and they are prohibited from distributing profits or assets to their members or directors. This is known as the "distributing profits test" under Australian law, and it distinguishes CLGs from regular companies, which may distribute profits to shareholders.

A minimum of 3 and a maximum of 9

Directors and non-director members have distinct roles and responsibilities. Directors: Directors of a CLG are appointed or elected to the board and are responsible for the overall management, governance, and strategic direction of the organization. Directors owe legal duties to the CLG, including their fiduciary duty to act in the best interests of the organization and exercise care, diligence, and good faith in fulfilling their duties. They are responsible for making decisions on behalf of the CLG, setting policies, overseeing operations, and ensuring compliance with relevant laws and regulations. Non-Director Members: Non-director members are individuals or organizations that hold membership in the CLG but are not part of the board of directors. Non-director members may have various roles depending on the CLG's constitution and by-laws. They may have the right to vote on certain matters, attend general meetings, receive reports and updates, and participate in the CLG's activities. Non-director members may also have specific rights or privileges associated with their membership, such as access to services or benefits offered by the CLG.

Under the Corporations Act 2001, there are no specific restrictions on family members serving as directors of a CLG. Directors of a CLG can be individuals who are appointed or elected to the board, and they may include family members, such as spouses, parents, siblings, or children. However, it's important to consider potential conflicts of interest that may arise when family members serve as directors of a CLG. Conflicts of interest can occur when a director's personal interests or relationships, including those with family members, may influence their decision-making or compromise their ability to act in the best interests of the CLG. As directors owe fiduciary duties to the CLG, including the duty to act in the best interests of the organization, they are required to manage any conflicts of interest in a diligent and transparent manner.

Under the Corporations Act 2001, there are no specific restrictions on a person serving as a director of multiple companies, including CLGs. However, it's important to note that being a director of multiple companies may increase the director's responsibilities, duties, and potential conflicts of interest. Directors of companies, including CLGs, owe legal duties and responsibilities to the company they serve, including their fiduciary duty to act in the best interests of the company and exercise care, diligence, and good faith. Serving as a director of multiple companies may require careful management of time, resources, and potential conflicts of interest to ensure that the director is able to fulfill their duties to each company effectively. Directors should be mindful of potential conflicts of interest that may arise when serving as a director of multiple companies.

There is no maximum limit on the number of directors a CLG can have, unless specified in the CLG's constitution or by-laws. We do however recommend limiting it at 20 due to ease of administration.

Charities MUST report and submit the Annual Information Statement to the ACNC annually. The Annual Information Statement is to be submitted by a responsible person in the ACNC Charity portal. This Statement includes details on the charities activities throughout the year, the program / projects and the Financial reports. More information on the AIS can be found here : The Annual Information Statement | ACNC

Please read general information on legal structures here on the website: Nonprofitspecialists.com.au/legal-structures