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Legal structures

NFP Companies, Trusts and PAF’s (Private and Public Ancillary Funds)

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Legal structures

Please note that this information is for general guidance only and is not intended to be legal advice. It is always recommended to consult with a legal professional or seek advice from the relevant regulatory bodies when considering the specific requirements for a not-for-profit company.

Not for Profit Companies


In Australia, not-for-profit (NFP) companies are regulated under the Corporations Act 2001 (Cth) and overseen by the Australian Securities and Investments Commission (ASIC) if they are incorporated as a company limited by guarantee. Additionally, some NFPs may be registered with the Australian Charities and Not-for-profits Commission (ACNC) if they operate as a charity.

The director requirements for a not-for-profit company in Australia are as follows:

  • Minimum number of directors: An NFP company limited by guarantee must have at least three directors. If the NFP is also a registered charity, it must have a minimum of three responsible persons who are usually the directors.​

  • Residency: At least one of the directors must ordinarily reside in Australia. If the NFP is a registered charity, a majority of the responsible persons must reside in Australia.​

  • Age requirement: Directors must be at least 18 years old.

  • Disqualification: A person cannot be a director if they are disqualified from managing corporations under the Corporations Act. Disqualifying factors include being an undischarged bankrupt or having been convicted of certain criminal offenses within the last five years.​

  • Consent to act as a director: Each person appointed as a director must provide their written consent to act in this capacity.​

  • Duties and responsibilities: Directors of NFPs have various duties and responsibilities, such as acting in good faith, exercising care and diligence, avoiding conflicts of interest, not improperly using their position or company information, and ensuring the company does not trade while insolvent.

Compliance with ACNC Governance Standards: If the NFP is a registered charity, its directors must also comply with the ACNC Governance Standards. These standards cover matters such as the charity's purpose, accountability to members, responsible management of financial affairs, and suitability of responsible persons.

It is essential for directors of NFP companies in Australia to be aware of their legal obligations and responsibilities. Failure to comply with these requirements can result in penalties, disqualification, or personal liability for directors.

Key points on Companies Limited by Guarantee:


Companies must comply with the Corporations Act 2001. ASIC administers and enforces this. Once the company registers with ASIC, it can apply to be a charity.​

Public companies must have:​

  • at least three directors and one secretary;

  • at least one member;

  • a registered office address and principal place of business in Australia;

  • a registered office open and accessible to the public;

  • a constitution or replaceable rules; and

  • a register of its members.

The company must also:​​


  • keep a record of all directors and members; meeting minutes and resolutions;

  • keep financial records;

  • appoint a registered company auditor within one month of registration;

  • prepare, have audited and lodge financial statements and reports after the end of each financial year unless exceptions apply;

  • provide its members with a copy of the company financial statements and reports, unless exceptions apply;

  • hold an annual general meeting once every calendar year, within five months of the end of the company’s financial year;

  • receive and review an annual company statement and pay an annual review fee to ASIC; and

  • lodge notices with ASIC if it changes officeholders, office addresses, constitution and its name.


Despite the above, there are certain rights and obligations of the Corporations Act that do not apply to registered charities under this regime.

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Fixed Trust (Charitable Trust)

A trust is a legal structure that holds and uses funds, property or other assets for its beneficiaries. Trusts are managed by trustees. It is recommended that a Trust has three (3) trustees if the trustees are individuals, and not a Corporate Trustee (company) who is acting as Trustee.

There are different types of trusts, and some trusts can be registered as charities with the ACNC.

Trusts registered as charities are often known as charitable trusts.

To be eligible for charity tax concessions from the Australian Taxation Office, a trust must be registered as a charity.

Registering a trust as a charity

To be registered as a charity, a trust must meet the ACNC legal meaning of a charity, and the ACNC requirements for registration. In summary, to be registered as a charity, a trust must:

  • Be a not for profit

  • have only charitable purposes for public benefit

  • not have a disqualifying purpose

  • not be an individual, a political party or a government entity.

Image by Romain Dancre

Fixed Trust : Necessitous Circumstances Funds​

Providing relief of necessitous circumstances

The common method of relieving a person in necessitous circumstances is by giving money or goods directly to the person. A necessitous circumstances fund can make distributions such as money or goods to other organisations, as long as those organisations provide care for persons in necessitous circumstances.

  • If a public fund distributes for various purposes, only one of which is the care of persons in necessitous circumstances, it may be a public ancillary fund (more on these below)


Not only must a fund be for persons in necessitous circumstances, it must also be for the relief of necessitous circumstances. Not all funds directed towards people in necessitous circumstances are for the relief of necessitous circumstances.


A fund provides scholarships for students to attend a particular school. Preference is given to meritorious students who are in necessitous circumstances.

While persons in necessitous circumstances may benefit from the fund, the fund is not dedicated to providing relief of necessitous circumstances.

Where a fund is maintained primarily to relieve one individual, family or similar group, its governing documents must make it clear that the fund is to relieve their particular necessitous circumstances. They must not just state that the fund is held on trust for the named individual or individuals.


A fund is set up to raise money for two families whose homes were badly damaged in a bushfire. The rules of the fund state that the money will go to 'food, clothing and emergency shelter'. It is clear that the fund is to relieve necessitous circumstances and not just for the personal benefit of the families.

Normally, a necessitous circumstances fund will use an application form to obtain financial information from anyone seeking assistance. However, in some situations the financial need will be obvious. For example, immediately after a natural disaster, a fund's employees would not normally need to check on the financial resources of each beneficiary.

Persons receiving relief must be in Australia

The persons receiving relief from their necessitous circumstances must be in Australia.


A fund has been set up to provide money, food and clothing to victims of a plane crash in New Guinea.

It is not a necessitous circumstances fund because it is not for the relief of people in Australia.


In exceptional circumstances, a fund established for the benefit of persons in Australia may actually provide relief to persons outside Australia. For example, a fund can provide money for an Australian person to have an operation overseas because the operation is not available in Australia.

Image by Tim Mossholder

NFP companies vs Fixed Trusts: What is the difference?

Not-for-profit companies are legal entities that operate for a social purpose rather than for profit. They are governed by directors, have the ability to enter into contracts, and can sue or be sued. Fixed trusts, on the other hand, are legal relationships between a trustee and the beneficiaries, where the trustee holds and manages the assets for the benefit of the beneficiaries. A charity can be established in a not-for-profit company or a fixed trust, each with its own unique features, benefits, and drawbacks.

Here is a summary and five point comparison of the two:

  1. Legal structure: A not-for-profit company has a more formal legal structure compared to a fixed trust, with directors and a constitution. A fixed trust is more flexible, with less formal governance arrangements.

  2. Management: A not-for-profit company is managed by directors, who are elected by members and are accountable to them. In a fixed trust, the trustee is responsible for managing the assets and making decisions in the best interests of the beneficiaries.

  3. Liability: In a not-for-profit company, directors can be personally liable for the company's debts, while in a fixed trust, the liability of the trustee is limited to the assets of the trust.

  4. Fundraising: A not-for-profit company has more flexibility in terms of fundraising and can enter into commercial activities to generate income, while a fixed trust is restricted in its ability to raise funds and must rely on contributions and investment returns.

  5. Dissolution: The process of dissolving a not-for-profit company is more complex compared to that of a fixed trust, as it involves winding up the company, paying debts and distributing any remaining assets. In a fixed trust, the assets can be distributed to the beneficiaries, and the trust can be terminated once its purpose has been fulfilled.

Public and Private Ancillary Funds

An Ancillary Fund is a trust used to collect and distribute donations for charitable purposes. It can be set up while a person is alive or through their Will. There are two types: Public Ancillary Funds and Private Ancillary Funds.

Public Funds can collect donations from the public, while Private Funds are used for private philanthropy, usually by family groups or individuals with a close relationship. Setting up an Ancillary Fund provides tax benefits, as donations made to the Fund are tax-deductible and investment returns are often exempt from income tax.

The Fund can only donate to other deductible gift recipients (DGRs).

To establish an Ancillary Fund, the following steps must be taken:​

  1. Choose between a Public or Private Ancillary Fund.

  2. Identify the individuals who will control the Fund, ensuring they meet the responsible person; requirements.

  3. Incorporate a trustee company with ASIC or another form of incorporated trustee.

  4. Establish the Ancillary Fund by preparing and signing a Trust Deed based on the relevant Model Trust Deed published by the Australian Taxation Office.

  5. Apply to the ACNC for registration as a charity or to the ATO for DGR endorsement if not seeking charity tax concessions.


For further information on other Legal Structures including Trusts, visit the ATO and ACNC websites:

Legal structures for not-for-profits | Australian Taxation Office (

Know your legal structure | Australian Taxation Office (

Legal structure | ACNC

Generally speaking, companies limited by guarantee provide better protection to Directors than a Fixed Trust structure will provide its Trustees. You must research the best legal structure to suit your needs. The choice between a not-for-profit company or a fixed trust for establishing a charity will depend on the specific circumstances, goals, and needs of the charity. This information is general in nature, and is not legal advice. Should you need legal advice, please contact Abbott & Mourly on

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