Governance refers to the way in which a group or organisation is managed and operated. This includes the various structures, systems, and agreements that allow the group to make informed decisions and navigate the right path forward.
Good governance ensures that the group operates effectively, ethically, and is able to achieve its goals.
What is a not-for-profit group?
A not-for-profit organisation does not operate for the profit or personal gain of its members, and any profit made is used to further the organisation's aims or charitable purposes. This can include saving profits for new projects, employing staff, or ensuring the organisation's sustainability.
Not-for-profit organisations can be charities or other types of organisations such as sporting clubs, community groups and service organisations, and professional associations. Different laws apply to not-for-profit and for-profit organisations.
What does incorporation mean?
According to Consumer Affairs Victoria (CAV):
They are clubs or community groups, operating not-for-profit, whose members have decided to give their organisation a formal legal structure. You can recognise an incorporated association by the word ‘Incorporated’ or the abbreviation ‘Inc.’ after its name. There are more than 38,000 incorporated associations in Victoria.
Each incorporated association is its own legal entity.
When a club or community group incorporates, it becomes a ‘legal person’ – that is, a legal entity that stays the same even if its members change. It can enter into contracts in its own name; for example, to borrow money, apply for grants or buy equipment. This protects the individual members of the association from legal liabilities. There are registration and reporting requirements for incorporated associations.
Victorian incorporated associations are registered with CAV under the Associations Incorporation Reform Act 2012.
Othe types of organisational structures:
- Unincorporated association
- Company
- Cooperative
- Indigenous corporation
- Trust
You can find more information on these other structure types at the Australian Taxation Office: Legal structures for not-for-profits (ato.gov.au)
Should your group incorporate?
Deciding whether to incorporate is often about assessing risk – you may want to seek legal advice on this.
It’s a good idea to regularly review this decision as your organisation changes and grows. If your organisation takes on more responsibilities or higher risk activities, or wants to apply for further funding, it can decide to incorporate.
Advantages of becoming incorporated
- Your group becomes a separate legal entity. This enables the group, rather than the individual, to apply for grant funding directly, to open a group bank account, arrange group insurance, enter contracts and much more.
- It ensures clarity about who owns your group’s property. When your group is incorporated, it can own goods and property in its own name. This makes it clear what property is owned by the group.
- The separate entity will continue even when members of your group change. This ensures your groups work can continue when members leave, and the group progress in building relationships with services, government agencies and other groups remains intact.
Benefits of remaining unincorporated
- The group can remain informal and doesn't have to hold meetings in a specific format.
- The group doesn't have to register with Government agencies.
- Your group can still partner with another incorporated group to act as an auspice when grant funding is required (see our Finance page of the toolkit for more info)
- Your groups work can still continue and grow.
Resource: Setting up an unincorporated organisation | Not-for-profit Law (nfplaw.org.au)
The resource link below is a very helpful fact sheet from Not-for-profit Law that can help you to make the decision on whether to incorporate or not. It has detailed information about the benefits of incorporating, and some examples about what might happen in the worst-case scenario if an organisation is unincorporated.
Resource: How to decide whether your group should incorporate(PDF, 370KB)
Your group has decided to incorporate. What next?
1. Make sure you meet the requirements for incorporation
To become an incorporated association, your club, community group or organisation must:
- have at least five members
- not operate for the profit of its members. An incorporated association can provide services or benefits to its members.
2. Choose a name
You must choose a name that reflects the purpose of the association.
- Your proposed name must not be identical or similar to one listed on Search ASIC registers. This list is checked as part of the application process, and you are unable to proceed through the application until a proposed name can be registered.
- Your association must have the word ‘Incorporated’ as the last word of its name. You may also use ‘Inc.’ or ‘Inc’.
3. Create your rules and purpose
Your association must have a written set of rules. In some associations, these rules are known as a constitution. The Associations Incorporation Reform Act 2012 (the Act) sets out the 23 matters the rules must cover in Schedule 1 of the Act.
Your association can choose to make its own rules, but they must comply with the Act. An alternative is to use the model rules, which are a set of prewritten rules for incorporated associations.
The rules also include the association’s purpose; this is what the association intends to achieve. For example, the purpose for a junior football association may be:
- To provide an opportunity for the youth of our area to participate in Australian Rules Football and enhance their health and wellbeing through organised sport.
- To provide for the health, welfare and wellbeing of players, supporters and spectators.
Resource: For more help creating rules for your association, view Incorporated association rules (consumer.vic.gov.au)
4. Vote to incorporate the association
To incorporate, your association must first hold a meeting to vote on whether to do so. You must give all members at least 21 days’ notice of the meeting.
At this meeting, a majority of votes cast by members must:
- authorise a person, who is at least 18 years old and lives in Australia, to incorporate the association
- approve proposed rules that comply with the Act, or approve adoption of the model rules.
Unless you nominate another secretary, the person who lodges the application for incorporation becomes the secretary. If the person who lodges the application is not the secretary, that person will become a delegate of the association. For more information, view Delegates of incorporated associations (consumer.vic.gov.au).
Unless the rules specify otherwise, the committee members of the unincorporated association form the first management committee of the incorporated association.
5. Lodge an application
You can only lodge an application if you are authorised to do so by your committee. Before you start to prepare your application, you will need to:
- read the requirements for registration to check your organisation’s eligibility
- search for the name you wish to use to make sure it is not being used by another organisation
- have an electronic copy of the proposed rules of the association ready in Word, PDF, or RTF format, unless your association is adopting the model rules
- have the details ready for trusts that affect the association.
You can register at Consumer Affairs Victoria at the following resource link.
Resource: Incorporated association registration process (consumer.vic.gov.au)
The board or committee of an organisation is in charge of governing the organisation. Some organisations have a ‘board’, others have a ‘committee’ - but both perform the same role.
Other names include:
• Committee of Management
• Committee of Governance
• Board of Management
What does the board or committee do?
Some of the things the board are responsible for are:
• Ensuring that the organisation achieves its purpose
• Setting the strategic direction and strategic goals
• Creating and overseeing the strategic plan
• Creating and overseeing the budget, or financial plan
• Monitoring the finances of the organisation, and ensuring it can meet its financial commitments
• Ensuring that the organisation operates according with all relevant laws and regulations
• Employing, supporting and supervising the CEO or Manager
What makes an effective board or committee?
Commitment
Board members have a meaningful connection to the organisation. Everyone is committed to working together so that the organisation can succeed.
Willingness to learn
Board members are always willing to learn new things and hear things from a different perspective.
Ethical behaviour
Acting in the best interests of the organisation. Acting according to all laws and regulations.
Collaboration
The board works as a team and shares the responsibilities around.
Communication
Strong communication between the board and the Manager is critical. Just the right amount of communication is important - not so much that it becomes difficult for the Manager to get things done.
Financial literacy
All board members are responsible for the finances - so it's very important that everyone can understand the financial reports. Great boards work together so that everyone understands the finances. This means that there are no silly questions - it's important to keep asking questions until you fully understand the information.
Knowledge, skills and experience
Great boards have a mixture of different skills and experience. This might include formal qualifications, or life experiences.
Diversity
Your board should be representative of your community - including people of all ages, genders, abilities, cultural backgrounds, socio-economic backgrounds etc.
What is a policy?
Policies are documents that lay out decisions made by the board of governance at your organisation. They must be approved at a board or committee meeting, and they should be debated first, so that everyone understands what is being voted on.
Policies usually have:
- A purpose statement - some background information about why the policy is needed.
- The policy itself - a few sentences or paragraphs explaining the decision made by the board on a specific topic.
- A date that the policy was approved by the board or committee.
What is a procedure?
A procedure is a document that explains how things are done at your organisation.
Procedures don't need to be approved by the board, but they might correspond with policies that the board have put in place.
Procedures are usually created and updated by staff, or sometimes by volunteers. They could include instructions for how to do things - like where to file the completed volunteer sign up forms, or how to update a page on your website.
Resource: Policies, procedures & templates (Community Door)
In this resource bank you will find management policies, procedures and templates designed to help with the day-to-day running of a community organisation.
What is a Constitution?
Incorporated associations must have a governing document called a ‘constitution’ or ‘rules’ that sets out the roadmap for how the association will operate. It's a legal requirement that an organisation and its members follow the rules of the organisation.
If an association decides to write its own rules (or constitution), it must make sure it meets certain legal requirements.
Every not-for-profit organisation needs to have a constitution or rules.
This is the document that contains the rules of the organisation, describes its basic structure and processes, and will usually specify:
- the aims or purposes of the organisation
- how the members of the organisation are admitted
- the rights and obligations of members
- how the office-bearers and other members of the governing body are elected or appointed
- how general meetings of members and meetings of the governing body are convened and conducted
- how the organisation is, in broad terms, to be governed, and
- what will happen to the organisation's assets if it is wound up
Resource: Managing an organisation’s rules or constitution (Not-for-profit Law)
Roles
The Board of Governance allocates roles to individuals based on the size of the organisation. While these roles are collectively managed by the committee, they are entrusted to individuals who assume specific responsibilities.
These roles could include:
- Chair, Chairperson or President – runs meetings and usually represents the organisation at public events
- Deputy chair, Vice-chair or Vice-president – takes on the role of the Chair when that person is unavailable
- Treasurer or Financial officer – manages the financial affairs of the organisation
- Secretary – reports to the relevant regulators, organises meetings, deals with documents and maintains records
- General board members
Not-for-profit Law has a great fact sheet on the different roles of board or committee members, specifically to help new board and committee members understand their roles, so they can contribute effectively to the successful running of their organisation from day one. This can be found at the resource link below.
Resource: New to a board or committee? An introduction to your role (Not-for-profit Law)
Your legal responsibilities
Board members must understand and fulfil their legal responsibilities, which encompass acting with honesty, integrity, and in the organisation's best interests, while avoiding conflicts of interest, maintaining confidentiality, managing transactions with related parties cautiously, and ensuring the organisation's financial stability.
You can find more helpful information your legal responsibilities here: Legal Help for Not-for-Profit Organisations (Not-for-profit Law)
Your financial responsibilities
All committee members share equal responsibility for managing the organisation's finances, regardless of their specific roles, including ensuring adequate funds, staying within budgetary limits, identifying and managing financial risks, complying with legal obligations, monitoring and reporting financial performance, and maintaining accurate records of all financial transactions.
You can find more helpful information your legal responsibilities here: Legal Help for Not-for-Profit Organisations (Not-for-profit Law)
Also see our Community Toolkit Finance page.
Your board induction kit or handbook
It's important that new board members have all of the information they need so that they can make good decisions that benefit your organisation.
A board member handbook or induction kit is a good idea.
Some of the things you might like to include in your board induction kit are:
- Information about your organisation
- Governing documents - like your constitution, policies and other relevant resources
- Board member roles and responsibilities
- Information about how you usually hold meetings, upcoming meeting dates, meeting expectations etc.
- Values and principles
- Demographic information about your community
- Board training opportunities
- Information about where to go for more help
Board (Committee) of Governance Induction Kit - Template(DOCX, 58KB)
Templates
External resources
Policies, procedures & templates (Community Door)
In this resource bank you will find management policies, procedures and templates designed to help with the day-to-day running of a community organisation. The documents contain references to specific positions in organisations such as employees, administration officers, program supervisors and managers. These are intended to be generic references and it is acknowledged that this may not apply in many cases.
Resources and tools (Consumer Affairs Victoria)
Access a comprehensive selection of complimentary templates that can be tailored for your organisation, covering a wide range of topics relevant to the operation of a not-for-profit entity.
Institute of Community Directors Australia
The best-practice governance network for the members of Australian not-for-profit and government boards and committees, and the senior staff who work alongside them – providing ideas and advice for community leaders. Membership is now free.
Policy Bank (Institute of Community Directors Australia)
Access a comprehensive selection of complimentary policies that can be tailored for your organisation, covering a wide range of topics relevant to the operation of a not-for-profit entity.
What is an incorporated association? (Consumer Affairs Victoria)
A detailed explanation of the process and significance of incorporating a club or community group as an association in Victoria, Australia. This page outlines the benefits and legal protections associated with incorporation under the Associations Incorporation Reform Act 2012.
Incorporated associations (ACNC)
A guide from Australian Charities and Not-for-profits Commission on incorporated associations and obtaining charity status.
Templates (ACNC)
Access a comprehensive selection of complimentary templates that can be tailored for your organisation, covering a wide range of topics relevant to the operation of a not-for-profit entity.
Jobs Australia
Jobs Australia is a national organisation that supports the largest network of Not-for-Profit Members who provide diverse employment services and pathways, education, training and skills development and community and social services. They primarily provide resources on Human Resource Management. Paid membership is required.
Know your legal structure (Australian Taxation Office)
Important information on choosing an appropriate legal structure when you set up a not-for-profit organisation.
Resources - Legal Help for Not-for-Profit Organisations (Not-for-profit Law)
Explore 300+ resources, including fact sheets and guides, to help at all stages of your organisation’s lifecycle, from getting started to winding up.
Incorporated association registration process (Consumer Affairs Victoria)
Register your group or organisation with Consumer Affairs Victoria