From 1 July 2019, any not-for-profit organisations operating as a trading or financial corporation will be required to comply with the new whistleblower protection regime under Part 9.4AAA of the Corporations Act 2001 (Cth).
Organisations that will be required to comply with the new regime
Any organisation that meets the definition of ‘trading or financial corporation’ will have to comply with the new regime. ASIC has advised that this may include:
- incorporated associations
- other bodies corporate, including not-for-profit bodies corporate (NFP)
- incorporated organisations registered with ASIC as Australian registered bodies
- incorporated organisations registered with the Australian Charities and Not-for-profits Commission (ACNC) as charities.
While all public companies limited by guarantee are already subject to existing whistleblower protection laws, those entities will also have to comply with the new regime from 1 July 2019.
When is an organisation a ‘trading or financial corporation’?
Organisations should assess whether they meet the definition of ‘trading or financial corporation’. ‘Trading’ in this sense refers to the sale of goods or services, while ‘financial’ relates to borrowing, lending, investing or providing advice on financial matters.
Whether an organisation meets this definition will depend on the nature of its activities, in particular whether trade or financial activities account for a ‘sufficiently significant proportion of its overall activities’.
A charity that sells goods or services to the public as part of its fundraising initiatives, or that has a loan or financial investment to support its activities, will not necessarily fall within the definition of trading or financial corporation.
Some examples provided by ASIC as to the characterisation of organisations are outlined below.
Trading or financial corporation examples
- animal welfare charity that derives substantial income from trading activities
- NFP sporting club that pays players, charges spectators admission fees and sells television and advertising rights
- NFP superannuation entity incorporated under state legislation, where its investments in providing loans are a ‘substantial and significant part of its overall activities’.
Bodies not meeting the definition
- NFP sporting club that does not pay players or charge spectators
- a medical research charity that has research as its central activity, with any trading activities being only ‘insubstantial and peripheral’ to this purpose.
Application of whistleblower regime
If an organisation meets the above criteria, it must comply with the Corporations Act’s whistleblower protection provisions. These provisions are designed to protect whistleblowers who report misconduct or an ‘improper state of affairs’ within an organisation. For example, the provisions stipulate that the organisation may not take any harmful or detrimental action against a whistleblower in response to any reports of organisational misconduct being raised by that person.
However, ASIC has advised that incorporated associations and other NFP bodies will not be required to implement a formal whistleblower policy.
Notably, the definition of whistleblower under the new regime covers both paid and unpaid employees, and, accordingly, is likely to include any volunteers of an NFP organisation.
Further information on the requirements under the new regime has been provided by Cooper Grace Ward here.
Enforcement of whistleblower obligations
As the whistleblower protection regime applies to incorporated associations, bodies corporate and other relevant bodies, ASIC will receive complaints relating to potential breaches and will be in charge of enforcing it.
Concerns as to potential breaches of the regime may also be lodged with:
- the ACNC, if an organisation is registered as a charity
- any relevant state or territory body responsible for incorporated associations.
What do you need to do?
Incorporated associations or NFP bodies corporate should review their activities to check whether they might fall within the definition of ‘trading or financial corporation’.
Entities caught by the regime should review their internal processes for handling organisational complaints to ensure they comply with new regime.
Public companies limited by guarantee should review the regime to ensure they are complying with the relevant requirements, including the need for a policy. ASIC has released a draft Regulatory Guide providing guidance as to its expectations of a whistleblower policy. The draft Guide can be found here.