The role of members of not-for-profit incorporated associations and companies limited by guarantee includes holding the Board members[1] accountable for the exercise of their powers. This is consistent with ACNC Governance Standard 2, which provides that those not-for-profits that are registered charities must take reasonable steps to be accountable to their members and must allow their members adequate opportunities to raise concerns about how the charity is run.
Members who have concerns about how a not-for-profit is being run or have a grievance with the Board may request the governing body call and hold a general meeting. The request will often include motions for consideration at the general meeting. Common motions proposed include removing one or more members of the Board or amending the Constitution.
Ascertaining the rights of the members (and the obligations of the Board) in relation to members’ resolutions and requests for general meetings requires a careful review of both the relevant legislation[2] and the organisation’s governing document[3]. Registered charities should also be aware of section 111L of the Corporations Act 2001 (Cth), which provides that registered charities are exempt from a number of provisions of the Corporations Act, including the provisions which relate to member requests for meetings.
While it is important to ensure the Board is accountable to the members, not every member request will be valid. It may not be in the interests of the members as a whole for the Board to entertain an invalid request.
A not-for-profit or charity Board that receives a request for a general meeting should give consideration to the following matters.
Timing of notice and meeting
Be aware of any requirements set out in the governing document or legislation in relation to the time within which notice of the meeting must be sent or the meeting held. In some cases, if the Board fails to act on a valid request within the required timeframe, the members may be able to convene the general meeting themselves at the organisation’s cost.
Validity of the request
Assess the validity of the member’s request itself. Key considerations include whether:
- the prescribed form (if any) for the request was used;
- the request was submitted correctly (for example, the governing document may require that the request be submitted to the secretary);
- the request was signed by the required number of individuals – this may be either a fixed number of members or a proportion of members (in which case the organisation should ensure its member register is up to date and the proportion has been properly calculated);
- the individuals who signed the request are in fact all current members of the organisation (if membership fees are levied, are any payments outstanding);
- it is evident from the face of the document that the members knew what they were signing. For example, a Court has found that pages of signatures should not be counted in circumstances where each page signed did not contain the wording of the request and the motion[4]. In this case, it is not possible for the Board to confirm the members knew the purpose for which their signature was being provided.
If the request is invalid, the Board should notify the requesting members that it will not proceed to convene a general meeting and give its reasons.
How the Board must respond to valid request for a general meeting will depend on the governing document and legislation. In some cases, the Board is required to act on a valid request and proceed to convene a general meeting. In other cases, the Board is not required to act on a valid request, but failing to do so will enliven the requesting members’ right to convene the meeting themselves.
Validity of any motion
The second matter for assessment is the validity of any motion(s) that the requesting members want considered at the general meeting. Key considerations include whether the motion conflicts with the governing document or relevant legislation. A motion must not go beyond the legal powers of the body or its purposes. For example, the members may not, in general meeting, pass a resolution requiring the organisation to do something that is inconsistent with the organisation’s governing document – instead, they must first pass a special resolution (and comply with any statutory process) to amend the governing document itself.
If the motion is invalid (and the meeting request discloses no other residual valid purpose for the meeting), the governing body is not required to convene a meeting[5]. If the governing body does not convene a meeting in these circumstances, the requesting members’ right to convene the meeting themselves (if any) is not enlivened.
If the Board resolves not to call a meeting
The Board may resolve not to call a meeting. If the Board does so because the meeting request or any motion was not valid, the requesting members will often seek to fix any identified issues and again request a meeting be convened. The Board should consider engaging with the requesting members in this interim period in order to ascertain whether their concerns can be addressed without convening a general meeting. This may reduce the potential for a disruptive and divisive general meeting and ensures the Board is giving members a fair opportunity to raise concerns.
If the Board resolves not to call a meeting in circumstances where it is choosing not to respond to a valid request, the Board should prepare for the possibility of a member convened general meeting. The members will ordinarily be entitled to access the member register in order to enable them to send out a notice of meeting. While the Board is not responsible for convening the meeting, it will usually be in the organisation’s best interests for the Board to ensure (if possible) that any procedural requirements for a properly convened meeting are met. This is because the organisation may be placed in a legally uncertain position if the meeting is improperly convened but seeks to pass resolutions that are binding on the organisation.
If the Board proceeds to call and convene a meeting
If both the request and the motion(s) are valid, the Board may call and hold a general meeting. Practical considerations for holding a meeting at the request of members include:
- the Board’s recommendation (if any) on the motion. Boards are not required to remain neutral on member-proposed resolutions. It is appropriate for the Board to form a position based on the Board’s assessment of the organisation’s best interest and to communicate this to the members;
- how the Board will communicate with the members regarding:
- the requesting members’ position – the relevant legislation or governing document may require the organisation to distribute a statement in support of the meeting or motion; and
- the Board’s position – the Board is free to communicate with its members in any way it deems appropriate regarding a proposed meeting or motion. This includes social media, email and face to face engagement. The quality of the Board’s communication can have a significant influence on the outcome of a member-convened general meeting. Clear, succinct and balanced communications which focus on the organisation’s purpose and the best interests of all members can be highly persuasive.
- whether it is appropriate to engage an independent chair or returning officer;
- protocols or standing orders for the efficient and orderly conduct of the meeting – if there are none in place, the Board might consider inviting the requesting members to agree to a set of appropriate protocols;
- the requirements in the governing document and relevant legislation regarding how the meeting and vote will be conducted. Proxy voting provisions may be particularly important.
- If a meeting is being held by technology the features of the relevant technology should be carefully reviewed and ideally tested before the meeting. Consider also the new Corporations Act Chapter 2G.5 meeting technology provisions for companies limited by guarantee.
How we can help
For more information or guidance regarding responding to member requests for general meetings, please contact us.
[1] In incorporated associations the governing body may be referred to as the ‘Committee’ – we have used the term ‘Board’ in this article to refer to both Boards and Committees.
[2] For a company limited by guarantee the Corporations Act 2001 (Cth) applies. For an incorporated association, the associations legislation in the relevant State or Territory applies.
[3] For a company limited by guarantee, this will be a Constitution or Memorandum and Articles of Association. For an incorporated association, the entity may operate according to Model Rules or may have adopted its own Rules.
[4] Gratton v Carlton Football Club Ltd (2004) 51 ACRS 29
[5] National Roads & Motorists’ Association v Parker (1986) 6 NSWLR 517, Queensland Press Ltd v Academy Investments No 3 Pty Ltd [1988] 2 QD R 575